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Title: The international linkages of Nigeria as an oil-dependent economy : macroeconometric analysis
Author: Ibironke, Adesola Bamidele
ISNI:       0000 0004 7659 7747
Awarding Body: Newcastle University
Current Institution: University of Newcastle upon Tyne
Date of Award: 2018
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Nigeria is an oil-driven economy with a high level of global integration. This thesis considers how oil- related fluctuations impact the economy by exploring three important aspects of the nexus between oil dependency and global integration. First, by modelling global integration through cross-country trade linkages, the thesis examines the impact of external (oil-related) shocks on Nigeria, and compares this with the impact of domestically generated shocks. The findings show that although oil price shocks cause real exchange rate appreciation and a consequent reduction of real GDP, these effects are not statistically significant. This implies that Dutch disease, particularly the spending effect of the disease, is not statistically significant in Nigeria. This is reasonable, as the country adopts the flexible exchange rate policy, which absorbs shocks and prevents "false" appreciation of real exchange rate. However, domestic shocks, specifically shocks to real GDP and inflation, have statistically significant impact in the country. Second, the international linkages between Nigeria and its main trade partners (i.e. US and Euro Area) are examined in terms of oil-related growth comovements, in order to test the decoupling hypothesis. This involves investigating whether or not the business cycles of the emerging and developing economy (Nigeria) has decoupled from those of the advanced economies (ADs). The rationale underlying the focus on oil-related comovements is that Nigeria is a major oil exporter and therefore oil price is likely to have a strong role to play in the transmission of international business cycles onto the country. The results show a statistically significant degree of growth comovements between the three economies under consideration, indicating that the decoupling hypothesis does not hold for Nigeria. Finally, the international linkages between Nigeria and the global economy are examined with respect to the effectiveness of Nigeria's stabilization fund and oil-price-based fiscal rule. The results show that the two fiscal instruments are effective at cushioning the impact of oil shocks on the economy, in terms of both fiscal and broader macroeconomic effects. These findings suggest the increased resilience of Nigeria to global shocks originating from the ADs (as dominant importers of Nigeria's exports). Complementing the findings with those on the decoupling hypothesis indicates that resilience does not require decoupling for Nigeria, which iii is consistent with the broad literature on the decoupling of the emerging market and developing economies (EMDEs) from the ADs. These results have policy implications for Nigeria. First, the country should maintain the adoption of the flexible exchange rate policy, because it has been effective as a shock absorber against Dutch disease. Second, broader macroeconomic policies are required to limit the adverse effects of internal shocks. Third, resilience does not appear to require decoupling for Nigeria, so long as effective arrangements are made to limit the effects of the shocks originating from the ADs. Fourth, Nigeria should maintain its stabilization fund and oil-price-based fiscal rule, possibly complementing them with more countercyclical policies, in order to build stronger resilience to external shocks.
Supervisor: Not available Sponsor: Nigeria's Tertiary Education Trust Fund (TETFund)
Qualification Name: Thesis (Ph.D.) Qualification Level: Doctoral
EThOS ID:  DOI: Not available