Evaluating the Correlation between Specific Macroeconomic Performance and the Price of Crude Oil in Nigeria
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Abstract
The study examines the relationship between oil price shocks and some selected Nigeria’s Macroeconomic variables by utilizing quarterly data for the period of 1980-2022 using a time frame of 46 years. The selected macroeconomic variables are Real Growth Domestic Product, Consumer Price Index and Real Exchange Rate. VECM was used as a technique for analysis, the results obtained from the estimation of the VECM model showed that there are long-run interdependences of oil price shocks that have a significant impact on Real Growth Domestic Product, Consumer Price Index and Real Exchange Rate in Nigeria. The study concluded, that the major source of revenue and foreign earnings to the economy is mainly from the sales of crude oil, as the economy is entirely dependent on the level of global oil prices, as such most of the macroeconomic indicators of the economy are directly or indirectly being affected by the oil price fluctuation in the economy, the study therefore Recommended that, since Nigeria doesn’t have control of oil prices, it is required that government diversify the economy to reduce the adverse effect of shocks emanating from the fluctuation of global oil prices, the country should diversify its export from oil exports to non-oil export Diversification of the economy is necessary to reduce the consequences of external shocks. The diversification of the oil revenue base would be a means of minimizing reliance on crude oil and petroleum products.
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References
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Salisu, A., & Haladu, A. I. (2023), An Assessment between the Relationship Between Stock Market Development and Monetary Policy on Economic Growth In Some Selected African Countries. Journal of Sustainable Development, 6(4), 114-125.
Salisu, A., & Mamman, T. (2022). Empirical Investigation between Import, Export, Globalization and Nigerian Economic Growth, 1986-2020: An Applications Granger Causality. African Journal, 2(1), 29.
Sami, S. & Taiwo, M. (2023). Effect of Crude Oil Prices and Production on the Performance of Nigerian Gross Domestic Product: A Conceptual Framework. Journal of Human Resource and Sustainability Studies, 11, 698-711. DOI: 10.4236/jhrss.2023.113038.
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Tang, J., Chen, Y., Chen, X., Yao, Y., Ying, H., Xiong, J., & Bai, J. (2010). Production of cytidine 5’-diphosphorylcholine with high utilization of ATP by whole cells of Saccharomyces cerevisiae. Bioresource technology, 101(22), 8807–8813. https://doi.org/10.1016/j.biortech.2010.06.006
Wakeford, J. (2006). The impact of oil price Shocks on the South African Macroeconomy: History and Prospects. In Accelerated and Shared Growth in South Africa: Determinants, constraints and opportunities.
Wilfred, I. U. (2024), Effect of Selected Macroeconomic Variables on External Reserves Management in Nigeria (1981-2022). Educational Administration: Theory and Practice, 30(5), 13787-13799. DOI: 10.53555/kuey.v30i5.6039.
Wudil, A. A., Muhammad, R., & Salisu, A. (2021). Impact of Some Monetary Policy Varibles on Economic Growth: Empirical Evidence From Selected West African Countires. Innovation in Economy & Policy Research, 2 (2), 1-14.
Aliyu, S. U. R. (2009). Impact of Oil Price Shock and Exchange Rate Volatility on Economic Growth in Nigeria: An Empirical Investigation. Research Journal of International Studies, 11, 4-15.
Bamaiyi, G. (2024). Effect of Oil Price Shocks on Selected Macroeconomic Variables in Nigeria (1990-2021). International Journal of Development and Economic Sustainability, 12(1), 12-26.
Blanchard, O., & Gali, J. (2007). The Macroeconomic Effects of Oil price Shocks: Why are the 2000s so different from the 1970s? NBER Chapters. In International Dimensions of Monetary Policy, National Bureau of Economic Research (pp. 373-421). https://www.nber.org/papers/w13368
Brown, S. P. A., & Yücel, M. K. (1999). Oil prices and US Aggregate Economic Activity: A Question of Neutrality. In Economic and Financial Review, Federal Reserve Bank of Dallas, Second Quarter (pp. 16-23).
Elmi, Z. M., & Jahadi, M. (2011). Oil price Shocks and Economic Growth: Evidence from OPEC and OECD. Australian Journal of Basic and Applied Sciences, 5(6), 627-635.
Guntur, A, R., & Shripad, R, M., (2020), Relationship between Crude Oil prices and Macro-economic Variables: Evidence from BRICS Countries. International Journal of Energy Economics and Policy, 10(5), 264-271.
Hamilton, J. (1996). This is What Happened to the Oil price-Macroeconomy Relationship. Journal of Monetary Economics, 38, 215-220.
Hamilton, J. D. (1983). Oil and the Macroeconomy since World War II. Journal of Political Economy, 91, 228-248.
Hoffman, D. L., & Rasche, R. H. (1996). Assessing Forecast Performance in a Coin-integrated System. Journal of Applied Econometrics, 11, 495-517.
Hunt, B., Isard, P., & Laxton, D. (2002). The Macroeconomic Effects of Higher Oil Prices. National Institute Economic Review, 179, 87–103. doi:10.1177/002795010217900111
Hussain, M., & Salisu, A. (2019). An Impact Assessment of Financial Sector Development on Economic Growth in Nigeria, 1986-2018. Jalingo Journal of Social and Management Sciences, 1(3), 97-110
Jones, C. T. (1991). OPEC Behavior under Falling Prices: Implications for Cartel Stability. Energy Journal, 11(3), 117-129.
Khramov, V., & Lee R. (2013). The Economic Performance Index (EPI): An intuitive indicator for assessing a country’s economic performance dynamics from a historical perspective. IMF working paper. WP/13/214. https://www.imf.org/external/pubs/ft/wp/2013/wp13214.pdf[
Kilian, L. (2010), Oil Price Volatility: Origin & Effects: Background Paper Prepared for the WTO’s World Trade Report 2010. University of Michigan and CEPR.
Killian, L., & Hicks, B. (2009). Did unexpected strong economic growth cause the oil price shock of 2003-2008?. Mimeo, Department of Economics University of Michigan.
Magaji, S., & Musa, I. (2015). Effect of Household Income on Child Labour in Nigeria. Lapai International Journal of Management and Social Science,8(1), 32 – 56.
Magaji, S., Ayo, A.A., & Musa, I. (2019). Relative Impact of Monetary Policy Instruments on Economic Growth in Nigeria. Lapai Journal of Economics, 3(2), 93-118.
Miamo, C. W., & Achuo E. D. (2021). Can the resource curse be avoided? An empirical examination of the nexus between crude oil price and economic growth. SN Business & Economics, 2, 5. DOI: 10.1007/s43546-021-00179-x
Mory, J. (1993). Oil Prices and Economic Activity: Is the Relationship Symmetric? Energy Journal, 14, 151—161.
Musa, I, Magaji, S., & Salisu, A. (2022). The Monetary Policy Shocks and Economic Growth: Evidence from SVAR Modelling. International Journal of Indonesian Business Review, 1(1), 1-11.
Musa, I., Magaji, S., Eke, C. I., & Abdulmalik, O. Y. (2022). Poverty and its Intractability: Causes and Consequences. Inclusive Society and Sustainability Studies, 2(2), 48-58.
Nnnanna, O. J., & Masha, I. (2003). “Oil price Fluctuation, macroeconomic behaviour and Policy Response in Nigeria: A VAR Specification. West African Journal of Monetary and Economic Integration, 3, (1), 85-113.
Omisakin, O., Adeniyi, O., &. Omojolaibi, A. (2009). A Vector Error Correction Modeling of Energy Price Volatility of an Oil Dependent Economy: The Case of Nigeria. Pakistan Journal of Social Sciences, 6(4), 207-213.
Omolade, A., Ngalawa, H., & Kutu, A. (2019). Crude oil price shocks and macroeconomic performance in Africa’s oil-producing countries. Cogent Economics & Finance, 7, 1607431. DOI: 10.1080/23322039.2019.1607431
Plakandaras, A. (2017). Time-Varying Role of Macroeconomic Shocks on House Prices in the US and UK: Evidence from Over 150 Years of Data. University Of Pretoria Department of Economics Working Paper Series.
Rafindadi, A. S. (2012). Macroeconomic Policy, Output and Unemployment Dynamics in Nigeria: Is There Evidence of Jobless Growth? In 53rd Annual Conference of the Nigerian Economics Society. DOI: 10.2139/ssrn.2135752
Riggi, M., & Venditti, F. (2015). The time-varying effect of oil price shocks on euro-area exports. Working paper.
Salisu, A., & Haladu, A. I. (2023), An Assessment between the Relationship Between Stock Market Development and Monetary Policy on Economic Growth In Some Selected African Countries. Journal of Sustainable Development, 6(4), 114-125.
Salisu, A., & Mamman, T. (2022). Empirical Investigation between Import, Export, Globalization and Nigerian Economic Growth, 1986-2020: An Applications Granger Causality. African Journal, 2(1), 29.
Sami, S. & Taiwo, M. (2023). Effect of Crude Oil Prices and Production on the Performance of Nigerian Gross Domestic Product: A Conceptual Framework. Journal of Human Resource and Sustainability Studies, 11, 698-711. DOI: 10.4236/jhrss.2023.113038.
Shaba, N. Y., Obansa, S. A. J., Magaji, S., & Yelwa, M. (2018). Analysis of the Relationship between Income Inequality and Poverty, Prevalence in Selected North Central States of Nigeria: 1991-2013. Applied Economics and Finance, 5(3), 22-23.
Tang, J., Chen, Y., Chen, X., Yao, Y., Ying, H., Xiong, J., & Bai, J. (2010). Production of cytidine 5’-diphosphorylcholine with high utilization of ATP by whole cells of Saccharomyces cerevisiae. Bioresource technology, 101(22), 8807–8813. https://doi.org/10.1016/j.biortech.2010.06.006
Wakeford, J. (2006). The impact of oil price Shocks on the South African Macroeconomy: History and Prospects. In Accelerated and Shared Growth in South Africa: Determinants, constraints and opportunities.
Wilfred, I. U. (2024), Effect of Selected Macroeconomic Variables on External Reserves Management in Nigeria (1981-2022). Educational Administration: Theory and Practice, 30(5), 13787-13799. DOI: 10.53555/kuey.v30i5.6039.
Wudil, A. A., Muhammad, R., & Salisu, A. (2021). Impact of Some Monetary Policy Varibles on Economic Growth: Empirical Evidence From Selected West African Countires. Innovation in Economy & Policy Research, 2 (2), 1-14.