Domestic tourism refers to the movement of the country residents within the confined territorial border of their nation for tourism purposes. The objective of this paper is to explore the viability of domestic tourism as an effective alternative of diversifying Nigerian economy. Our findings show that Nigeria is blessed with abundant tourism products, cultural heritages, artefacts and monuments that if fully harnessed and patronized the country will have lucrative source of revenue that will lead to significant economic prosperity. The study further reveals the extent to which domestic tourism contributes to GDP, employment generation, wealth creation and infrastructural development. The overall challenges facing tourism sector in Nigeria have been identified which includes among others insecurity, insufficient funding, poverty and lack of adequate tourism infrastructural facilities. We recommend more government budgetary allocation to the sector, manpower development and more UNESCO listing of tourism sites in the country as a way forward to revamp tourism sector.