THE CURRENT ACCOUNT AND OIL PRICE FLUCTUATIONS NEXUS IN NIGERIA

Considering Nigeria as an oil dependent country, fluctuations in oil prices as a result of policy competition between OPEC and oil shale producing countries (such as the United States and Canada) in recent years has posed an impediment on the current account balances of Nigeria. This study investigates the relationship between oil price fluctuations and the current account balances in Nigeria. The study used a time series data sample from 1977 to 2015. The Autoregressive Distributed Lag (ARDL) was used to estimate the relationship between the current account and oil price fluctuations in the short-run and long-run. It was argued from the findings that in the short-run, the oil price had a positive but insignificant impact on the current account balances, while in the long-run, it impacted negatively, but was found to be a significant determinant of current account balances in the economy. Other variables such as population growth (POP), gross domestic product (GDP) and trade (T) had an insignificant relationship with the current account balances in the short-run, while in the long-run, only GDP and oil price (OP) were found to be significant determinants of the current account balances in the economy. The study, therefore, concludes that better performances of the current account balance in the Nigerian economy are a function of the stability in the oil price. From the findings, it was recommended that the economy should be tailored towards mitigating the shocks in oil price through considering alternative means of trade.