Abstract
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 forutne proves ultimately detrimental to its economy. Key words: Oil and Gas, Gross Domestic Product, causality, macroeconomic indicators.
Highlights
The Nigerian oil and gas sector plays a very dominant role in the nation’s economy with oil receipts accounting for 82.1%, 83% and about 90 per cent of the nation’s foreign exchange earnings in 1974, 2008 and 2010 respectively (Ihua et al, 2009)
Being a net importer of oil, large shifts or fluctuations in oil prices should be a matter of serious concern to the Nigerian government when taking policy decisions that affect her national economic growth and development. In view of these developments, the research presented in this paper examines the causality between oil price volatility and key macroeconic variables with further emphasis on how oil price volatility conforms to stylized facts established by theory and prior empirical work
The ADF unit root test result presented above confirms that change in oil prices is stationary at level while stationarity was achieved for real gross domestic product (GDP) at the second difference
Summary
The Nigerian oil and gas sector plays a very dominant role in the nation’s economy with oil receipts accounting for 82.1%, 83% and about 90 per cent of the nation’s foreign exchange earnings in 1974, 2008 and 2010 respectively (Ihua et al, 2009). This is an economically precarious situation as confirmed by Oriakhi and Osaze (2013). Since the discovery of oil, Nigerian’s reliance on income from oil and Gas has further been buoyed by an almost consistent upward movement in the prices of crude oil reaching about $147 per barrel in 2008, before averaging $90 per barrel in 2010 (Oriakhi and Osaze, 2013).
Sign-in/Register to view highlights & summary Sign-in/Register to access full text options 
Free) 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a call
