Impact of Nigerian Petroleum Oil Production on Nigerian Economy: Cointegration and Error Correction Model Analysis

Abstract

This study was done to investigate the effect of Nigerian crude oil production against Nigerian economy.Johansen's co-integration concept is employed on thirty-three years (1981-2013) data about annual Gross national income, petroleum production along with petroleum oil exchange. Augumented Dickey-fuller (ADF) test was carried out in level as well as first difference of every sequence. ADF test indicated existence of unit root at the level otherwise at first difference the series were stationary. The trace and eigenvalues of Johansen co-integration indicated single co-integrating equation in the system, hence presence of long-term relationship between the variable. However, since the series are co-integrated, vector-error-correction-model was applied to estimate the long-term coefficient.Crude oil production has a negative coefficient and significant, while crude oil export is significant in predicting difference in Gross national income on the long-term. Contrary to the long-term result there was no short-run causation between Gross national income, petroleum oil production and crude oil exportation in Nigeria.The revealed result of the study attracted recommendation that export of the product should be given keen attention and proper management, that will bring development of other sectors through the income from crude oil exportation which will bring about great growth in economy.