Impact of Oil Price Instability on Economic Growth (A Case of Nigeria)
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This study assessed the impact of oil price instability on the Nigerian economic growth using the VAR model. 1981 to 2015 annual time series data was utilized in the study and it was obtained from the CBN statistical database. While cointegration test confirms the existence of a long-run relationship, test for unit root indicated that all the variables were non-stationary at level but stationary at first difference. The Granger causality result shows that oil price Granger caused economic growth and exchange rate, while exchange rate Granger caused inflation. Moreover, the variance decompositi...
This study assessed the impact of oil price instability on the Nigerian economic growth using the VAR model. 1981 to 2015 annual time series data was utilized in the study and it was obtained from the CBN statistical database. While cointegration test confirms the existence of a long-run relationship, test for unit root indicated that all the variables were non-stationary at level but stationary at first difference. The Granger causality result shows that oil price Granger caused economic growth and exchange rate, while exchange rate Granger caused inflation. Moreover, the variance decomposition result indicated that oil price instability is the largest source of variation in economic growth and exchange while the largest source of variation in the inflation rate is exchange rate followed by oil price. Hence, it is concluded that oil price instability significantly influences economic growth and exchange rate of Nigeria but indirectly affects inflation. This study finally recommended the diversification of Nigerian economy.
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