Crude Oil Price Shocks and Macroeconomic Behavior in Nigeria (original) (raw)

INTERACTION BETWEEN OIL PRICE SHOCKS AND NIGERIA’S NON-OIL MACROECONOMY

Past Nigeria specific studies on oil price shocks-macroeconomy association had earlier discovered a significant real effective exchange rate appreciation, which is suggestive of the existence of “Dutch Disease” in Nigeria. As a result, this paper undertook a detailed investigation into oil price shocks-non-oil macroeconomy association, which it believes should be the first major step to solving the “Dutch Disease” problem in Nigeria. Analysis was conducted using linear and non-linear variants of oil price, employing the multivariate Vector Autoregressive (VAR) and Vector Error Correction (VEC ) models respectively. Results indicate that both measures of oil price account for remarkable changes in real exchange rates, and the transmission effects of these variations on non-oil export and import are both negative. On the bases of this, the paper recommend policies geared towards evolving realistic and stable exchange rates for the naira, to complement current efforts being made to diversify the economy in the direction of non-oil productions.

Oil price fluctuations and the Nigerian economy

Opec Review, 2005

The single most important issue confronting a growing number of world economies today is the price of oil and its attendant consequences on economic output. Several studies have taken the approach of Hamilton (1983) in investigating the effect of oil price shocks on levels of gross domestic product. The focus of this paper is primarily on the relationship between oil price changes and economic development via industrial production. A vector auto regression model is employed on some macroeconomic variables from 1980 through 2004. The results indicate that oil price changes affect real exchange rates, which, in turn, affect industrial production. However, this indirect effect of oil prices on industrial production is not statistically significant. Therefore, the implication of the results presented in this paper is that an increase in oil prices does not lead to an increase in industrial production in Nigeria.

Impact of Oil Price Volatility on Macroeconomic Variables and Sustainable Development in Nigeria

2016

The main objective of this study is to determine the impact of oil price volatility on macroeconomic variables and sustainable development in Nigeria. The significant role of oil in the Nigerian economy cannot be overestimated. Though there are studies by other researchers on oil prices and macroeconomic variables, their findings are contentious and country-specific. Our literature review and methodology shade lights on these positions. We used secondary time series data in a vector auto regression analysis. We found that fluctuations in oil prices do substantially affect the real GDP, exchange rates, Unemployment, Balance of payments and interest rates in Nigeria. Negative shocks in the international oil market, have significant impact on price fluctuations. Due to increased imports in the Nigerian economy, inflationary pressures are inevitable and are pronounced. Government revenues and expenditures have decreased significantly. We recommend diversification of the economy and ener...

The Effect of Global Oil and Gas Prices and Production Fluctuations on the Economy of Nigeria

The journal of applied business and economics, 2023

Once a cornerstone of the U.S. economy, crude oil production now experiences a paradigm shift, abundant for domestic consumption and export, signaling a lasting global oil price transformation. Despite a surge in U.S. hydrocarbon production and weakening oil prices, imports from Nigeria dramatically dropped from 1.5 million barrels per day in 2006 to 0.2 million in 2013, ceasing entirely by early 2014. Consequently, Nigeria faced a sudden depletion of trade surpluses and reduced foreign reserves. This study delves into the immediate and long-term challenges confronting Nigeria, particularly examining the impact of recent oil and gas price fluctuations on key macroeconomic factors. Findings highlight the balance of payments' high elasticity to oil price shifts and low elasticity to money supply changes with a coefficient of determination of 78.69%. Additionally, the exchange rate shows low elasticity to oil price changes and moderate elasticity to money supply variations with a coefficient of determination of 82.80%.

The Influence of Oil Price Volatility on Selected Macroeconomic Variables in Nigeria

Acta Universitatis Bohemiae Meridionalis

The paper analyses the influence of oil price volatility on Exchange Rate Variability, External Reserves, Government Expenditure and real Gross Domestic Product using the methodology of Vector Auto-Regressive (VAR) to carry out regression analysis, impulse response function and factor error variance decomposition for robust policy recommendations. The results of the research show that unstable oil price exerts varying degrees of deleterious effect on exchange rate variability, external reserves, Government expenditure and real gross domestic product (GDP). Based on the findings of the study, we recommend the need for the country to branch out its revenue sources. This will further shield the dangle effect of the fluctuation in prices of oil. Serious policy attention should be attached to agricultural reformation, industrial policy drives, mines and mineral development to diversify Nigeria’s economy following the downward slide in the oscillations in oil prices to address the problem...

IMPACT OF OIL PRICE VOLATILITY ON MACRO-ECONOMIC VARIABLES IN NIGERIA (1970-2015

There exists no consensus amongst economists and policy makers regarding the impact, level of oil shocks and long run relationships between oil price and macroeconomic variables in Nigeria. This study is aim at examining the impact of oil price volatility on macroeconomic variables in Nigeria from 1970 to 2015. The study employed secondary (time-series) data on oil price (OPR), GDP, foreign reserve (FRS), exchange rate (EXR), and inflation (INF), sourced from WDI, NBS and CBN respectively. To examine the time series properties of the variables, the study employed ADF and PP Unit Root tests. Granger causality test is used to explore the nature and direction of relationship between the variables. VAR tools and ARDL model are employed to capture the dynamic impact and extent to which OPR shocks affects macroeconomic variables in Nigeria. The study establishes that, all the variables used are stationary with different order of integration. Result from the ARDL model reveals the existence of long run relationship between OPR and macroeconomic variables (MEV). This has further confirmed by the uni-directional 2 C 6 F causality running from OPR→MEV (p<0.05 coefficients). Therefore, the study recommends the urgent need for economic diversification, this will certainly dilute the detriment of over dependence on oil, the shocks it poses on macroeconomic variables and mark a new dawn in the global age.

Oil price shocks and the macroeconomy of Nigeria: a non-linear approach

Journal for International Business and …, 2011

Nowadays, the impact of oil price shocks is pervasive as it virtually affects all facets of human endeavor. As such, it is pertinent that we should know the relationship between oil price shocks and the macroeconomy. Therefore, this paper assesses empirically, the effects of oil price shocks on the real macroeconomic activity in Nigeria. Granger causality tests and multivariate VAR analysis were carried out using both linear and non-linear specifications. Inter alia, the latter category includes two approaches employed in the literature, namely, the asymmetric and net specifications oil price specifications. The paper finds evidence of both linear and non-linear impact of oil price shocks on real GDP. In particular, asymmetric oil price increases in the non-linear models are found to have positive impact on real GDP growth of a larger magnitude than asymmetric oil price decreases adversely affects real GDP. The non-linear estimation records significant improvement over the linear estimation and the one reported earlier by ). Further, utilizing the Wald and the Granger multivariate and bivariate causality tests, results from the latter indicate that linear price change and all the other oil price transformations are significant for the system as a whole. The Wald test indicates that our oil price coefficients in linear and asymmetric specifications are statistically significant. JEL Classification Codes E32, E37

Oil price volatility and economic development: Stylized evidence in Nigeria

The research presented in this study, investigates chiefly the causal relationship between oil prices and key macroeconomic variables in Nigeria in a multivariate framework using times series data from 1980 to 2010. To examine whether there is prediction between oil prices and macroeconomic indicators (inflation, interest rate, exchange rate and real gross domestic product) as well as the impact of oil prices on the applied macroeconomic indicators, this research adopted the Granger causality and the ordinary least squares respectively. After ensuring data stationarity, the results suggest that in the short run, changes in the gross domestic product (GDP) is not influenced by oil price volatility, nor do we find evidence of influence on key macroeconomic variables. Again the findings indicate that there is a positive but insignificant relationship between oil price and the Nigerian Gross domestic product. Overall oil prices have no significant impact on real GDP and exchange rate in Nigeria. The result suggests that Nigeria has a special case of the Dutch Disease, where a country’s seeming good fortune proves ultimately detrimental to its economy.

EFFECTS OF FLUCTUATIONS IN OIL PRICE ON MACROECONOMIC VARIABLES IN NIGERIA

The study analyzed the effect of the fluctuation in the crude oil price on some key macroeconomic variables in Nigeria. Using the autoregressive distributed lagged model (ARDL), the study shows that there is no cointegration relationship in any direction between the oil price and each of output, interest rate, inflation rate, unemployment rate, and exchange rate. There is however, a unidirectional cointegration running from oil price to each of money supply (M2) and government expenditure. The results of a vector autoregression (VAR) estimation reveals that there is no causality between the oil price and each of the output, interest rate, inflation rate, unemployment rate, and exchange rate. A vector error correction (VEC) estimation shows that the causality between the oil price and each of the money supply and government expenditure is in one direction, from the oil price to each of the two variables. The orthogonalized impulse response functions (IRFs), cumulative orthogonalized IRFs, and forecast error variance decomposition (FEVD) estimations, all confirm that each of the output, interest rate, inflation rate, unemployment rate, and exchange rate is unresponsive to shocks in oil price; while shocks in oil price has a permanent effect on each of the money supply and government expenditure. The study therefore, concludes that Nigeria has not used the huge revenue realized from its oil and gas sector during the period of oil windfalls and rising oil prices to grow its economy. Also, it is found out that inflation in Nigeria is a monetary phenomenon as a response of the domestic price levels to the increase in money supply, which responds positively to the increase in oil revenue over the years. It is therefore suggested that Nigeria needs to diversify its economy and sources of revenue; maintain prudent fiscal management and fiscal discipline; make the governmental institutions, agencies and parastatals more transparent at all tiers of government, and curb corruption and financial misappropriation, especially in the oil and gas sector of the economy.

THE IMPACT OF OIL PRICE MOVEMENT ON NIGERIAN MACROECONOMIC PERFORMANCE

Journal of Global Economics, Management and Business Research, 2019

The paper investigated the impact of oil price movement on key macroeconomic performance variables and as well empirically accounted for how the Nigerian economy reacts to the different movements in oil price. The counter-cyclical behaviour in the relationship between oil price and macroeconomic variables in Nigeria required the use of multivariate model with the pre-estimation test used as a guide to identify the appropriate one to be adopted, VECM was used among these four competing multivariate technique based on the outcome of the pre-estimation test. The study avails the policy makers the opportunities to better acquaint themselves with possible ways of mitigating the adverse effects of negative impact of oil price fluctuations and also to harness and better utilise the largesse of positive oil price changes. Hence, the study recommended enhanced economic diversification by increasing the contributions of other sectors to GDP and increase the export earnings accrued to the nation from the real sector as against the present revenue structure that rely solely on oil proceeds that is subject to incessant price fluctuations and international politics.