CRUDE OIL PRICES AND ECONOMIC GROWTH IN NIGERIA AN EMPIRICAL ANALYSIS

Abstract

This paper examined the relationship between oil prices and economic growth in Nigeria using Autoregressive Distributed Lag (ARDL) model and Pairwise Granger Causality test on annual time series data from 1981 to 2022. Variables used in the study include Crude Oil Price (OILP), Nigeria Real Gross Domestic Product (RGDP) and Exchange Rate of Naira (EX). The Augmented Dickey Fuller (ADF) tests show that the series contain unit root in their level form and became stationary at the first difference. Estimate of the ARDL bound cointegration did not indicate long run relationship among the variables. In the short run, the causality test results indicate insensitive nature of the causal relationship between the variables. This suggests that oil price and exchange rate do not provide predictable information about real GDP. The findings lead us to conclude that in Nigeria, international crude oil price cannot be used as a policy tool in adjusting the economic growth in both short run and long run periods. Policy makers should focus on domestic economic policies that could diversify the economy.