Oil Consumption and Economic Growth in Nigeria: A Multivariate Cointegration Analysis
International and Public Affairs
Volume 2, Issue 1, March 2018, Pages: 11-22
Received: Feb. 19, 2018; Accepted: Mar. 9, 2018; Published: Apr. 14, 2018
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Alexander Abraham Anfofum, Department of Economics, Faculty of Social Sciences, Nigeria Defence Academy, Kaduna, Nigeria
Olure-Bank Adeyinka Michael, Department of Economics, Faculty of Social Sciences, Nigeria Defence Academy, Kaduna, Nigeria
Oyefabi Ilemobola Solomon, Department of Economics, Faculty of Social Sciences, Nigeria Defence Academy, Kaduna, Nigeria
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The paper seeks to examine the relationship between oil consumption and economic growth in Nigeria using the Johansen and Juselius Co-integration technique based on the Cobb-Douglas production function to construct three models by introducing three major sectors of oil consumption of Nigeria (Transport, Power and Industrial sector oil consumption) and how Nigerian's upward review oil price variable impact on GDP. ADF (1979) and Johansen Maximum Likelihood method of cointegration (1988) are used to test the order of integration, Long run and short run dynamics between variable respectively using annual data since 1970-2016. The study shows an evidence of the long run and dynamic relationship for all the variables except industrial oil consumption and oil price variables which has no short run impact on GDP. Also it was found that capital and labour are more important in affecting output growth compared to energy consumption Oil prices impacting real GDP negatively in long run but positively in short run. Prominent policy recommendation are, in order to sustain high economic growth in the long-run, the country needs to increase the efficiency of its workforce and expand its saving capacity to generate more capital and need to strengthen the effectiveness of energy generating agencies by ensuring periodic replacement of worn-out equipment in order to drastically curtail transmission power losses.
Capital, Economic Growth, Labour, Oil Prices, Sectoral Oil Consumption, Oil Shocks, Johansen Maximum Likelihood Method
To cite this article
Alexander Abraham Anfofum, Olure-Bank Adeyinka Michael, Oyefabi Ilemobola Solomon, Oil Consumption and Economic Growth in Nigeria: A Multivariate Cointegration Analysis, International and Public Affairs. Vol. 2, No. 1, 2018, pp. 11-22. doi: 10.11648/j.ipa.20180201.12
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