The Economic Importance of Crude Palm Oil in Nigeria
Author(s)
Behrooz gharleghi , Benjamin Chan Yin Fah ,
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Abstract
Before the advent of crude oil production in Nigeria, Nigeria’s main stay was agriculture and was dominated by palm crude oil production. Despite all these the Nigerian palm crude oil production and exportation is ranked 4th in the world. In the light of the poor performance of the Nigerian economy since independence despite the huge mineral, material and human endowment, as well as the accelerating dynamics of the global economy, this study was set out to examine the economic importance of palm crude oil production in Nigeria. The objective of the study is to first evaluate the relationship between palm crude oil production and Nigeria’s economic performance and second determine the substitutability of palm oil for crude oil in Nigeria. It is hypothesized that palm crude oil production does not have any significant impact on economic growth in Nigeria; and that palm crude oil production cannot be substitute for crude oil in Nigeria. Secondary data were sourced from the central bank of Nigeria and were analyzed using the ordinary least square econometric technique with a multiple regression n model and with the aid of the e-views software. Both palm crude oil production and crude oil production showed the right signs being positive but the rate at which palm oil substitute for crude oil showed the wrong sign being negative however none of the variables was statistically significant and so we accepted both hypotheses. ADF unit root test reveals that all the variables were stationary at level except RTS that was stationary at first difference. Despite a weak short-run result the variables showed to be converging at the long-run equilibrium as indicated by the Johansen-Juselius cointegration test which showed three cointegrsting equations.
Keywords
cointegration, unit root, production function, palm oil, crude oil
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