Crude Oil Price and Balance of Payment in Nigeria: An ARDL-Bound Test Approach.

Abstract:

This study investigates crude oil price and balance of payments in Nigeria using quantitative method of analysis with data collected from CBN and world bank publications spanned from 1991-2023. The study employs the descriptive analysis and Auto Regression Distributive Lag (ARDL) technique of estimation in investigating the variables and found that crude oil price (WTI) had an insignificant impact on the balance of payment within the study period in Nigeria. Also, inflation rate and exchange rate were insignificant while balance of trade was significant factor that influenced the country’s BOP position. It was further discovered from the study that balance of trade, exchange rate and interest rate were negatively related to BOP, while WTI was positively related to BOP. It was discovered that the balance of payments has a long run relationship with all the variables included in the model. Based on the findings, the study recommends that government should focus on diversification of the economy from oil to other sectors, such as the agricultural sector, service sector, trade, and commerce sector, etc. so as to have many export commodities and services which will open up different sources of revenue for the economy and reduce over-reliance on oil earnings and hence a favourable balance of payment position.