PETROLEUM PRODUCTION AND CONSUMPTION PATTERN IN NIGERIA: DOES THE LAW OF DEMAND HOLD?

Abstract

With the Nigerian government pursuing programmes to improve the welfare of the citizenry, there are uncertainties endangering the actualization of this goal. Being an economy with a trajectory of high reliance on oil revenues through the years and high dependence on external financing, shocks in oil prices are expected to adversely affect the economy. This study seeks to address the impact of oil price change on the consumption pattern of Nigerians with a view to validating the theoretical law of demand. Employing the autoregressive distributed lag model, the study shows that increase in oil prices negatively affected both consumption and development level of the citizenry in Nigeria. Thus, the study recommends among other things, that government should endeavor to cushion the effect of such price fluctuations through fiscal policy-mix in the prevailing economic fundamentals.