IIARD International Institute of Academic Research and Development

IIARD INTERNATIONAL JOURNAL OF BANKING AND FINANCE RESEARCH (IJBFR )

E-ISSN 2695-1886
P-ISSN 2672-4979
VOL. 2 NO. 2 2016

---

Crude Oil Production and Nigerian Economic Growth: A Test of Dutch Disease and the Paradox of Plenty: 1981-2014

LUCKY ANYIKE LUCKY, NWOSI, ANELE ANDREW

---

Abstract

This study examined Nigeria Crude oil Production and its impact the economic growth from 1981-2014. The objective was to investigate the impact of Nigeria crude oil production on economic growth, test the DUTCH DISEASE AND THE CLASSICAL PARADOX OF PLENTY in Nigeria. Time series data were collected from Central Bank of Nigeria (CBN) Statistical and World Energy Report was modeled as the function Oil Revenue (OILR), Oil Export (OILEX), Crude oil Reserves (COR), Quantity of Crude Oil Produced (QOP), Domestic Consumption (DC) and Crude Oil Price (OILP). The Ordinary Least Square Method of Cointegration, Granger Causality test, Augmented Dickey Fuller Unit Root Test and Vector Error Correction Model were used to determine the long and short –run relationship that exist among the variables. Findings from the regression result revealed that Oil Revenue, Oil Export have positive but insignificant impact on Nigeria economic growth. Domestic consumption has positive and significant impact while Crude Oil reserves, Quantity of Crude Oil Produced and Oil Price have negative and insignificant impact on economic growth. The result of the Unit Root proved stationarity of the variables at first difference. The cointegration test proved long- run relationships that exist between the dependent and the independent variables while the Granger Causality test proved bi-directional causal relationship running from the independent to the dependent and the dependent to the independent. The study concludes that oil revenue and oil export have no significant effect on the growth of Nigeria economy, this proved presence of the DUTCH DISEASE AND THE CLASSICAL PARADOX OF PLENTY in Nigeria. It recommends that the oil revenue should properly be accounted for and invested to enhance economic growth

---

References:

Ayanwale, B.A., (2007). FDI and Economic Growth: Evidence from Nigeria. African Economic
Research Consortium (AERC) Research Paper 165, Nairobi. ISBN 9966-778-09-8

Abdul Hadi, A. R., Yahya, M. H., & Shaari, A. H., (2009). The effect of oil price fluctuations on
the Zalaysian and Indonesian stock markets. Asian Journal of Business and Accounting,
2, 69-91.

Adebisi T., (2012).A Vector Autoregressive Analysis of Oil and Exchange Rate in Nigeria: A
Case of Dutch Disease, British Journal of Arts and Social Sciences, 11(I).
http://www.bjournal.co.uk/BJASS.aspx

Akanni, O.P., (2004). Oil Wealth and Economic Growth in Oil Exporting African countries.
AERC Research paper 170.

Akanni, O.P., (2007). Oil Wealth and Economic Growth in Oil Exporting Countries. AERC
Researcg Oaoer 170

Akinlo, A. E., (2012). How Important is Oil in N Akanni, O.P. (2007). Oil Wealth and Economic
Growth in Oil Exporting Countries, AERC Researcg Oaoer 170igeria’s Economic
Growth?” Journal of Sustainable Development, Published by Canadian Center of Science
and Education, 5,(4),165-179.

Akpan, E. O., (2009). Oil price shocks and Nigeria’s Macroeconomic. Annual Conference of
Centre for the Study of African Economies (CSAE): Economic Development in Africa,.
Oxford.

Alia, H, Mukhtarb, U, Tijanib, B., and Auwal, M. (2015). Dynamic relationship of exchange
rates and crude oil prices in South Africa: Are there asymmetries? Research Journal of
Finance and Accounting,(6) 6,195 – 200.

Al-Moneef, M., (2006). The contribution of the oil sector to Arab Economic evelopment. OFI
Pamphlet Series 34.Vienna: Austria.

Anyanwu, J. C., Oyefusi, A., Oaikhenan, H., & Dimono, F. A.,(1997).The Structure of the
Nigeria Economy. Joanee Educational Publishers Limited Onitsha.

Ayuba, K. A.,(2012). Environmental impact oil Exploration and Exploitation in the Niger Delta
of Nigeria. Global Journal of Science Frontier Research Environment and Earth
Science, 12(3),1-11.

Bernanke, B. S. (1983). Irreversibility, Uncertainty, and Cyclical Investment. Quarterly Journal
of Economics, 98, 85-106.

Campbell, J. Y., & Perron, P. (1991). Pitfalls and Opportunities: What Macroeconomists Should
Know about Unit Roots. In O. J. Blanchard, & S. Fischer (Eds.), NBER Macroeconomics
Annual ( 141-201). MIT Press, Cambridge, MA 14. ttp://dx.doi.org/10.2307/3585053

Central Bank of Nigeria. (2014). Statistical Bulletin. Retrieved from http://www.cbn.gov.ng

Chang, Y., & Wong, J. F. (2003). Oil price fluctuations and Singapore economy. Energy Policy,
31, 1151-1165.

Domar, E. (1946). ‘Capital expansion, rate of growth, and employment’, Econometrica,
Engle, R. F., & Granger, C. J. (1987). Cointegration and error-correction representation,
estimation and testing. Econometrica, 55, 251-278.

Farzanegan, M., & Markwardt, G. (2009). The effects of oil price shocks on the Iranian
economy. Energy economies, 37(3), 134-151.

Ferderer J (1996). Oil Price Volatility and the Macroeconomic: A Solution to the Asymmetry
Puzzle J. Macroecon. 18:1-16.

Ferraro, D. and Rogo, K. and Rossi, B. (2011). Can Oil Prices Forecast Exchange Rates? 1-59.

Granger, C.W.J, (1969), “Investigating Causal Relations by Econometric Models and
CrossResearch spectral Methods”, Econometrica, 37, 428-438.

Hadiza, M. S. T.,(2013). Nigeria Local Content Act: The Role of Petroleum Trining Institute
Effrum in Human Capital Development. Petroleum Technology Development Journal (
International), 3(1), 45-52.

Hamdi, H., & Sbia, R. (2013). Dynamic relationships between oil revenues, government
spending and economic growth in an oil-dependent economy. Economic Modelling,
35(C), 118-125.http://dx.doi.org/10.1016/j.econmod.2013.06.043

Harrod R.F. (1939). An essay in dynamic economics. Economic Journal, 49, 14-33. [This paper
constructs a growth model based on Keynesian ideas]

Ibrahim, M. H. (2007). The Role of the Financial Sector in Economic Development: The
Malaysian Case. International Review of Economics, 54, 463-483.

Idowu, K.O., (2005).A Preliminary Investigation into the Causal Relationship between Exports
and Economic Growth in Nigeria. CBN Economic and Financial Review 43(3): 29-50
Ito, K., (2012).The Impact of Oil Price Volatility on Macroeconomic Activity in Russia.
Economic Analysis Working Papers 9 (5).

Jumah, A., & Pastuszyn, G., (2007). Oil Price Shocks, Monetary Policy and Aggregate Demand
in Ghana. Economics Series.

Masih R, Peters S, Mello, L., (2010). Oil Price Volatility and Stock Price Fluctuations in an
Emerging Market: Evidence from South Korea. 1-32.

Nwokeji, G. U., (2007). The Nigerian National Petroleum Corporation and the Development of
the Nigerian Oil and Gas Industry: History, Strategies, and Current Directions. Research
Report Prepared in Conjunction with an Energy Study ponsored by the James A. Baker
III Institute for Public Policy andJapan Petroleum Energy Center, Rice University.

Odularu, .G.O., C. Okonkwo, (2009).Does Energy Consumption Contribute to the Economic
Performance? Empirical Evidence from Nigeria.

Odularu, G. O. ,(2008). Crude Oil and the Nigerian Economic Performance Oil and Gas
Businesshttp://www.ogbus.ru/eng/ .

Ogbonna, G.N. & Appah E. (2012) Petroleum Income And Nigerian Economy: Empirical
Evidence; Arabian Journal Of Business And Management Review (Oman Chapter)
1(.9);53-59.

Ojebiyi, A. & Wilson, D., (2011). Exchange rate volatility: an analysis of the relationship
between the Nigerian naira, oil prices, and US dollar. Master Thesis in Business
Administration 15 ECTS, Master of International Management , Gotland University, 1 –
33.

Okoh, R.N., (2004). Globalisation and growth of Nigerian non-oil exports. A Paper Presented at
the Centre for the Study of African Economies. African Conference, on Growth, Poverty
Reduction and Human Development in Africa 21st – 22nd March, 2004, Oxford, UK

Oladipo, S. O., & Fabayo, J. O., (2012). Global Recession, Oil Sector and Economic Growth in
Nigeria. Asian Transactions on Basic and Applied Sciences, 1(6), 29-41.

Olomola, P. A., & Adejumo, A. V., (2006). Oil price shock and macroeconomic activity in
Nigeria. International Research Journal of Finance and Economics, 3, 28-34.

Omiete, V.O., & Onyemachi, M. O., (2015). Money Supply and Asset Prices in Nigeria (2008 – 2013):
An empirical Review. Research Journal of finance and Accounting 6(10), 45 – 56.

Oriakhi, D. E, Osaze, D., (2013). Oil Price Volatility and Its Consequences On the Growth of the
Nigerian Economy: An Examination (1970-2010). Asian Econ. Finan. Rev. 3(5):683-702

Tweneboah, G., & Adam, A. M. (2008). Implications of Oil Price Shocks for Monetary Policy in
Ghana: A Vector Error Correction Model. Munich: University Library of Munich.

Ushie, V., Adeniyi, O., & Akongwale, S., (2012) .Oil Revenues, Institutions and
MacroeconomicPerformance in Nigeria. CSEA Working Paper WPS/12/02 March

Vesela, J., (2010). ?esky kapitalovy trh pohledem globalni fundamentalni analyzy.. Sbornik
p?isp?vk? zmezinarodni v?decke conference. Evropske finan?ni systemy 2010“.
Masarykova univerzita Brno. 14, 137–147.

DOWNLOAD PDF

---

Back