OIL PRICE FLUCTUATIONS AND NON-OIL SECTOR DEVELOPMENT: IMPLICATIONS FOR NIGERIAS BALANCE OF TRADE
Yusuf Hammed Agboola
Volume 14 Issue 2
Abstract
This study examined the effects of oil price fluctuations and non-oil sector development on Nigerias balance of trade over the period 1991–2021. The study also incorporated foreign exchange reserves and government expenditure as additional explanatory variables. Annual secondary data were obtained from the World Bank Development Indicators. The Autoregressive Distributed Lag (ARDL) estimation technique were employed to examine the short and long-run relationships among the variables. The findings revealed that oil price had a positive and statistically significant effect on the balance of trade in both the short and long run. Foreign exchange reserves had a positive and significant short-run effect but an insignificant long-run effect. Government expenditure exhibited a positive and significant short-run effect but a negative and significant long-run effect. Similarly, non-oil sector GDP had no significant short-run effect but a negative and significant long-run relationship with the balance of trade. The diagnostic tests confirmed that the model satisfied the relevant statistical requirements. The study concludes that Nigerias balance of trade remains strongly influenced by oil price movements, while growth in the non-oil sector does not automatically translate into improved trade performance. The study recommends economic diversification, increased support for non-oil exports, productive government spending and prudent foreign exchange reserve management to improve Nigerias balance of trade. Keywords: Oil Price Fluctuations, Non-Oil Sector Development, Balance of Trade, Foreign Exchange Reserves, Government Expenditure.
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