Nexus between Oil Price Volatility and Industrial Output Expansion in Nigeria

Oil price volatility is responsible for the inability of the industrial sector to contribute significantly to GDP growth in Nigeria. Therefore, the study examines the relationship between  oil prices volatility and the surge of industrial growth in Nigeria between 1980 and 2023. The study employed the Autoregressive Distributed Lag (ARDL) model. Cobb-Douglas production function was used to analyze the relationship between volatile oil prices and the surge of industrial output, the ARDL model is applied to analyze both the short-run and long-run dynamics of the relationship.  Findings revealed a significant short-run negative impact of volatile oil prices on industrial output in the short run, while the long-run analysis indicates a complex interplay of factors, including exchange rate fluctuations and policy responses. The findings underscore the critical need for economic diversification and the implementation of stabilization policies to shield the industrial sector from the adverse effects of oil price volatility. The study recommended among others that; Nigeria government should implement strategies to stabilize oil prices by creating oil reserves, diversifying energy source, and strengthening oil market regulations, and government should focus on controlling inflation, ensuring a stable exchange, and reducing the cost of borrowing.