IDEAS home Printed from https://ideas.repec.org/a/dug/actaec/y2022i1p78-95.html
   My bibliography  Save this article

Oil Prices and Economic Activity in Nigeria: An Asymmetric Cointegration and Threshold Analysis

Author

Listed:
  • Raymond Osi Alenoghena

    (University of Lagos)

  • Adolphus Arhotomhenla Aghughu

    (Federal government of Nigeria)

Abstract

Oil price fluctuation greatly affects the economy of oil producing-net-exporting small open economies of developing countries. This study investigates the nonlinear relationship between oil price volatility and economic growth in Nigeria, covering the period 1981 to 2019. The nonlinear autoregressive distributed lag (NARDL) model is adopted to establish the asymmetric cointegration status of oil price volatility and GDP growth. The switching point between the variables is estimated using the threshold regression approach. The results from the NARDL analysis reveal that the relationship between oil price volatility and economic growth is cointegrated in the long run and has an asymmetrical relationship. Furthermore, the threshold regression investigation indicates that the switching point for the oil price in the relationship with economic growth is US$48.263 per barrel. Hence, whenever oil price falls below the threshold, there is a negative effect on the country’s economic growth. Therefore, the study recommends that the government take advantage of oil export earnings and make some savings whenever oil price goes above the threshold. The savings can be used to assist in developing the other sources of foreign exchange earnings and sustain the country’s development effort.

Suggested Citation

  • Raymond Osi Alenoghena & Adolphus Arhotomhenla Aghughu, 2022. "Oil Prices and Economic Activity in Nigeria: An Asymmetric Cointegration and Threshold Analysis," Acta Universitatis Danubius. OEconomica, Danubius University of Galati, issue 18(1), pages 78-95, February.
    • Handle: RePEc:dug:actaec:y:2022:i:1:p:78-95
    as

    Download full text from publisher

    File URL: https://dj.univ-danubius.ro/index.php/AUDOE/article/view/1538/1826
    Download Restriction: no
    ---><---

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:dug:actaec:y:2022:i:1:p:78-95. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Daniela Robu (email available below). General contact details of provider: https://edirc.repec.org/data/fedanro.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.