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IMPACT OF CRUDE OIL PRICE CHANGES ON ECONOMIC GROWTH IN NIGERIA (1980-2014)
ABSTRACT
This study examined the impact of crude oil price changes on economic growth in Nigeria. The study sets out to examine the causal and both short and long-run relationship between crude oil price changes and economic growth in Nigeria. The underpinning theoretical framework dwells in Harrod-Donor theory of economic growth, the theory of employment, interest and money and Kaldor theory of economic growth. The study employed the annual time series data from 1980 to 2014 for the following variables: Crude Oil Prices (COP), Capital Formation (CF), Real Gross Domestic Product (RGDP), Market Capitalization (MCAP), Foreign Reserves (FR), Inflation Rate (INF) and Exchange Rate (EXR), using descriptive statistics and normality test, regression analysis, unit root test of ADF, Johansen cointegration, error correction model and causality test. The results revealed significant relationship between the variables. The causality test result also indicates that a causality relationship runs from crude oil prices to all the indicators of economic growth. The implication is that any change in the prices of crude oil will have effect on the growth of the Nigerian economy. Based on the significant relationship between crude oil prices and various economic growth indicators used in the study, Nigerian government should implement policies that will eradicate oil theft and corrupt practices in the NNPC so as to take maximum advantage of crude oil price increases.
Keywords: Crude oil prices, capital formation, foreign reserves, real gross domestic product and market capitalization.