Effect of International Crude Oil Prices on Nigeria’s Gross Domestic Product from (1985-2020)

Abstract

The aim of this study is to investigate the effect of oil price and its volatility on the development of Nigeria's economy; this is due to the decline of the Nigerian economy as a result of decrease in daily oil production and plummeting oil prices. The study assesses both long-and short-term effects of oil price volatility on real GDP in Nigeria. To achieve the basic objective of this research and to ascertain a comprehensive and robust outcome, the study adopted secondary data such as Nigeria's Real GDP, Crude Oil Price, Real Exchange Rate and Foreign Direct Investment (FDI) that covers the period 1985 to 2020. In the analysis of data collected the research adopts Autoregressive Distributed Lag (ARDL) estimation technique. From the analysis, it can be deduced that in the short run, there is a positive impact of oil price on real GDP which is statistically significant at one percent level. As real exchange rate rises by one percent, the real GDP rises by 1.528 per cent, all things being equal. While the long run, the effect is positive and statistically significant measuring 14.67 positive effects on the economy. It also revealed that while oil price volatility affects economic development positively in the short term, its effect in the long term is not statistically significant. Findings from the study revealed that crude prices have a positive effect on GDP in Nigeria. Therefore, sustaining an equilibrium tempo of crude oil supply in Nigeria is crucial while the international community should allow the forces of demand and supply to play its role. This is because the rate of supply has effect on price and frequent change in price means high volatility. The article is structured as follows: introduction, literature review, methodology, data analysis, discussion of findings and recommendations.

Effect of Crude Oil Prices and Production on the Performance of Nigerian Gross Domestic Product: A Conceptual Framework

“…The demand and supply of oil depends on the internationally determined market price which can be affected by unpredictable global events (Nwosu, Anumudu, & Nnamchi, 2020). Thus, the price and production of crude oil remains an important component influencing the world's economic development, modern turn of events, food cost, poverty, and other financial factors, other than its elements is the primary list exhibiting oil market conditions (Jiménez-Rodríguez, 2008;Naranpanawa & Bandara, 2012;Sule-Iko & Nwoye, 2023). Crude oil in this study is believed to be the main driver of the economic condition of developing countries especially Africa continents Nigeria to be precise such that a rise in the price of crude oil significantly improves the country's revenue and a fall also affects the nation's revenue negatively (Sule-Iko & Ibrahim, 2021).…”

Price Stability and Economic Development in Nigeria: Issues and Challenges

“…This indicates that certain money market instruments can affect price stability in Nigeria (Appah, 2023). The study by (2023) found that oil price volatility has a positive impact on real GDP in the short run, but its effect in the long run is not significant (Sule-Iko & Nwoye, 2023). This suggests that while oil price volatility can have a positive effect on economic development in the short term, it may not have a lasting impact (Sule-Iko & Nwoye, 2023).…”