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
Views 780 Downloads 30
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
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.
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.
Copyright © 2018 Authors retain the copyright of this article.
This article is an open access article distributed under the Creative Commons Attribution License (http://creativecommons.org/licenses/by/4.0/
) which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
Abid M, Sabri M (2012) Energy Concept-Economic Growth Nexus: Does the Level of Aggregation Matter? International Journal of Energy Economic and Policy 2: 55-62.
Adeyemi A. Ogundipe and Ayomide Apata (2013) Electricity Consumption and Economic Growth in Nigeria. Journal of Business Management and Applied Economics Vol. II, Issue 4 July 2013.
Aigbedion, I., & Iyayi, S. E. (2007). Diversifying Nigeria’s Petroleum Industry. International Journal of Physical Sciences, 2, 263-270.
Akarca AT, Long TV (1980) On the Relationship between Energy and GNP: A Reexamination. Journal of Energy Development 5: 326-331.
Aminu M. Mustapha and Aminu M. Fagge (2015) Energy Consumption and Economic Growth in Nigeria: A Causality Analysis. Journal of Economics and Sustainable Development Vol.6, No.13, 2015.
Bright Orhewere and Machame Henry (2011) Energy Consumption and Economic Growth in Nigeria. JORIND (9) 1, June, 2011. ISSN 1596.
Cobb C, Douglas P (1928) A Theory of Production. An American Economic review 18:139-165.
Dickey DA, Fuller WA (1979) Distribution of Estimators for Autoregressive Time Series Regression with a Unit Root. Journal of the American Statistical Association 74: 427-431.
Engle RF, Granger CWJ (1987) Co-integration and Error Correction: Representation, Estimation, and Testing. Econometrica 55: 251-276.
Georgescu-Roegen N (1975) Energy and Economic Myths. Southern Economic Journal 41:347-81.
Hamilton J. D (2011) Historical Oil Shocks. NBER Working paper No. 16790.
ekwe, I. Assessing the Future of Nigeria’s Economy: Ignored Threats from the Global Climate Change Debacle. Africa Economic Analysis. http://www.afbis.com/analysis/climate_change.htm
Johansen S (1988) Statistical Analysis of Cointegrating Vectors. Journal of Economic Dynamics and Control 12: 231-254.
Johansen S (1995) Likelihood Based Inference in Cointegrated Vector Autoregressive Models. Oxford: Oxford University Press.
Johansen S, Juselius K (1990) Maximum Likelihood Estimation and Inference on Co - integration with Applications to the Demand for Money. Oxford Bulletin of Economics and statistics 52: 169-210.
Kraft J, Kraft A (1978) On the Relationship between Energy and GNP. Journal of Energy and Development 3: 401-403.
Lee C, Chang C (2005) Structural Breaks, Energy Consumption, and Economic Growth Revisited: Evidence from Taiwan. Energy Economics 27: 857-872.
Levent K (2007) Testing Causal Relationship between Energy Consumption, Real Income and Prices: Evidence from Turkey. MPRA Paper 1: 1-29.
MacKinnon JG (1991) Critical Values for Cointegration Tests. In: Engle RF and Granger J, Long-run (eds), Economic Relationships: Readings in Cointegration. Oxford University Press.
Michael Chugozie Anyaehie and Anthony Chukwudi Areji (2015) Economic Diversification for Sustainable Development in Nigeria Open Journal of Political Science, 2015, 5, 87-94 Published Online March 2015 in SciRes.
Nazir S, and Hameed T (2015) Impact of Oil Price and Shocks on Economic Growth of Pakistan: Multivariate Analysis (Sectoral Oil Consumption). Bus Eco J 6: 182. doi:10.4172/2151-6219.1000182
Rasmussen NR, Roitman A (2011) Oil Shocks in a Global Perspective: Are They Really That Bad? IMF.
Sanusi, L. S. (2010). Growth Prospects for the Nigerian Economy. Convocation Lecture Delivered at the Igbinedion University Eighth Convocation Ceremony, Okada.
Soytas U, Sari R (2003) Energy Consumption and GDP: Causality Relationship in G-7 Countries and Emerging Markets. Energy Economics 25: 33-37.
Sustainable Development Definition (1993). An Architect’s Guide to Designing for Sustainability.
Towards Sustainable Development. Our Common Future. Report of the World Commission on Environment and Development, UN Documents: Gathering a Body of Global Agreements, the NGO Committee on Education of the Conference of NGOs.
Zaman B, Farooq M, Ullah S (2011) Sectoral Oil Consumption and Economic Growth in Nigeria: An ECM Approach. American Journal of Scientific and Industrial Research 2: 149-159.