Crude Oil Exports and Economic Growth in Nigeria

Abstract

This study was motivated to verify the relevance or otherwise of the Export-Led Growth Hypothesis with empirical evidence of crude oil exports in Nigeria. Data were collected from the Central Bank of Nigeria Statistical Bulletin. The study's objective was addressed with the application of Engle Granger Cointegration Test, Error Correction Model, and Impulse Response test. The following are the findings of this research work: The model's error correction coefficient indicates that the model accounted for 81% of disequilibrium caused by an error in the long term. The lag values of RGDP have a negative but insignificant relationship with RGDP. This implies that past economic growth leads to a reduction in present economic growth in Nigeria. In the same vein, crude oil exports and RGDP have a positive and significant relationship, confirming that crude oil exports highly drive that economic growth in Nigeria in the short run. At the same time, the reverse is the case in the long run. Hence, oil exports support the presence of the Export-Led Growth Hypothesis only in the short run in Nigeria. Furthermore, the dynamic interaction between oil exports and economic growth was examined within the context of impulse response analysis. Shocks to oil exports generated a significant positive response initially, which gradually decreased over the forecast period. It could be concluded that oil exports have a crucial impact on the Nigerian economy. Because of the above findings, this study makes the following recommendations for the policymakers in Nigeria; promoting oil exports could be considered a viable policy in increasing Nigeria's economic growth. Also, it is imperative to state that the policymakers should factor in time lag to ensure appropriateness in the timing of policies formulation.