The Impact of Income from Crude Oil and Inflation on Nigeria Economy (2003-2022)

This study examines the relationship between income derived from crude oil and inflation, and their collective impact on the Nigerian economy, with a focus on Gross Domestic Product (GDP). Using secondary data sourced from the Central Bank of Nigeria's Statistical Bulletin covering the period from 2003 to 2022, the study employs econometric techniques, particularly the Ordinary Least Squares (OLS) method, to estimate the parameters of the model. Diagnostic tests, including auto correlation, heteroscedasticity, and multicollinearity, are conducted to ensure the robustness of the model.
The findings reveal that while the Consumer Price Index (CPI) and Exchange Rate exhibit strong and statistically significant relationships with GDP, crude oil income does not show a significant impact. The model's high correlation coefficient (R = 0.991) and R Square value (0.982) indicate a strong predictive power, explaining 98.2% of the variance in GDP. The CPI, with an unstandardized coefficient of 514.081 and a highly significant p-value, demonstrates a strong positive influence on GDP, whereas the impact of Oil Revenue and Exchange Rate, reflected by their respective coefficients and non-significant p-values, is weak and statistically insignificant.
Correlation analysis further supports these findings, showing strong positive relationships between CPI and GDP, and between Exchange Rate and GDP, while Oil Revenue shows weak and non-significant correlations with both GDP and the Exchange Rate. The study concludes that inflation and exchange rates are critical determinants of economic stability in Nigeria, whereas crude oil income, within the period and model examined, does not significantly drive GDP growth.