Oil Price Volatility and Economic Growth in Nigeria: Evidence from ARCH and GARCH Models
DOI:
https://doi.org/10.65820/ejems-3vol2-issue1-2026Keywords:
Crude Oil Prices, Inclusive Economic Growth, Economic Volatility, ARCH and GARCH Model, Price ShockAbstract
Purpose: This study investigated the impact of crude oil price volatility on Nigeria’s economic growth, with emphasis on the magnitude of oil price volatility and its short-run and long-run effects on economic performance.
Methodology: The study adopted a quantitative approach, using annual time-series data for Nigeria. Crude oil price volatility is estimated using the Generalised Autoregressive Conditional Heteroskedasticity (GARCH) model. At the same time, the Autoregressive Distributed Lag (ARDL) bounds testing technique is employed to examine short-run and long-run relationships between oil price volatility and economic growth. Descriptive statistics, unit root tests, cointegration analysis, and diagnostic tests are conducted to ensure the robustness of the model estimates.
Results: The findings revealed substantial volatility in crude oil prices in Nigeria, characterised by persistent shocks and volatility clustering. Short-run ARDL results show that oil price fluctuations significantly affect GDP growth, highlighting Nigeria’s vulnerability to external oil price shocks. In the long run, crude oil price volatility significantly reduces economic growth, leading to higher production costs, reduced investment, and sustained economic instability.
Novelty and Contribution: The study contributed to the literature by jointly applying GARCH and ARDL techniques to capture both oil price volatility dynamics and their differential short- and long-term effects on economic growth in an oil-dependent economy.
Practical and Social Implications: The findings underscore the need for robust oil revenue stabilisation frameworks, including effective use of the Sovereign Wealth Fund, and accelerated economic diversification into agriculture, manufacturing, and renewable energy to promote sustainable economic growth.
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Copyright (c) 2026 Gwaison Panan Danladi (Author)
This work is licensed under a Creative Commons Attribution 4.0 International License.
This article is licensed under a Creative Commons Attribution 4.0 International License.
