Macroeconomic Impact of Oil Price Shocks on Government Expenditure and Economic Growth in Nigeria

Jump To References Section


  • Department of Economics, University of Abuja, Abuja ,NG
  • Department of Economics, University of Abuja, Abuja ,NG
  • Department of Economics, University of Abuja, Abuja ,NG



Oil Price, Government Expenditure, Economic Growth, Generalised Method of Moment, Dutch Disease


The Nigerian economy depends on over 90% oil exports revenue to drive government expenditure aimed at supporting growth-enhancing fiscal investments. Oil price has therefore become the standard benchmark for estimating aggregate annual revenue projections for all fiscal budgets and overall prospects of budgetary success. Over the years, growth in oil exports revenue and associated growth in government expenditure supported by macroeconomic policy reforms have failed to diversify the economy away from its mono-cultural revenue base. This paper investigated the nexus between oil price shocks, government expenditure and economic growth in Nigeria for the period 1986 to 2018, an era marked by bold market reforms. Generalized Methods of Moments (GMM) and Vector Error Correction (VECM) techniques are used for the empirical examination of the relationship between the study variables. The results indicate a direct and significant relationship between oil price and both government expenditure and economic growth. The exchange rate and exports channels are the intermediaries that transmit oil price shocks to the economy. Similarly, findings have confirmed evidence of the Dutch Disease in Nigeria. Given the ongoing decarbonization of global energy, the study provides recommendations for an urgent shift in growth policy focus away from dependence on oil revenue to bold reforms that will fast-track fiscal and exports revenue diversification and sustainability, anchored on private sector initiatives.


Download data is not yet available.


Metrics Loading ...




How to Cite

Darma, N. A., Magaji, S., & Amase, J. (2022). Macroeconomic Impact of Oil Price Shocks on Government Expenditure and Economic Growth in Nigeria. SDMIMD Journal of Management, 13, 97–112.



Research Papers



Adedokun, A. (2018). The effects of oil price shocks on government expenditures and government revenue nexus in Nigeria. Future Business Journal, 4: 219–232.

Alekhina, V., & Yoshino, N. (2018). Impact of world oil prices on an energy exporting economy including monetary policy, Working Paper, 828. Chiyoda, Tokyo: Asian Development Bank Institute.

Alley, I., Asekomeh, A., Mobolaji, H., and Adeniran, Y. A. (2018). Oil Price Shocks and Nigerian Economic Growth. European Scientific Journal, 10, 19: 376–392.

Arellano and Bower (1995). Another Look at the Instrumental-Variable Estimation of Error Component Models. Journal of Econometrics, 68: 29 – 52.

Central Bank of Nigeria (2020). Central Bank Annual Reports and Accounts. Central Bank of Nigeria Publications.

Fueki, T., Higashi, H., Higashi, N., Nakajima, J., Ohyama, S., & Tamanyu, Y. (2018). Identifying oil price shocks and their consequences: The role of expectations in the crude oil market. Bank for International Settlements. BIS Working Papers No. 725.

Giraud, P. (1995). The equilibrium price range of oil Economics, politics and uncertainty in the formation of oil prices. Available from:

Gylych, J., Jibrin, A. A., Celik, B., & Isik, A. (2020). Impact of oil price fluctuations on the economy of Nigeria, the core analysis for energy producing countries. Global Market and Trade Journal.

Johansen, S., and Juselius, K. (1990). Maximum Likelihood Estimation and Inference on Cointegration with Applications to the Demand for Money. Oxford Bulletin of Economics and Statistics 52 (2), 169–210.

Kettle, S. (2021). Oil Crisis. Encyclopedia Britannica. Available from

Kanu, S. I., & Nwadiubu, A. (2020). Global oil price shocks and effects on economic growth: An econometric Investigation of Nigeria. International Journal of Innovation and Economic Development, 6(4): 7–26.

Keynes, J. M. (1936). The General Theory of Employment, Interest and Money. London: Macmillan HET Edition. Retrieved at: keynes/gt/gtcont.htm” to be included in the reference list.

National Bureau of Statistics (2021). Nigerian Gross Domestic Product Report (Q1, 2021).

Nwosu, C. A., Ihekaire, U. R., Ndukwe, O. P., & Amanze, C. A. (2020). Effects of oil price shocks on the real sectors of the Nigerian economy. International Journal of Innovative Finance and Economic Research, 8(1):162– 176.

Okunoye, I., & Hammed, S. (2020). Oil price shock and fiscal-monetary policy variables in Nigeria: A structural VAR approach. Munich Personal RePEc Archive, 104145. Available from:

Olanipekun, D. B. (2016). Oil price shocks, exchange rate and Nigeria’s economy. International Journal of Economics, Commerce and Management, IV(8):254– 270.

Omotosho, B. S. (2019). Oil price shocks, fuel subsidies and macroeconomic instability in Nigeria. Central Bank of Nigeria Journal of Applied Statistics, 10: 2.

Orhewere, B., & Ogbeide-Osaretin, E. N. (2020). Oil price shocks and their impact on capital expenditure in Nigeria. Economica AUDCE, 16: 227–238.

Patrick, O. (2020). Macroeconomic impacts of oil price shocks on the Nigerian economy. European Journal of Business and Management Research, 5(5).

Philips, P. C. B., & Perron, P. (1988). Testing for a unit root in time series regression. Biometrika, 75(2), 355–346.

Raouf, E. (2021). International Journal of Energy Economics and Policy, 2021, 11(5), 78-84.

Sloman J., & Hinde, K. (2008). Economics for Business (4ed.). Edinburgh: Pearson Education Limited.