The impact of unstable oil export revenue on the Nigerian economy: a test of the export earnings instability hypothesis

Abstract

This study is focused on investigating the impact of unstable oil export revenue on the Nigerian economy. Specifically, it seeks to investigate the generally held traditional hypothesis in the literature that unstable export earnings, especially of less developed countries are detrimental to their economic growth. In this context, the study seeks to test this widely held proposition with respect to unstable oil export revenue in the Nigerian economy where oil exports constitute over 90 % of the country's total export earnings. The approach applied econometric analysis of the data collected on the following macroeconomic variables: Gross Domestic Product, private consumption expenditure, imports, gross fixed capital formation (gross domestic investment) and gross domestic savings. To complement the econometric methods, trend analysis was employed for visual presentation of the trends of oil export revenue with each of the macroeconomic variables The general policy recommendations that derive from these findings are that, the country needs to diversify her export basket to accommodate new and non-traditional export products. This will be beneficial in providing the economy with greater flexibility to offset the negative impact of unstable oil export revenue on the economy. Data on the key macroeconomic variables are also recommended to be improved and harmonized by different agencies held with statutory responsibility. This would make economic planning reliable and minimize unnecessary data problems that could be encountered by prospective researchers on the Nigerian economy.