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Oil Price Volatility and Economic Growth in Nigeria: A Dynamic Analysis
Subject area: Arts, Social Sciences and Humanities · Area of research: Economics
Abstract
This study examines the impact of oil price volatility on Nigeria's economic growth. It studies the relationship between oil price changes and economic growth. It also studies the impact of oil price volatility on growth and the contribution of oil price volatility to growth fluctuation. The study is based on the Dutch Disease Hypothesis and is based on data from years 1980 to 2024 from official national and international sources. In this study, oil price volatility was analyzed and measured with the GARCH (1,1) model, while ARDL, VECM, Variance Decomposition, and Impulse Response were conducted. The results of the study show the existence of a stable long-run relationship between oil prices and economic growth. It was found that volatility of oil prices has a negative impact on growth in the short run. This is attributed to increased uncertainty, declined investment, fiscal disturbances, and exchange rate volatility. While oil price volatility explains only a small proportion of GDP forecast variance, direct, oil price volatility explains a small proportion of output variation, when compared to exchange rate volatility. The study offers a comprehensive multi-method econometric framework (ARDL, VECM, IRF, FEVD) for a robust analysis of different effects. The study offers quantification of the indirect and direct transmission channels of volatility in oil prices and extends the period of analysis up to 2024, capturing the recent structural shocks (e.g. COVID-19 shock).
Keywords
oil price volatility, economic growth, dutch disease, ARDL, VECM, exchange rate, nigeria
How to cite this paper
@article{1722690,
author = {OJOAWO Celestina Damilola, Dr. OLAOYE O. O.},
title = {Oil Price Volatility and Economic Growth in Nigeria: A Dynamic Analysis},
journal = {Iconic Research And Engineering Journals},
year = {2026},
volume = {10},
number = {3},
pages = {101-109},
issn = {2456-8880},
url = {https://www.irejournals.com/formatedpaper/1722690.pdf},
abstract = {This study examines the impact of oil price volatility on Nigeria's economic growth. It studies the relationship between oil price changes and economic growth. It also studies the impact of oil price volatility on growth and the contribution of oil price volatility to growth fluctuation. The study is based on the Dutch Disease Hypothesis and is based on data from years 1980 to 2024 from official national and international sources. In this study, oil price volatility was analyzed and measured with the GARCH (1,1) model, while ARDL, VECM, Variance Decomposition, and Impulse Response were conducted. The results of the study show the existence of a stable long-run relationship between oil prices and economic growth. It was found that volatility of oil prices has a negative impact on growth in the short run. This is attributed to increased uncertainty, declined investment, fiscal disturbances, and exchange rate volatility. While oil price volatility explains only a small proportion of GDP forecast variance, direct, oil price volatility explains a small proportion of output variation, when compared to exchange rate volatility. The study offers a comprehensive multi-method econometric framework (ARDL, VECM, IRF, FEVD) for a robust analysis of different effects. The study offers quantification of the indirect and direct transmission channels of volatility in oil prices and extends the period of analysis up to 2024, capturing the recent structural shocks (e.g. COVID-19 shock).},
keywords = {oil price volatility, economic growth, dutch disease, ARDL, VECM, exchange rate, nigeria},
month = {September},
}