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The up and down movement in the price of crude oil in recent years has led to increasing concern about its macroeconomic implications for the Nigerian economy as economic planning has become very uncertain given the fact that the economy is highly vulnerable to oil price fluctuations. It is with this view in mind that this paper empirically analyses the impact of fluctuating oil revenue and the performance of the Nigerian economy between 1999 to 2016 (a seventeen years period of democratic governance), using secondary data sourced from Central Bank of Nigeria Statistical Bulletin and World Bank Development Indicators with VAR econometric tools of analysis. After appropriate stationary and robustness checks, the study finds out that oil price shocks (proxy for oil revenue) retards economic growth as it has a negative relationship with economic growth. An interesting outcome from the VAR Block Exogeneity Test is the unidirectional causality running from Oil Revenue to Real Gross Domestic Product (economic growth) which reveals the fact that during the years under reference, proceeds from oil export were mainly responsible for the level of astronomical growth recorded in the economy. The study concludes that oil price fluctuation paints an unstable future for the Nigerian economy because macroeconomic variables like employment, interest rate and price stability become victims. Both fiscal and monetary tools are frequently revised to keep the system afloat during price shocks. Nigeria remains a victim of these policy shocks because of overdependence on oil export earnings. A major policy recommendation is the need for policy makers to concentrate on policies that will strengthen and stabilize the macroeconomic structure of the Nigerian economy with specific focus on alternative sources of government revenue (reduction of dependence on oil proceeds) and reduction in monetization of crude oil receipts (fiscal discipline).
Keywords: Oil shocks, Economic Growth, VAR, ECM, Granger Causality