The Impact of Oil Sector Deregulation on the Nigerian Economic Growth

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This study theoretically and empirically set out to investigate the Deregulation of the Nigerian Oil sector and its economic growth. Theoretical and conceptual propositions of the Benign Perspective of Natural resource abundance beneficial to growth revealed that the oil sector affects the country’s economic growth and various economic policies of subsidy and deregulation in this sector certainly affects the economy. Variables of the oil sector such as exchange rate, foreign direct investment, global oil price, inflation rate, oil price, oil production and oil revenue were used to determine the extent of implication the oil sector has on the country’s economic growth. The research work used annual secondary data on these variables beginning from 1980 to 2013. In achieving the objectives of the study, a long run approach of econometric analysis was employed using the trend analysis to examine movements and behaviours in the variables, the unit root test to test the stationarity of the variables, the Auto Regressive Distribution Lag test to test for the presence of long run relationship among the variables, Error Correction to model to show the rate at which short-run inconsistencies are being corrected and incorporated into the long-run equilibrium relationship and the Pairwise Granger Causality to examine the direction of causality among the variables.

The estimated result emanating from the analysis and discussion section of this study indicated that the variables considered in the model are stationary and have long run co-movement. The study showed that increase in exchange rate positively affects the economy, Foreign Direct Investment and Global Oil Price negatively impacts the economy, these variables in the oil sector context do not significantly impact the economy, therefore, changes or movements in these variables do not necessarily prompt the government into deregulating the oil sector. Oil price, Oil Production and Oil revenue positively impacts the economy and these impacts are significant because the expected negative effects of increased inflation and exchange rate and on the economy are being neutralized by these variables. Therefore, the study concludes that Oil Price, Oil Production and Oil revenue are key variables in the oil sector and greatly affects the Nigerian economy through the policies of subsidy and deregulation with deregulation being more effective because it attracts private investors to the oil sector who compete among themselves, this competition in turn leads to efficiency and increase revenue in the oil sector. The deregulation policy is also effective in that it increases oil revenue and this is being used in repairing, maintaining and restructuring our refineries and increase their capacity to refine more oil products to meet rising local demand, to increase its export and reduce the importation of oil products.

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The Impact of Oil Sector Deregulation on the Nigerian Economic Growth

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