Link between Oil Price and Macroeconomic Dynamics in Nigeria

Wed, 01 Apr 2026 12:58:07 +0000

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Evaluating the
Evaluating the Link between Oil Price and Macroeconomic Dynamics in Nigeria

Abstract
Crude oil exports have long been a major source of foreign exchange earnings and government income for the Nigerian economy. The volatility of the oil price and its impact on Nigerians’ economic well-being are among the country’s most pressing issues at the moment. This research explores the link between oil price fluctuations and selected macroeconomic variables in Nigeria by analysing quarterly data from 1980 to 2022, covering a span of 42 years. The data was collected from the National Bureau of Statistics (NBS) publications, the Central Bank of Nigeria (CBN) Annual Report and Statistical Bulletin, World Bank and International Financial Statistics (IFS) of the IMF. The chosen macroeconomic indicators include Real Gross Domestic Product, Consumer Price Index, and Real Exchange Rate. The Vector Error Correction Model (VECM) was employed for analysis, and the estimation results indicated long-term interdependencies, where oil price shocks significantly influence the Real Gross Domestic Product, Consumer Price Index, and Real Exchange Rate in Nigeria. The study concluded that crude oil sales serve as the primary source of revenue and foreign earnings for Nigeria, making the economy heavily dependent on global oil prices. Consequently, most macroeconomic indicators are directly or indirectly affected by oil price fluctuations. Given that Nigeria lacks control over oil prices, the study recommended economic diversification to mitigate the adverse effects of external shocks. Specifically, the country should expand its exports beyond oil to non-oil sectors. Diversifying the economy and broadening the oil revenue base would help reduce dependence on crude oil and petroleum products. Implementing sustainable policies, which could help to improve the agriculture and industrial sectors, will further shield the economy from the impact of oil price shocks.

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Layman Abstract: Nigeria relies heavily on crude oil exports for government revenue and foreign earnings. However, fluctuations in oil prices create economic instability, affecting key financial indicators such as economic growth, inflation, and exchange rates.
This study analysed data from 1980 to 2022 to examine how oil price changes impact Nigeria’s economy. The findings show that oil price shocks significantly influence the country’s economic performance, making Nigeria highly vulnerable to global oil market changes.
Since Nigeria cannot control oil prices, the study recommends diversifying the economy by expanding non-oil sectors such as agriculture and industry. Reducing dependence on crude oil and promoting sustainable policies will help stabilise the economy and protect it from future oil price shocks.

Disclaimer: This scientific-creative video was produced using AI voice-over and royalty-free stock images and clips. All content is sourced exclusively from peer-reviewed journal articles and book chapters, with full citations provided below. The peer-review process for these sources is also detailed here.

Source / Reference: https://doi.org/10.9734/bpi/nabme/v5/4860
Peer Review History: https://peerreviewarchive.com/review-history/4860

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Related keyword:

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Nigeria's GDP and Oil Revenue
Economic Diversification in Nigeria
Oil Dependency and Economic Growth
Nigerian Government Revenue from Oil
Crude Oil Price and Inflation in Nigeria
Oil Price Impact on Exchange Rate
Nigeria’s Foreign Exchange and Oil Exports
Economic Diversification Strategies in Nigeria
Agriculture and Industrial Growth in Nigeria
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IMF and World Bank Data on Nigeria
Central Bank of Nigeria Oil Report
Sustainable Policies for Nigeria’s Economy