PETROLEUM ENERGY CONSUMPTION, TRADE OPENNESS AND FOREIGN DIRECT INVESTMENT: A TRIPARTITE APPROACH TO ECONOMIC GROWTH IN NIGERIA
Keywords:Economic growth, Petroleum consumption, Trade openness, Foreign Direct Investment, Time series
Nigeria is an oil-rich country with a significant reliance on petroleum consumption. This study examines the tripartite effects of petrol final energy consumption, trade openness, and foreign direct investment on economic growth in Nigeria over the period 1990-2021. The unit root results and the number of data points at the disposal of this study permit the application of ARDL econometric estimation technique. The short-run and long-run estimated parameters indicate that there are impacts of petroleum consumption, Foreign Direct Investment (FDI) and trade openness on economic growth in both short-run and long-run in Nigeria. In the long run, petroleum consumption (0.3762%), trade openness (0.2272%) and FDI (0.1271%) have a positive and significant impact on economic growth. The coefficient of the error correction term is negative and statistically significant. This implies that the model is mean-reverting, and that the short run model tends to revert to its long-run equilibrium value over time in the event of disequilibrium at the speed of 63% per annum. The model is robust for policy making as it passed diagnostics tests, no evidence of serial correlation, no evidence of heteroskedasticity, no evidence of model misspecification, there is dynamic stability via Cusum and Cusum of Square and the residuals are normally distributed as evidenced from Jarque-Bera statistics. Based on the statistically significant positive impacts of petroleum energy consumption, trade openness and foreign direct investment, this study suggests that policies aimed at increasing petroleum consumption, FDI and trade openness are going to lead to increase in economic growth in Nigeria.
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