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Oil Consumption and Economic Growth in Nigeria: A Multivariate Cointegration Analysis

Received: 19 February 2018     Accepted: 9 March 2018     Published: 14 April 2018
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Abstract

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.

Published in International and Public Affairs (Volume 2, Issue 1)
DOI 10.11648/j.ipa.20180201.12
Page(s) 11-22
Creative Commons

This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.

Copyright

Copyright © The Author(s), 2018. Published by Science Publishing Group

Keywords

Capital, Economic Growth, Labour, Oil Prices, Sectoral Oil Consumption, Oil Shocks, Johansen Maximum Likelihood Method

References
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[19] 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.
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[22] Rasmussen NR, Roitman A (2011) Oil Shocks in a Global Perspective: Are They Really That Bad? IMF.
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Cite This Article
  • APA Style

    Alexander Abraham Anfofum, Olure-Bank Adeyinka Michael, Oyefabi Ilemobola Solomon. (2018). Oil Consumption and Economic Growth in Nigeria: A Multivariate Cointegration Analysis. International and Public Affairs, 2(1), 11-22. https://doi.org/10.11648/j.ipa.20180201.12

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    ACS Style

    Alexander Abraham Anfofum; Olure-Bank Adeyinka Michael; Oyefabi Ilemobola Solomon. Oil Consumption and Economic Growth in Nigeria: A Multivariate Cointegration Analysis. Int. Public Aff. 2018, 2(1), 11-22. doi: 10.11648/j.ipa.20180201.12

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    AMA Style

    Alexander Abraham Anfofum, Olure-Bank Adeyinka Michael, Oyefabi Ilemobola Solomon. Oil Consumption and Economic Growth in Nigeria: A Multivariate Cointegration Analysis. Int Public Aff. 2018;2(1):11-22. doi: 10.11648/j.ipa.20180201.12

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  • @article{10.11648/j.ipa.20180201.12,
      author = {Alexander Abraham Anfofum and Olure-Bank Adeyinka Michael and Oyefabi Ilemobola Solomon},
      title = {Oil Consumption and Economic Growth in Nigeria: A Multivariate Cointegration Analysis},
      journal = {International and Public Affairs},
      volume = {2},
      number = {1},
      pages = {11-22},
      doi = {10.11648/j.ipa.20180201.12},
      url = {https://doi.org/10.11648/j.ipa.20180201.12},
      eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.ipa.20180201.12},
      abstract = {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.},
     year = {2018}
    }
    

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  • TY  - JOUR
    T1  - Oil Consumption and Economic Growth in Nigeria: A Multivariate Cointegration Analysis
    AU  - Alexander Abraham Anfofum
    AU  - Olure-Bank Adeyinka Michael
    AU  - Oyefabi Ilemobola Solomon
    Y1  - 2018/04/14
    PY  - 2018
    N1  - https://doi.org/10.11648/j.ipa.20180201.12
    DO  - 10.11648/j.ipa.20180201.12
    T2  - International and Public Affairs
    JF  - International and Public Affairs
    JO  - International and Public Affairs
    SP  - 11
    EP  - 22
    PB  - Science Publishing Group
    SN  - 2640-4192
    UR  - https://doi.org/10.11648/j.ipa.20180201.12
    AB  - 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.
    VL  - 2
    IS  - 1
    ER  - 

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Author Information
  • Department of Economics, Faculty of Social Sciences, Nigeria Defence Academy, Kaduna, Nigeria

  • Department of Economics, Faculty of Social Sciences, Nigeria Defence Academy, Kaduna, Nigeria

  • Department of Economics, Faculty of Social Sciences, Nigeria Defence Academy, Kaduna, Nigeria

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