OIL PRICE VOLATILITY AND NIGERIAN ECONOMIC GROWTH
ABSTRACT
This study is motivated by a desire to examine oil price volatility and Nigerian economic growth. In light of the empirical review and other discussions, a number of questions arose as to whether there is significant relationship between oil price volatility and economic growth. Using the Ordinary Least Square (OLS) regression technique with the aid of computer software, the empirical findings revealed among other things that for economy growth to be increased there is need for government to increase the level of national output. Recommendations where however made by the researcher.
TABLE OF CONTENTS
CHAPTER ONE: INTRODUCTION
Background to the Study                 
Statement of the Research Problem            
Objectives of the Study                     
Research Hypothesis                         
Scope of the Study                         
Significance of the Study                     
Limitation of the Study                    
References                         
CHAPTER TWO: LITERATURE REVIEW
Introduction                             
Economic Overview of Nigeria                
Oil Price Shocks and Nigeria’s Macro Economy    
Oil Price and the Economy: Empirical Evidence    
References                            
CHAPTER THREE: RESEARCH METHODOLOGY
Introduction                             
The Research Design                        
Sources of Data Collection                
Model Specification                         
Method of Data Analysis                    
CHAPTER FOUR: DATA ANALYSIS AND INTERPRETATION
4.1    Introduction                         
4.2    Data Analysis                            
4.3    Interpretation of OLS Results                
4.4    Implication for Policy                        
CHAPTER FIVE:    SUMMARY, RECOMMENDATIONS AND CONCLUSION
Introduction                         
Summary of Findings                             
Recommendations                        
Conclusion                                
Bibliography                             
Appendix                                 
CHAPTER ONE
INTRODUCTION
BACKGROUND TO THE STUDY
Oil is a major source of energy in Nigeria and the world in general. Oil being the Mainstay of the Nigerian economy plays a vital role in shaping the economic and political destiny of the country (Odularu, 2008). Although, Nigeria’s oil industry was founded at the beginning of the century, it was not until the end of the Nigeria civil war (1967 - 1970) that the oil industry began to play a prominent role in the economic life of the country (Odularu, 2008). Crude oil discovery had certain impacts on the Nigeria economy both positively and adversely. On the negative side, some of these communities still suffer environmental degradation, which led to deprivation of means of livelihood and other social factors. Hence, the need to evaluate implications of the global financial crisis on the oil revenue generated. Considering the fact that there are other sectors of the economy that benefit substantially from excess revenue made from the oil sector with the ultimate aim of increasing the real gross domestic product of the economy and the eventual sustainable development of the country.
The price of crude petroleum rose from the first time in Nigeria in 1973 from $3 to $11.6 per barrel in response to the uncertainties created by the Arab-Israel war, which erupted in October 1973. The resultant rise in the price of crude petroleum generated a total of N9.2 billion in revenue for Nigeria in 1994 as the country exported 108 million tons of crude oil that year (Mandal, 2007). The upsurge in crude oil and price and the resultant increase in the revenue for the country created opportunity for economic development and modernization of the Nigeria economy.
    Although the oil price increase in 1943 was short lived, between 1979 and 1980, the price of oil rose in the international market between $35 and $40 a barrel. The rise in crude oil price again was only mainly to the Iranian revolution. In responses Nigeria produced 84.2.5 million barrel in 1979 and realized N9305.6 million in the prices “The Africa Guardian, (1986), First Bank Business Report, (1990)” with the increased revenue derivable from oil sector the Nigeria economy became monocultural as emphasis shifted from the agriculture sector to the oil sector. Thus in 1980 the nation experienced a severe economic crisis which is traceable to the over dependence on the oil sector “Otashere, (1988)” The oil glut era of the 1980s created a serious problem for the Nigerian economy.
    Consequent upon the freezing, the country passed through a period of structural adjustment programmed in 1986. This was accompanied by austerity measure of enormous proportion. By 1990 a sign of relief was not welcome with the price of oil in the international market soared as a result of the gulf war between Iraq and Kuwait, as a result of the war, Nigeria earning from crude oil export reached N106.62 million as against the targeted N38.62 million.
In the late 1990’s and early 2000 crude oil maintained at position as the highest contributor to the federal account. This was shown in the year 2003 annual budget. Out of estimated proved revenue of N1,819.214 billion, a total of N1,201.789 billion representing 61.58% is expected to be generated from oil. The projection is predicted on a crude oil price at $21 per barrel: the answer to this question rest on the pattern of crude oil price volatility.
STATEMENT OF THE RESEARCH PROBLEM
In addition to the monoculture structure of the oil production bases, there was the problem of oil price volatility, which to a large extent has adversely affected the Nigeria economic growth since 1973,substantial fluctuations in the international price of crude oil have had negative implication for the country’s macroeconomic policies Okigbo, (2001), Iwayemi, (2005).
Against this backdrop, the following research questions are raised:
Is there significant relationship between oil price volatility and economic growth?
Is there significant relationship between inflation rate and economic growth?
Is there significant relationship between exchange rate and economic growth?
OBJECTIVES OF THE STUDY
The broad objective of this study is to examine oil price volatility and Nigerian economic growth.
The specific objectives are:
To determine if there is significant relationship between oil price volatility and economic growth.
To examine whether there is significant relationship between inflation rate and economic growth.
To ascertain if there is significant relationship between exchange rate and economic growth.
 RESEARCH HYPOTHESIS
The hypothesis for this study is:
Ho:    There is no significant relationship between oil price volatility and economic growth.
H1:    There is a significant relationship between oil price volatility and economic growth.
Hypothesis II
Ho:    There is no significant relationship between inflation rate and economic growth.
H1:    There is a significant relationship between inflation rate and economic growth.
Hypothesis III
Ho:    There is no significant relationship between exchange rate and economic growth.
H1:    There is a significant relationship between exchange rate and economic growth.
SCOPE OF THE STUDY
It is well known fact around the globe that, there is no limitation to knowledge. As a result of the above fact, the scope of this research will be limited to the Nigerian economy vis-à-vis oil price volatility and Nigerian economic growth.
In term of time series, a period of 30 years is used i.e. 1981 to 2011 using some macroeconomic variables.
SIGNIFICANCE OF THE STUDY
It is expected that this study would consolidate existing literature on the issues surrounding the oil price volatility and Nigerian economic growth. The study would also facilitate the examination of the effects of oil price volatility on Nigerian economic growth and thus boosting the empirical evidence from Nigeria. Furthermore, given the empirical nature of the study, the outcome of this study would aid policy makers and regulatory bodies in economic modeling and policy simulation with respect to the selected variables examined in the study.
The result of the study would be of benefits to investment analysts, investors and corporations.  
It will also be useful in stimulating public discourse given the dearth of empirical researches in this area from emerging economies like Nigeria. Finally, it would also add to the available literature on the area of study while also providing a platform for other researchers who may want to further this study.
  LIMITATION OF THE STUDY
In the course of carryout this study, the researcher encountered some constraints such as finance, time, and the response rate of the respondents.
Financial Constraints: Finance is largely needed to tour wider regions or locations just to gather data for processing. But this was not adequately available to sufficiently meet the purpose of this study.
Time Constraints: This study coincided with the first and second semester academic demands which made it enormously tasking. More time would have been devoted to critically evaluate the impact of the capital market on Nigerian economy using some basic market indicators.
 REFERENCES
Odularu, G. O. (2008), Crude Oil And The Nigerian Economic Performance, World Trade Organisation (WTO), Centre William Rappard, Rue de Lausanne 154, Case postale 48, 1211 Geneve 21
Mandel, E. (2007), The Sharp Slump. A Marxist analysis of recession in the seventies, Berlin.
Iwayemi A. (2005), “Oil and the Macro economy. A Perspective on recent economic performance” in Iwayemi macroeconomic economy. A case study of Nigeria. An NCEMA publication.