UPSTREAM OIL AND GAS SECTOR AND ECONOMIC GROWTH IN NIGERIA (1981 – 2020)

Abstract

This paper examined the impact of upstream oil gas sector on economic growth in Nigeria relative to other key sectors like agriculture, manufacturing and trade. The Secondary data on Real GDP, Petroleum and Natural gas, manufacturing, agriculture and trade (Dependent and Independent variables) are obtained from the CBN statistical bulletin and National Bureau of Statistics. The econometrics method of OLS, co-integration and Error Correction Mechanism were used for the analysis. The OLS result showed that a unit increase in any of the explanatory variables accounted for about 99.9 percentage variation in economic growth. The F statistics revealed a joint significant of all the variables in the model. Though, the existence of negative auto correlation renders the OLS result to be spurious and therefore it could not be used for policy prescription. The result of the unit root test however showed that all the variables (Real GDP, Petroleum & natural gas, agriculture and Trade) were stationary at first difference. This prompted the study to conduct a cointegration test to ascertain a long run equilibrium relationship among the variables model. It was discovered that there are four integrating equations which justifies the existence of long run equilibrium relationship among the variables in the model. The study further determines the direction of causality among the variables in the model using Engel Granger causality test. The result revealed a unidirectional causality from Agriculture to Petroleum and Natural Gas, Manufacturing while a bi-directional causality exists between manufacturing to output growth. The study therefore recommends that the government should invest the proceeds from oil and natural gas on other sectors of the economy most especially agricultural and manufacturing sectors. The government should also redirect its focus on proper management of its re venue and effective control of unnecessary expenditure.