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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

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