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Crude Oil Price Shocks And Macroeconomic Behavior In Nigeria

Author

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  • Emmanuel Olusegun STOBER

    (Associate Professor, PhD, senior researcher, Department of Statistics and Econometrics, Bucharest University of Economic Studies, National Scientific Institute of Labour and Social Protection)

Abstract

Milton Friedman's permanent income hypothesis suggests that frictionless open economies with depletable natural resources should increase its external reserves with most of the resource windfalls. Nigeria like any other country endowed with natural resources such as crude oil and liquefied natural gas are often faced by the Dutch disease. The evolution of the Nigeria’s foreign exchange market has been influenced by the changing pattern of international trade, institutional changes in the economy and structural shifts in production. The increased export of crude oil followed by the sharp fall in its prices, and enhanced official foreign exchange receipts should give the government a wakeup call. This study focuses on macroeconomic behavior in the presence of crude oil price volatility. The dataset covered the period of 1970-2014, using OLS model. Given the high degree of dependency and contribution crude oil has on Nigeria’s revenue generation, this analysis reveals crude oil price to be having a positive impact on Nigeria’s economic wellbeing. A 1% increase in its price has an impact of 0.67% increase in GDP. Adding-up all other analyzed variable, crude oil still stand as the mean influential factor to the Nigerian economic development. Therefore, it is of optimum important to quickly diversify the economy, to prevent the repercussion of crude oil price shock, and also heavily invest in the development of infrastructural facilities to create the enabling environment for a non-oil economy

Suggested Citation

  • Emmanuel Olusegun STOBER, 2016. "Crude Oil Price Shocks And Macroeconomic Behavior In Nigeria," Journal of Social and Economic Statistics, Bucharest University of Economic Studies, vol. 5(1), pages 56-66, JULY.
    • Handle: RePEc:aes:jsesro:v:5:y:2016:i:1:p:56-66
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    File URL: http://www.jses.ase.ro/downloads/Vol5NO1/Stober.pdf
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    References listed on IDEAS

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    1. Araujo, Juliana D. & Li, Bin Grace & Poplawski-Ribeiro, Marcos & Zanna, Luis-Felipe, 2016. "Current account norms in natural resource rich and capital scarce economies," Journal of Development Economics, Elsevier, vol. 120(C), pages 144-156.
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    3. Mr. Suman S Basu & Jan Gottschalk & Mr. Werner Schule & Mr. Nikhil Vellodi & Ms. Susan S. Yang, 2013. "The Macroeconomic Effects of Natural Resource Extraction: Applications to Papua New Guinea," IMF Working Papers 2013/138, International Monetary Fund.
    4. Mr. Marcelo Martinez & Mr. Montfort Mlachila, 2013. "The Quality of the Recent High-Growth Episode in Sub-Saharan Africa," IMF Working Papers 2013/053, International Monetary Fund.
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    Cited by:

    1. Emmanuel Olusegun Stober, 2017. "Are We There Yet?," Academic Journal of Economic Studies, Faculty of Finance, Banking and Accountancy Bucharest,"Dimitrie Cantemir" Christian University Bucharest, vol. 3(4), pages 68-76, December.

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    More about this item

    Keywords

    Exchange rate; External reserves; Nigerian economic development; Vector Error; Correction Model (VECM);
    All these keywords.

    JEL classification:

    • C54 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Quantitative Policy Modeling
    • C55 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Large Data Sets: Modeling and Analysis
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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