Oil Revenue Dependence and Economic Diversification in Imo State: An Empirical Investigation (2015 to 2024)

Petroleum revenue dependence has long constrained the development of sustainable economic diversification in Nigeria's oil-producing states, creating fiscal vulnerability to global crude oil price shocks. This study empirically investigates the relationship between oil revenue dependence and economic diversification efforts in Imo State from 2015 to 2024. The study is anchored on the Dutch Disease Theory, which explains how an abundance of natural resource revenues can crowd out non-resource sectors through currency appreciation and labor reallocation, inhibiting structural economic diversification. A longitudinal research design was adopted using secondary data sourced from the Imo State Ministry of Finance, the Federation Account Allocation Committee (FAAC) records, and the National Bureau of Statistics. Johansen Cointegration and Granger Causality tests were applied to examine the dynamic relationship between petroleum revenue and non-oil sector output. Findings reveal a significant negative relationship between oil revenue dependence and the growth of Imo State's agricultural and service sectors, consistent with Dutch Disease dynamics. In years of high oil earnings, non-oil sector investment and output growth decelerated, suggesting a resource crowding-out effect. The study concludes that Imo State's fiscal dependence on oil revenues is economically constraining its capacity for sustainable diversification. It is recommended that Imo State government establish a Diversification Investment Fund financed from oil revenue surpluses and use it to fund agribusiness, tourism, and technology sector incentives.

Keywords: Oil revenue, economic diversification, Dutch Disease, Imo State, fiscal policy