Impact of Oil Dependence on the Nigeria’s Economic Growth

Abstract

This study aims to capture the effect of oil dependence on the Nigeria's economic growth from 1973 to 2013. Applying the ARDL bounds testing co-integration procedure, the oil rents ratio to GDP was used as a proxy for oil dependence and a significant negative correlation was discovered between oil dependence and GDP per capita, which was robust to the specification employed. The export sector value added had an insignificant negative correlation with GDP per capita in the long run; this is due to the high level of dependence on oil. Thus validating the presence of Dutch disease in the Nigerian economy. The study suggested the expansion of Foreign Direct Investment and sterilization of oil rents overseas by fostering Incentives so as to reduce the oil price shocks and the negative effects of crude oil prompted capital inflow in the Nigeria's economy.