Oil Price Instability and Industrial Output Expansion in Nigeria

Student: Moses Ojoajogun Negedu (Project, 2025)
Department of Economics
Bamidele Olumilua University of Edu. Science and Tech. Ikere Ekiti, Ekiti State

Abstract

This study investigates the impact of oil price instability on industrial output expansion in Nigeria from the year 1980 - 2022, employing the Autoregressive Distributed Lag (ARDL) model. As an oil-dependent economy, Nigeria's industrial sector is significantly influenced by fluctuations in global oil prices, which affect fiscal revenues, exchange rates, and industrial investments. This study employs the Cobb-Douglas production function to analyze the relationship between oil price volatility and industrial output, the ARDL model is applied to analyze both the short-run and long-run dynamics of the relationship between oil price volatility and industrial output. The results reveal a significant short-run negative impact of oil price instability on industrial output, while the long-run analysis indicates a complex interplay of factors, including exchange rate fluctuations and policy responses. The findings underscore the critical need for economic diversification and the implementation of stabilization policies to shield the industrial sector from the adverse effects of oil price volatility. This study contributes to the existing literature by providing a robust econometric framework to understand the nexus between oil price dynamics and industrial growth in Nigeria.

Keywords
price instability industrial output expansion nigeria
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