INFLATION, OIL REVENUE AND ECONOMIC GROWTH NEXUS IN NIGERIA

The nexus among inflation, oil revenue and economic growth in Nigeria has been examined throughout the duration of this study, using data obtained from world bank 1985-2022. The Autoregressive Distributive Lag Model (ARDL) was adopted as estimation technique in the study. Results show that increase in the inflation rate in the economy will lead to a drop in the GDP of the economy and the increase in oil revenue will lead to an increase in economic growth. Gross capital formation and Labor also indicate positive effects in the long-run while Effective exchange rate shows a negative effect on the economy in the long run. The error correction term-0.419828 has a negative sign and is statistically significant this means that in any situation of disequilibrium the speed of adjustment back to equilibrium in the following year will be at a rate of 41.9% in the first model. In the second model the error correction term is -0.519156 and has a negative sign and is statistically significant and this means that in any situation of disequilibrium, the speed of adjustment back to equilibrium is 51.9% in the second model. The results of the granger causality test shows that there is bidirectional causality between Inflation and Gross domestic period, Oil revenue and Gross domestic period, but a unidirectional causality between oil revenue and inflation where oil revenue granger causes inflation but inflation does not granger cause oil revenue. The government should establish maximum amount of annual spending, in order to limit the rapid increase in government expenditure that encourages inflation. The government should also engage in the rehabilitation of the old refineries and construction of new refineries in order to stop the age long practice of exporting unrefined oil at a low price and purchasing the refined oil at a high price. Reconstruction of refineries is necessary as the exportation of crude oil and importation of refined oil eats out of oil revenue.