Oil Price Shocks, Fiscal Policy Adjustment, and Economic Growth in Nigeria: A Structural VAR Analysis (1990-2023)

This study analyses the transmission mechanism of oil price shocks through fiscal policy to economic growth outcomes in Nigeria from 1990 to 2023, employing a structural vector autoregression model. Nigeria's dependence on oil revenues creates a well-documented volatility transmission channel from global crude oil markets through the federal budget to aggregate economic activity, but the magnitude and duration of these effects and the effectiveness of fiscal stabilisation policies in dampening them remain empirical questions requiring rigorous analysis. Drawing on Dutch disease theory, fiscal multiplier literature, and recent macroeconomic modelling studies from 2019 to 2024, the study employs a quantitative time series research design. Annual and quarterly data are sourced from the Central Bank of Nigeria, National Bureau of Statistics, International Monetary Fund World Economic Outlook, and the Sovereign Wealth Institute. A structural VAR with sign restrictions is estimated to identify oil price, fiscal policy, and aggregate demand shocks. Impulse response functions and forecast error variance decompositions are computed and interpreted within a policy economics framework. The study expects to find procyclical fiscal policy behaviour that amplifies oil price shocks, a significant and negative growth response to adverse oil shocks, and evidence that the Excess Crude Account and Sovereign Wealth Fund mechanisms partially attenuate shock transmission. Recommendations address strengthening fiscal rules, deepening sovereign wealth fund capitalisation, and diversifying Nigeria's non-oil fiscal base. Keywords: oil price shocks, fiscal policy, economic growth, structural VAR, Nigeria