SSESSMENT OF OIL PRICE, EXCHANGE RATE AND ECONOMIC DEVELOPMENT IN NIGERIA: A GOAL PROGRAMMING OPTIMIZATION APPROACH

Abstract

There appears to be no consensus on many empirical studies (predominantly domestic studies) on the relationship between oil price, exchange rate and economic (Growth) development, hence the need to assess using the mathematical tool of goal programming to assess oil price, exchange rate and economic development. The decision variable of the goal programming analysis was generated firstly from the 10-years average of oil price, exchange rate and economic development. While oil price aspirational target of $80 per barrel and exchange rate target of N250/$ was attainable from the mathematical analysis conducted, that of economic development proxied by Human Development Index (HDI) target of 0.60 was found to be unattainable with margin of deviation of approximately 50%. Substitution of the respective deviations of the three constraints gave a non-zero objective function which suggest that the oil price, exchange rate and economic development goal programming analysis is not optimized. The study therefore recommended that government should as a matter of urgency double down on its oil exploration potentials by strengthen its institution to curb the menace of crude oil theft, revamp oil refinery to minimize incessant exchange rate pressure, diversifying the economy so as to mitigate rising unemployment and inflation rate and finally develop a pragmatic exchange rate regime that suite the economic peculiarities of Nigeria given the economy’s weak international trade competitiveness. This will ensure efficient and proactive trickle-down effect of proceed of oil endowment on socio-economic indicators and other near proxy of economic development.