ABSTRACT

The study investigated the effect ofoil price instability on industrial sector out in Nigeriafor the period 1981-2018 with specific objectives namely; to determine the impact ofoilprice shocks on industrial sector output in Nigeria, to determine the impact oftotal government expenditure on industrial sector output in Nigeria, to determine the impact of official exchange rate on industrial sector output in Nigeria. The specified model was estimated using the VectorAutoregression Model to determine the level ofimpact that one variable has on the other. While E-views 10 statisticalsoftware was employed in computing the result, time series data were obtainedfrom World Bank national accounts data and OECD National Accounts datafiles and the study established the past realization ofIndustrial Value Added (INDVD) is associated with 52% increase in INDVD on average, ceteris paribus implying a strong endogenous influence coming INDVD on itselfboth in short run and in the long run while the percentage increase in total government expenditure (TGEXP) accountsfor 3% increase in INDVD on the average, ceteris parisbus, implying a strong endogenous influence coming from TGEXP to INDVD in short run and long run period, the percentage increase in Trade Openness (TRAOP) accountsfor 3% increase in INDVD on the average ceteris parisbus, implying a strong exogenous influence i.e insignificant effect on INDVD at 5% level of significance andfinally the percentage increase in Oil Price Shock (OILPVT) accountsfor 0.00000302 increase in INDVD on the average implying no significant effect on INDVD at 5% level ofsignificance and the study, therefore, recommended that the Nigerian government needs to diversify its export revenue base in order to minimize the over reliance on crude oil. Also, the country needs to develop the local capacity of its refining so as to reduce the importation ofrefinedpetroleum which serves as input to most productive sectors ofthe economy