The current issue of deregulation of downstream oil sector through gradual subsidy withdrawal has regenerated heated debates in Nigeria. The government claims that the process will guarantee long term stability in product supply and price which will translate into economic growth and development, however skeptics especially the organised labour are claiming that deregulation will lead to higher product prices, high cost of production, loss of jobs and will bring about negative growth in the economy. Therefore this paper employs a Vector Autoregressive (VAR) model on quarterly data over the period 1980q1 to 2012q4 using Variance Decomposition, Impulse Response Function and Granger Causality tests to examine the effect of deregulation of downstream oil sector on four macroeconomic variables, namely; GDP, Inflation, Unemployment and Minimum wage. This paper finds evidence that changes in oil price due to deregulation is the major source of variation in GDP, Inflation and Unemployment, while it is not found to be a significant source of variation in Minimum wage. The paper also discovered that there is positive impact of oil price changes on GDP and Inflation but negative impact on Unemployment and Minimum wage in the short run which became positive in the long run. Finally the Granger causality test indicates unidirectional causality running from Petroleum prices to GDP and from Inflation to Petroleum prices while there is no evidence of a causal relationship with Minimum wage and Unemployment.
|Publication status||Published - 2013|
|Event||Annual Paris Business and Social Science Research Conference - Paris, France|
Duration: 3 Jul 2013 → 4 Jul 2014
|Conference||Annual Paris Business and Social Science Research Conference|
|Period||3/07/13 → 4/07/14|
Sani, S. B. (2013). Effect of deregulation of downstream oil sector on selected macroeconomic variables in Nigeria. Paper presented at Annual Paris Business and Social Science Research Conference, Paris, France.