Abstract
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. DOI : 10.7176/JETP/9-5-01 Publication date :June 30 th 2019
Highlights
Nigeria, a member of the Organization of Oil Exporting Countries (OPEC) is ranked the sixth oil producing nation in the world
The result of the test using Augmented Dickey Fuller(ADF) showed that four of the time series data namely oil price (OILP), government revenue (GREV), inflation (INF) and unemployment (UEMP) were stationary at first difference (I1), that is, they are integrated of order 1; while government expenditure (GEXP), money supply (M2) and real gross domestic product (RGDP) were stationary at second difference (I2), the variables were integrated of order 2
The result of stationarity test using Phillip Peron (PP) showed that all five of the variables namely oil price(OILP), government revenue(GREV), government expenditure(GEXP), inflation(INF) and unemployment(UEMP) were stationary at first difference (I1), indicating that they are integrated of order 1while the other two variables such as money supply (MS2) and real gross domestic product(RGDP) were stationary at second difference(I 2), said to be integrated of order 2
Summary
The study adopts a time series secondary data between 1981 and 2014 from the Central Bank of Nigeria (CBN), National Bureau of Statistics (NBS), International Monetary Fund (IMF) and the World Bank. The annual time series data employed are oil prices (OILP), government revenue (GREV), government expenditure (GEXP), money supply (MS2), inflation (INF), real gross domestic product (RGDP) and unemployment (UEMP). These variables are decomposed into quarterly observations (1981Q1- 2017Q4) in order to achieve increased data points and provide greater degree of freedom
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