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Research Article Open access CC BY 4.0

Investigating the Impact of Oil Export on Gross Capital Formation in Nigeria

Udude Celina Chinyere, Odo Stephen Idenyi, Ituma Sunday Okpoto, Elom- Obed Ozioma Favour

Asian Research Journal of Arts & Social Sciences · pp. 1–12 · Published 19 Apr 2017

10.9734/ARJASS/2017/32605

Abstract

This study examined impact of oil export on gross capital formation in Nigeria for the period of 1980- 2015. The study specified the model as gross capital formation (GCF) being a function of oil export (OEX), real gross domestic product (RGDP) and exchange rate. The pre test carried out in the study are unit root test and co integration test while VECM econometric test was used to test the impact of the explanatory variables on the dependent variable and the data used are sourced from central bank of Nigeria bulletin 2014. Based on the above stated econometric procedure, the study found out that: (i) oil export inversely and significantly impacts gross capital formation in Nigeria both in long run and short run within the period under review.(ii) real gross domestic product impacts gross capital formation in Nigeria in the long run during  the study time. (iii) There is causal relationship existing between dependent variable and explanatory variables in Nigeria. The study concludes that oil export has not contributed to growth in gross capital formation in Nigeria. Based on the findings above the study recommend that government should legalize the operations of local (illegal) refineries operating in Nigeria and also make our local refineries to operate at  full capacity so that it will lead  to availability of refined products for domestic consumption and consequently discourage the importation of refined product from abroad thereby saving the country huge foreign exchange hitherto used for importation, to enable the revenue generated from oil export to be used for investment purposes that will boost the gross capital formation of the country which will in turn lead to economic growth.  

Gross capital formation oil export Nigeria co integration VECM

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