Should a cheap fork be oiled / lubricated from time to time?
If yes, how?
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Lubricating the forks wont affect performance by may increase life and preserve cosmetic looks. Cheap forks typically have a coil spring and a sealed damper unit, neither will perform any better with lubrication.
Oiling the stanchions and dust seals (by Vorac's method above) will prevent dust and water from entering the lower, which over time would cause the fork to stop working, and will help keep the stanchions from rusting.
More expensive forks are different where oil dampers can get damaged if seals are not well maintained. The oil can become contaminated (different viscosity = different performance) and leak oil. Also any metal on metal could cause scratches which would allow to leak through.
Best is to try. Apply cheep oil form the hardware store (fine machine oil, $1) on both stanchions near the dust seals, compress several times, then wipe off the excess. See if the fork performs any better.
My XCR fork does really begin acting like a fork, after I disassemble it, clean and grease. On the other hand, servicing a similarly-priced fork provided no benefit at all.
It defiantly helps (on coil spring forks). Way back when, I fryed the RST forks that came on my GF Tarpon on a hot July day in Florida. The fork literally seized. When I got home I pulled the dirt seals off and sprayed a healthy dose of lube (not WD 40 or KY..). The forks started working again but never quite the same, that is to say, they were crapier than just new crap. Regular lubing will keep them going long enough you purchase a plush of fork.
Cheap suspension forks can have difference attributes to more expensive ones.
If you put extra oil on fork stanchion it can mix with the internal oil.
If it was a more expensive fork and the performance had reduced I would suggest properly servicing them: changing the oil and seals.
Cheaper forks often have elastomers that provides the damping instead of oil which wears out and means you have to replace them.