Publisher: University of Port Harcourt

International Price of Crude Oil and Foreign Reserves: The Nigerian Experience (1980 – 2015)

Oyegun G., Cookey A.e., Gbanador C.a.
KEYWORDS: Crude oil, External reserves, Foreign reserves, International price


The paper investigates the impact of International price of crude oil on foreign reserves in Nigeria for the period 1980 – 2015. Data covering these periods were collected from the Central Bank of Nigeria Statistical Bulletin, and annual publications The econometric techniques of Ordinary Least Square (OLS), Augmented Dickey Fuller (ADF), Unit Root Test, Johansen Co-integration test and Error Correction Method (ECM) were employed in the empirical analysis.. The result of the regression analysis shows that there is a positive relationship between the dependent variable (ER) and international price of crude oil in Nigeria. This invariably means that as the level of oil price increases, foreign reserves increases significantly and whenever there is a fall in international crude oil price, ER falls as well. This finding thus made the argument against oil dependency relevant. In the short-run, Nigeria was able to have increasing, yet external reserves balance because of the high global oil prices, but in the long-run, the inconsistency of oil prices and lack of diversification of the productive base has had a negative effect on Nigeria’s external reserves position. Thus, the study suggests that global oil prices are the cause of instability in Nigerian external reserves balance. Therefore, a combination of strict fiscal policy focused on the actual implementation of developmental programs, diversification and industrialization might be effective instrument to protect the country’s economy from further global shocks and lead to increased and consistent external reserves balance

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