ABSTRACT
This study assessed the effect of oil price volatility on economic growth in Nigeria, for the period 1981-2016, using vector Autoregressive modeling approach The focus was on the relationship between oil price changes and selected macroeconomic variables with particular emphasis on real GDP which acted as proxy for economic growth. From the findings, it was observed that oil price at the prevailing exchange rate determines the level of government spending, which in turn determines real GDP. Also, own innovations and innovations due to oil price volatility, exchange rate and consumer price index, are to a large extent, the leading sources of economic shocks in Nigeria. From the foregoing, the core emphasis should be centered on the attainment of a long-lasting breakthrough by way of mitigating the damaging effects of oil price unpredictability to attain a swift and sustainable development in Nigeria. From the findings, it was observed that, Oil price at the prevailing exchange rate determines the level of government spending, which in turn determines real GDP. Overall, it can be said that there is a crucial relationship between oil price volatility and economic growth and due to the fact that the Nigerian economy is highly vulnerable to oil price changes, expected growth targets are hardly met.
KEY WORDS: Oil Price real GDP, FEVD, IRF, Vector Autoregression, Nigerian.