The Impact of oil Price on the Nigerian Economy

Abstract

This study contends that upward adjustments of petroleum productsprices have resulted in inflation, high cost of living, and inequitable distribution of income in Nigeria. Between 1978 and 2007, the various Nigerian regimes increased fuel prices a total of 18 times. Most of the increase occurred in the 1990-2007 period when prices were adjusted, sometimes twice a year. The objectives of the study were to examine the economic impacts of price instability and identifying the causes of increase in prices of oil products. The assumptions of the study are that the rise in price of petroleum products has contributed significantly to inflation in Nigeria, using simple regression analysis of data to find out the relationship between dependent and independent variables. The study revealed that whenever petroleum increases, the inflation rate also increases. The explanation for the above result is that the relationship between the inflation rate and the price of petrol is significant. The study recommended that more resources should be tapped to diversify the economy.

Keywords: Oil, price, inflation, increase