Oil Price Volatility and Economic Development in Nigeria
Keywords:
Oil Price Volatility, Nigerian Economy, Economic Development, Oil Dependency, Macroeconomic ImpactAbstract
This study looks at the impact of oil price volatility on Nigerian economic development from 1981 Q1 to 2020 Q1, using data from the National Bureau of Statistics and the Central Bank Statistical Bulletin. Estimating generalised autoregressive conditional heteroscedasticity, exponential generalised autoregressive conditional heteroscedasticity, and threshold generalised autoregressive conditional heteroscedasticity. The changes in the quarterly variation of the oil price (Brent Crude) are used to calculate oil price volatility. Economic development is quantified by a deconstructed human development index, which includes per capita income, life expectancy, and literacy. The exchange rate in Nigeria is measured by its quarterly variation. The empirical findings indicate that oil price volatility promotes economic development. Furthermore, currency rate volatility promotes economic progress in Nigeria. Furthermore, it demonstrates that the combination of interplay of oil price and exchange rate volatility had only a minor impact on economic development via life expectancy and literacy channels. Finally, it was discovered that the volatility of oil prices and exchange rates has an uneven influence on Nigerian economic progress. Based on the aforementioned, the study suggests that: The proceeds from oil should be directed towards infrastructure development, which serves as a springboard for economic development, and the government should encourage economic diversification and reduce external dependence in order to cushion against external shocks such as oil price and exchange rate fluctuations.
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