Crude Oil Price Dynamics and Nigerian Economic Growth: Are Diaspora Remittance Inflows a Safe Haven?

ABSTRACT: Unpredictability in global crude oil prices continues to pose significant challenges to oil-dependent economies such as Nigeria. These challenges are largely due to the limited economic diversification and mono-economy nature of the country. This has made the country highly susceptible to external shocks and widens fiscal and financial gaps during oil price downturns. In light of this, diaspora remittance inflows are globally viewed as a potential economic stabilizer and alternative source of external finance, especially for the developing nations. This study investigates the relationship between crude oil price dynamics and Nigeria's economic growth from 1986 to 2022, with a focus on the importance of remittances as a safe haven, particularly during periods of oil price variations. To analyze this relationship, the study employs the Phillips-Perron (PP) and Augmented Dickey-Fuller (ADF) unit root tests to assess the stationarity of the macroeconomic variables: economic growth, crude oil prices, exchange rate, inflation, and diaspora remittance inflows. The Autoregressive Distributed Lag (ARDL) bounds testing method is used to examine long-run relationships among these variables. Additionally, the ARDL model is employed to estimate the short- and long-run impacts of crude oil price changes and remittance inflows on economic growth. The empirical outcomes show that all variables are stationary at first difference and exhibit a long-run relationship. Specifically, crude oil price volatility has a statistically significant negative effect on Nigeria's economic growth, highlighting the economy's vulnerability to oil price shocks. In contrast, diaspora remittances reveal a positive and significant impact on economic growth, suggesting their potential as a stabilizing force. The exchange rate also exerts a negative effect on growth. Based on these findings, the study recommends that the Nigerian government prioritize policies aimed at stabilizing crude oil revenues while also promoting remittance flows. This includes the creation of supportive institutional regulations and reforms that reduce transaction costs and eliminate bureaucratic barriers in remittance transfers. Future research should explore the sector-specific impacts of oil price fluctuations to provide more targeted policy insights.