Effect of Oil price and exchange rate volatility on economic gowth in Nigeria (1970-2012).
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Date
2014
Authors
Journal Title
Journal ISSN
Volume Title
Publisher
Economics,Obafemi Awolowo University
Abstract
Controversies abound over the nexus between oil price and exchange rate volatility on economic growth. However, previous related studies in Nigeria only focused on either the impact of oil price shock on economic growth or the effect of exchange rate volatility on economic growth without examining the joint effect of the two variables on economic growth.
The study analyzed the trend and pattern of oil price and exchange rate volatility in Nigeria and also examined the effect of oil price on exchange rate volatility. The study equally determined the dynamic interrelationship that exists among oil price, exchange rate volatility and economic growth in Nigeria. Secondary data were used for this study. Annual data on real gross domestic product, exchange rate, money supply and inflation rate were sourced from Central Bank of Nigeria (CBN) Statistical Bulletin. While annual data on oil price was sourced from energy price indicator. Data collected were analyzed using descriptive statistics (such as graphs and percentages) and econometrics method which include co-integration and vector autoregressive techniques.
The result showed that oil price volatility has negative but insignificant relationship with economic growth as a 1 per cent increase in oil price volatility reduces real gross domestic product by 1.7 per cent. In the same vein, exchange rate volatility has insignificant adverse effect on real GDP as 1 percent increase in exchange rate volatility brings about 2.6 per cent decrease in real GDP. Also, inflation rate has insignificant negative relationship with GDP as 1 per cent increase in inflation rate results to 0.005 per cent decrease in real GDP. Money supply has positive relationship with GDP as 1 per cent increase in money supply leads to 0.08 per cent increase in real GDP.
The study concluded that oil price volatility depresses economic growth more than volatility in exchange rate-a scenario that may attribute to mismanagement of oil revenue in the country.
Description
xiii,116p
Keywords
Oil price, Oil revenue, Volatility, Economic growth
Citation
Olofinle,G.D(2014). Effect of Oil price and exchange rate volatility on economic gowth in Nigeria (1970-2012). Obafemi Awolowo University