IIARD International Institute of Academic Research and Development

IIARD International Journal of Economics and Business Management (IJEBM )

E-ISSN 2489-0065
P-ISSN 2695-186X
VOL. 11 NO. 2 2025
DOI: 10.56201/ijebm.vol.11.no2.2025.pg201.218

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The Impact of Global Oil Prices on the Nigerian Economy: Evidence Markov Regime-Switching Models

Musa Ismail Shafa, Ali Salisu, Adahama Ibrahim Haladu

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Abstract

It is widely known fact that global oil prices shocks and its substantial consequence on real macroeconomic output still remain a significant issue bedevilling a number of world economies. This study examines the impact of global oil price on macroeconomics variables in Nigeria using Markov Regime Switching (MRS) models. The unit root test of ADF and PP indicated all the variables employed are stationery at first difference. The study found that the estimates lend support to the presence of regime switching for the effects of oil price shocks on real gross domestic product. It was observed that the probability regime two of oil price shocks has high volatility than regime one in the whole sample period of the study with their P-value been statistically significant. The study recommend that policy makers should look inward to diversify the economy from mono-economy of oil sector and exploit alternative revenue areas such as aggressive tax regime by taxing the rich more, solid mineral exploration, reserve management, investment in agricultural mechanisation and adopt flexible policies to attract foreign investment.

keywords:

Macroeconomic fluctuation, Oil price shocks, VAR and Markov Regime Switching

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