I would like to use my Lada Niva for normal road travel, but at 3500 rpm at 100 kph it is not very fuel efficient. I don’t know what the current differential ratio is, but I assume it has been changed for off-road driving. I already changed a 4-speed gearbox to a 5-speed, decreasing the engine speed from about 5000 rpm at 80 kph to the current 3500 rpm at 100 kph. Can I further reduce it by changing the differential gear ratio?
Yes, gear ratios are the second largest influence on your fuel consumption. Number one being maladjusted timing. I always relay the story of my and my wife's cars: she has a 1.4 Opel Corsa and I have a 2.0 Turbo Coupe. While my car has more than twice the power of hers and weighs 350kg more, we get about the same consumption figures (she gets 12.5km/l and I get 12.3km/l, or about 8 to 8.2 litres per 100km). The reason is that her car revs about 3000RPM at 100km/h and mine does 2300RPM at the same speed.
Your problem is going to be that your engine was designed to deliver power at a certain RPM range and if you mess with the final drive, you might be driving in a portion of the rev range where you don't have sufficient torque. Although that's a much bigger problem for highly-tuned performance cars with narrow torque bands than for an off-roader such as your Lada. I would suggest not going too severe. I can't find exact figures, but it's usually okay to fit a 1.6 litre's final drive on a 1.4 litre car. I wouldn't go any further than that.
For quick reference, you shouldn't decrease the size of the final drive by more than 6-8%. but that will already lower your RPM from 3000 to between 2760 and 2820. anything more and your car will be as tardy as a donkey.
Sounds like you might be under geared, and need to raise your gearing. In other words, it sounds like your engine is spinning too many times for each wheel revolution. Raising your gearing will allow your engine to spinning less per wheel revolution, and possibly increase you efficiency. Example: Your engine currently spins 4 times per 1 wheel revolution, raise the gearing to have it go 2 per 1, and one can assume your fuel efficiency will improve.
If your diff ratio has been changed for offroad use your speedometer will be innacurate. Much so if larger tyres are fitted.Purchase an after market speedo cable corrector (available for both needle dial( as in your case) or digital speedos.The faster you go the greater the error i.e.29" to 30" inch tyres with 4.11.1 ratio can see a false speedo reading at 100k.p.h. of 20%