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Oil price Fluctuation and Aggregate Output Performance in Nigeria

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  • Ibrahim, Taofik

Abstract

This paper investigates the relationship between oil price fluctuation and output performance in Nigeria during the period 1970 to 2015. It synthesizes the standard neoclassical growth model and the Keynesian national income identity by augment the typical production function to include oil price as one of the factors of production and then super-impose the augmented production function on the Keynesian national income identity. The Two Stage Least Square (2SLS) estimation technique that accounts for the plausibility of endogeneity was adopted in the study. The ADF unit root and Johansen cointegration tests were used to determine the time series properties of the data used in the study. Findings suggest that oil price impacted positively on aggregate output but negatively on agricultural, manufacturing and service sector suggesting that fluctuation in oil price create uncertainty in the production capacity of the productive sectors and it also undermines the effectiveness of the government fiscal management of crude oil revenue. The study, therefore, recommends that the Nigerian government need to diversify its export revenue base in order to minimize the over reliance on crude oil. Also, the country needs to develop the local capacity of its refinery so as to reduce the importation of refined petroleum which serves as input to most productive sectors of the economy.

Suggested Citation

  • Ibrahim, Taofik, 2018. "Oil price Fluctuation and Aggregate Output Performance in Nigeria," MPRA Paper 88636, University Library of Munich, Germany, revised 12 Apr 2018.
    • Handle: RePEc:pra:mprapa:88636
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    File URL: https://mpra.ub.uni-muenchen.de/88636/1/MPRA_paper_88636.pdf
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    References listed on IDEAS

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    10. Oriakhi D.E & Iyoha Daniel Osaze, 2013. "Oil Price Volatility and its Consequences on the Growth of the Nigerian Economy: An Examination (1970-2010)," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 3(5), pages 683-702.
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    Cited by:

    1. Babatunde Adekunle OKUNEYE & Peter Olugbenga OLUWO, 2023. "Crude Oil Price Fluctuations and Manufacturing Sector Performance in Nigeria (1981 - 2019)," Business & Management Compass, University of Economics Varna, issue 2, pages 139-152.
    2. Clovis Wendji Miamo & Elvis Dze Achuo, 2021. "Crude Oil Price and Real GDP Growth: An Application of ARDL Bounds Cointegration and Toda-Yamamoto Causality Tests," Economics Bulletin, AccessEcon, vol. 41(3), pages 1615-1626.
    3. Aye, Goodness C. & Odhiambo, Nicholas M., 2021. "Oil prices and agricultural growth in South Africa: A threshold analysis," Resources Policy, Elsevier, vol. 73(C).

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    More about this item

    Keywords

    Oil Price; Aggregate output; Agricultural output; Manufacturing output; Service output; Nigeria; Two-Stage Least Square (2SLS);
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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