Asymmetric Effect of Oil Price and Revenue Shocks on Nigeria’s Economy

This study analyses the asymmetric effects of oil price and revenue shocks on Nigeria’s economy, utilising annual time series data from 1981 to 2023 and employing the Non-Linear Autoregressive Distributed Lag (NARDL) methodology. The empirical results confirm a long-run relationship between real GDP and selected macroeconomic variables. In the long run, positive oil price shocks exhibit a weakly significant positive effect on real GDP, whereas negative shocks have a much stronger and statistically significant negative impact. Regarding oil revenue, positive shocks are found to be statistically insignificant, while negative shocks exert a highly significant contractionary influence on real GDP. In the short run, negative oil price shocks surprisingly have a positive and significant effect on output, suggesting that declines in oil prices may prompt compensatory fiscal measures or lead to increased non-oil activity. The findings underscore Nigeria’s economic vulnerability due to its dependence on oil, as negative oil price and revenue shocks impose substantial long-term contractionary pressures, whereas positive shocks do not translate into sustained economic growth. This evidence strongly supports the resource curse hypothesis and highlights the fragility of oil-dependent economies such as Nigeria. Consequently, the study recommends that the Federal Government pursue economic diversification centred on long-term structural transformation, with targeted investments in human capital, infrastructure, and technology to foster a knowledge-driven economy. Additionally, the establishment of robust fiscal buffers, particularly a rules-based sovereign wealth fund for saving excess oil revenues during boom periods, is advocated to improve resilience and provide essential resources during economic downturns.