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This study evaluated the impact of oil price volatility on four key macro-economic variables in Nigeria within the period, 1970-2015. Part of the investigation involved an inquiry into the effectiveness of two major fiscal rules that became operationalized in Nigeria in 1986 (the introduction of Benchmark price for crude oil) and 2004 (the introduction Excess Crude Account).The study adopted the ex-post facto and analytical research design and used annual time series data for a forty-six year period (1970- 2015). Data were collected from the Central Bank of Nigeria’s annual statistical bulletins, the National Bureau of Statistics annual bulletins and the World Bank’s development indicators. Four key hypotheses were proposed and tested with change in oil price as the major explanatory variable while government revenue, government expenditure, GDP growth rate and inflation served as dependent variables. The Autoregressive Distributed Lag (ARDL) model, Granger Causality and Chow Breakpoint tests were used to test the hypotheses. Results revealed that change in oil price had a positive and significant impact on government revenue and government expenditure, had positive but no significant impact on Gross Domestic Product growth rate, but had no positive and significant impact on the domestic price level. The chow break-point test indicated that, of the two Fiscal Rules put in place by the Nigerian government, only the Excess Crude Account showed significant effectiveness on her fiscal operations. The study recommends, amongst others, that efforts be intensified on revenue diversification away from oil through conscious zero-oil revenue budget proposals. |
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