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

摘要

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.