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Abstract
In the protracted quest for the diversification of the Nigerian economy, empirical conclusions have been made that oil price shocks are negatively related to output growth. Many studies on oil price –macroeconomy relationship in Nigera have been conducted without considering the net differential of the oil price change which contributed in muddling up the results.In a bid to overcome this, we employed the EGARCH model to extricate only the increases in oil price and used the conditional volatility measure in the Bayesian Vector Autoregression(BVAR)model based on monthly data (1986M1 to 2015M12) for industrial production index and selected macroeconomic variables in Nigeria. Our results show that shock to oil price causes a rise in industrial production which may indicate that positive oil price increase is favourable to output growth in Nigeria. Therefore, the authorities should take advantage of the increased revenue accruing from rise in oil price to diversify into industrial and manufacturing productions and further stimulate industrial capacity growth through appropriate policies.