Symmetric Oil Price Shock and the Nigerian Economy: An Empirical Re-Investigation Using SVECM and ARDL Approach
Symmetric Oil Price Shock and the Nigerian Economy: An Empirical Re-Investigation Using SVECM and ARDL Approach

Summary/Abstract: This study investigates the response of the Nigerian economy to symmetric oil price shock. It made use of annual data that spanned 1960 to 2016. A Structural Vector Error Correction Model(SVECM) and Autoregressive Distributed Lag (ARDL) techniques were employed. The Augmented Dickey-Fuller unit root tests revealed that the variables employed are non-stationary and precisely of order one. A cointegration test among the variables is passed and there is only one unique cointegrating vector. The results from both the SVECM and the ARDL suggest that real GDP will initially respond positively to oil price shock symmetrically but later decreases sharply, with the potential to lapse the Nigerian economy into a long time recession if not properly managed. It is therefore recommended that the productive base of the Nigerian economy should be diversified to other sectors. Also, security arrangements in the key oil- producing areas should be improved in order to avoid negative oil price shocks that could destabilize and plunge the economy.

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