Oil Price Volatility and Sustainable Output Growth in Nigeria
- Country : Nigeria
- Subject : Economics
Keywords : Oil Price, Output Growth, Volatility, ARCH, Pairwise Granger Causality, ARDL and Nigeria.
Abstract
The paper examines the impact of oil price volatility on sustainable output growth in Nigeria between 1980 and 2017. The study employs ARCH to establish the existence of volatility in oil price or otherwise and the result confirms the presence of volatility in oil price in Nigeria. Also, pairwise granger causality was carried out to ascertain the direction of causality and the result shows that, oil price volatility granger-cause output growth in Nigeria. Again, the results of unit root test show that the variables are stationary at both level and first difference which suggest that Autoregressive Distributed Lag (ARDL) is appropriate technique to employ for the analysis. The results of ARDL suggest that, Oil Price Volatility has positive but insignificant impact on sustainable output growth in Nigeria both in short-run and in long-run. However, Inflation (INF) and Real Effective Exchange Rate (REER) said to have negative but significant impact on sustainable output growth in Nigeria in the long run. Based on these findings, government is therefore advised to formulate policies gear towards reducing the current level of inflation in Nigeria as well as ensure the appreciation of naira and exchange rate stability for the desired level of sustainable output growth to be achieved in Nigeria.
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