Economic Uncertainties in Nigeria: An Empirical Investigation on the Non-Oil Sector

Abstract

This study empirically determined the effects of economic uncertainties on non-oil sector in Nigeria from 1985 to 2023. To represent economic uncertainties, the study employed inflation rate, interest rate, exchange rate, and crude oil price while non-oil gross domestic product is employed to represent the non-oil sector in Nigeria. Annual time series data obtained from the Central Bank of Nigeria (CBN) statistical bulletin and the World Bank Development Indicators were utilized for the analysis. The applied data analysis techniques included the Dickey-Fuller’s (ADs) Augmented diagnosis for unit root, bounds cointegration test, and Autoregressive Distributive Lag (ARDL) approach. The results of the unit root test indicated that the interest and exchange rates appeared integrated at levels [I(0)], whereas non-oil sector gross domestic product, inflation rate, and crude oil price were stationary at first difference [I(1)]. Results of the bounds cointegration test indicated that inflation rate, interest rate, exchange rate, crude oil price, and non-oil sector gross domestic product exhibited long-run correlation. The ARDL model estimation result indicated that the non-oil gross domestic product is substantially influenced by inflation rate and exchange rate, while interest rate had non-substantial negative effect. Conversely, the regressand is substantially influenced by crude oil price. The research subsequently determined that economic uncertainties had substantial impact on the performance of Nigeria's non-oil sector. The research suggested that the government should strive to decrease the rate of inflation in Nigeria in order to boost output of the non-oil sector to enhance inclusive non-oil economic stability in Nigeria.