Examining the Effect of Oil Price Shock on Nigeria’s Economic Growth in the Light of Vision 2030: A Combination of VCEM and ARDL Models

Nwuju; Kingdom; LekaraBayo; Ifeoma Better; Nwanneako; Sabinus Nnamdi; Ogbonna; Fine Uchechi

doi:10.56201/ijasmt.vol.11.no1.2025.pg73.87

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Examining the Effect of Oil Price Shock on Nigeria’s Economic Growth in the Light of Vision 2030: A Combination of VCEM and ARDL Models

Nwuju, Kingdom, LekaraBayo, Ifeoma Better, Nwanneako, Sabinus Nnamdi, Ogbonna, Fine Uchechi

Abstract

Nigeria's economy is heavily reliant on oil, with crude oil accounting for a significant share of government revenue and export earnings. This dependence exposes the nation to economic vulnerabilities stemming from global oil price fluctuations, which can disrupt fiscal stability and economic growth. In the context of Nigeria's Vision 2030, which aims to diversify the economy and reduce its reliance on oil, understanding the effects of oil price shocks on economic growth becomes critical for formulating resilient policies and achieving sustainable development. This study investigates the effect of oil price shocks on Nigeria's economic growth in the context of Vision 2030, which emphasizes economic diversification and resilience. The research utilizes annual time series data spanning 42 years (1981–2022) for key macroeconomic indicators: Gross Domestic Product (GDP), Crude Oil Price (COP), Crude Oil Revenue (COR), Exchange Rate (EXR), and Non-Oil Revenue (NOR). Data were sourced from the Central Bank of Nigeria (CBN), National Bureau of Statistics (NBS), and World Bank. The study adopts a combination of Vector Error Correction Model (VECM) and Autoregressive Distributed Lag (ARDL) models to examine both short- and long-term relationships among the variables. Descriptive statistics revealed significant variability in GDP (mean: 226.68, standard deviation: 169.50) and other variables, reflecting Nigeria's economic volatility. The ARDL Bounds Test confirmed a long-run relationship among the variables, while the short-run estimates revealed that crude oil prices significantly impacted GDP (coefficient: 1.22, p < 0.05), and exchange rate fluctuations had both positive and negative short-term effects. Long- run results showed a negative impact of crude oil prices (coefficient: -2.26, p < 0.05) and crude oil revenue (coefficient: -0.08, p < 0.01) on GDP, emphasizing Nigeria's vulnerability to oil price shocks. Diagnostic tests confi

Keywords

Oil Price ShocksEconomic GrowthVision 2030Time seriesARDL Model

References

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Examining the Effect of Oil Price Shock on Nigeria’s Economic Growth in the Light of Vision 2030: A Combination of VCEM and ARDL Models

Abstract

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References

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