Oil Price Shock and Macroeconomic Performance in Nigeria: Implication on Employment (original) (raw)

An analysis of the impact of oil price shocks on the growth of the Nigerian economy: 1970-2011

African Journal of Business Management, 2015

This paper examines the impact of oil price shocks on Nigerian economic growth while controlling the effects of unrest in the international oil market, exchange rate and agriculture output using quarterly time series data from 1970:q1-20011:q4.The broad objective of the study is to evaluate the long run relationship among the variables namely; oil price, exchange rate, agriculture output, unrest and economic growth. The research applied ADF unit root tests to ascertain the stationary of the series and also employed Johansen and Juselius (1990) trace and maximal eigenvalue tests to ensure long-run relationship among the variables under the study. In addition, structural Vector Autoregression (SVAR) is also applied in examining the link between the shocks emanating from oil price, unrest and their impacts on economic growth. The finding from ADF revealed that all the series at level are not stationary but stationary at first difference with constant. Moreover, the findings from SVAR using the Impulse response functions (IRFs) and variance decompositions (VDCs) indicated that the response of oil price shocks and unrest to (rGDP) economic growth depicts both positive and negative impact, i.e. long-run impact on economic growth exists. The study concludes that oil price, exchange rate, agriculture output and unrest contained some useful information in predicting the future path of economic growth in Nigeria. It, therefore, recommends that government should diversified the economy from oil to non oil sectors base and to improving the security situation in the Niger Delta with a view to boosting oil output, hence leading to increased revenue and by implication growth of the economy.

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 Shocks and Macroeconomic Performance in Nigeria

2013

This paper examines the macroeconomic implications of symmetric and asymmetric oil price and oil revenue shocks in Nigeria, using the vector autoregressive (VAR) estimation technique. The paper finds that both positive and negative oil price shocks influence real government expenditure only in the long run rather than in the short run, while examining positive and negative shocks to external reserves revealed stronger implications for expenditure in the long run, with positive rather than negative oil price shocks having stronger short and long run effects on real GDP, and therefore triggering inflationary pressure and domestic currency depreciation as importation rises. This implies that the country exhibits the Dutch disease syndrome in the short and long run. However, results obtained show that oil revenue shocks are capable of impeding economic growth only in the long run while raising general price levels marginally in the short run after the initial shocks, with evidence of se...

Oil Price Shocks and Variations in Macroeconomic Variables in Nigeria

The study was an evaluation of the impact of oil price fluctuations on specific macroeconomic variables in Nigeria for the period, 1981-2017. This was examined to establish the innovations oil price will caused on some selected macroeconomic variables such as government revenue, government expenditure, money supply, inflation, real gross domestic product and unemployment. Using results from impulse responses and variance decompositions from a VAR, the result showed that oil price fluctuations largely accounted for the variations in six out of seven macroeconomic variables namely government revenue (GREV), government expenditure (GEXP), money supply (MS2), real gross domestic product (RGDP) and unemployment (UEMP) while its impact on inflation (INF) was found to be insignificant thus, providing evidence that oil price is not inflationary in an open economy such as Nigeria. The result of the impulse response function (IRF) also revealed that aside from inflation which had a negative response to oil shock, all other six variables such as government revenue, government expenditure, money supply, real gross domestic product and unemployment had a positive significant response to oil shock throughout the 10 th quarters.From the empirical investigation, it can be concluded that a combination of fiscal and monetary policies could provide effective instruments for the stabilization of the economy after an oil shock.

Oil Price Shocks and Macroeconomic Performance of the Nigerian Economy: A Structural Var Approach

Facta Universitatis, Series: Economics and Organization, 2020

This study examines the effect of oil price shocks on the macroeconomic performance of the Nigerian economy covering the period from 1980 to 2018. The effect of oil price shocks is investigated on macroeconomic variables like output growth, inflation, interest rate, exchange rate and industrial production index using the structural vector autoregression (SVAR) approach. The results of the investigation reveal that oil price shocks have significantly and negatively affected economic growth and industrial output. Furthermore, while the results show that oil price shocks have a significant positive effect on inflation, the effect is also positive on interest rate and exchange rate, but it is not significant. The results of impulse response function show a negative effect on output growth, it is positive on inflation, but mild and indeterminate on industrial production, interest rate and exchange rate. Based on findings in this study, the Renaissance theory and the Dutch Disease theorie...

Crude Oil Price Shocks and Macroeconomic Behavior in Nigeria

Journal of Social and Economic Statistics, 2016

Milton Friedman's permanent income hypothesis suggests that frictionless open economies with depletable natural resources should increase its external reserves with most of the resource windfalls. Nigeria like any other country endowed with natural resources such as crude oil and liquefied natural gas are often faced by the Dutch disease. The evolution of the Nigeria's foreign exchange market has been influenced by the changing pattern of international trade, institutional changes in the economy and structural shifts in production. The increased export of crude oil followed by the sharp fall in its prices, and enhanced official foreign exchange receipts should give the government a wakeup call. This study focuses on macroeconomic behavior in the presence of crude oil price volatility. The dataset covered the period of 1970-2014, using OLS model. Given the high degree of dependency and contribution crude oil has on Nigeria's revenue generation, this analysis reveals crude oil price to be having a positive impact on Nigeria's economic wellbeing. A 1% increase in its price has an impact of 0.67% increase in GDP. Adding-up all other analyzed variable, crude oil still stand as the mean influential factor to the Nigerian economic development. Therefore, it is of optimum important to quickly diversify the economy, to prevent the repercussion of crude oil price shock, and also heavily invest in the development of infrastructural facilities to create the enabling environment for a non-oil economy.

Licensed under Creative Common OIL PRICE SHOCKS, EXCHANGE RATE AND NIGERIA'S ECONOMY

2016

The recent oil price shock and its effect on the stability of the Nigerian economy had led to a reawakening of the chosen theme. This study empirically examined the relationship between oil price shocks, exchange rate, external reserve and real GDP in Nigeria using data spanning from 1971Q1 to 2014Q4. The variables of interest were analyzed using Structural Vector Autoregressive (SVAR) Model. The impulse response functions as well as variance decomposition results were derived from the analysis. Some insightful findings emanated from the study. It was revealed that oil price shocks had negative effect on external reserve, exchange rate and economic growth. The negative effect of oil price shocks on external reserves and economic growth tended to be more significant in the long run. The findings of this study revealed that oil price shocks had a deleterious effect on the macroeconomic performance of Nigeria. An effective macroeconomic management is required to reduce the adverse effe...

Oil Price Shock and Aggregate Economic Activity in Nigeria

2006

The objective of this study was to examine the effect of oil price shock on output, inflation, the real exchange rate and the money supply in Nigeria using quarterly data from 1970 to 2003. The VAR method was employed to analyze the data. The findings were contrary to previous empirical findings in other countries; oil price shock does not affect output and inflation in Nigeria. However, oil price shocks do significantly influence the real exchange rates. The implication is that a high real oil price may give rise to wealth effect that appreciates the real exchange rate. This may squeeze the tradable sector, giving rise to the "Dutch Disease".

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.

Macroeconomic Effects of Exogenous Oil Price Shock in Nigeria: Persistent or Transitory

International Journal of Economics and Finance, 2018

This paper examines the macroeconomic effects of exogenous oil price shock in Nigeria. The paper additionally investigates the symmetric effects of oil price shock and the persistence and/or transitory nature of the shock. To achieve these objectives, the Generalised autoregressive conditional heteroskedasticity (GARCH), Component generalised autoregressive conditional heteroskedasticity (CGARCH) and Exponential generalized autoregressive conditional heteroskedasticity (EGARCH) were employed to estimate the various equations. The results showed that oil price volatility has significant positive effect on exchange rate, foreign external reserves, government revenue, and capital importation. The results also revealed symmetric and persistent effect of oil shock in Nigeria. Based on the results, the paper made recommendations for ameliorating and/or insulating Nigeria from the vulnerabilities of oil price shocks.