Oil Consumption and Economic Growth in Nigeria: A Multivariate Cointegration Analysis (original) (raw)

The paper seeks to examine the relationship between oil consumption and economic growth in Nigeria using the Johansen and Juselius Co-integration technique based on the Cobb-Douglas production function to construct three models by introducing three major sectors of oil consumption of Nigeria (Transport, Power, and Industrial sector oil consumption) and how Nigerian's upward review oil price variable impact on GDP. ADF (1979) and Johansen Maximum Likelihood method of cointegration (1988) are used to test the order of integration, Long run, and short-run dynamics between variables respectively using annual data from 1970-2016. The study shows evidence of the long run and dynamic relationship for all the variables except industrial oil consumption and oil price variables which has no short-run impact on GDP. Also, it was found that capital and labour are more important in affecting output growth compared to energy consumption Oil prices impacting real GDP negatively in long run but positively in the short-run. The prominent policy recommendation is, in order to sustain high economic growth in the long-run, the country needs to increase the efficiency of its workforce and expand its saving capacity to generate more capital and need to strengthen the effectiveness of energy generating agencies by ensuring periodic replacement of worn-out equipment in order to drastically curtail transmission power losses

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