Oil Price Surge And Oil Output In Nigeria: Effects Of The Ukraine-Russia Crisis

Abstract

This study examined the Ukraine-Russia Crisis effect on oil price surge and oil output in Nigeria. The Taylor rule revealed that oil price and output increase significantly increases capital inflow and domestic exchange rate appreciation in oil-exporting countries. However, contemporary empirical evidence from Nigeria contravenes the Taylor rule. The objective is to reveal the Ukraine-Russia Crisis effect on the oil market and understand the factors behind Nigeria’s inability to benefit from the windfall of the oil price. This study uses the supply-demand model to explain the cause-effect nexus. Findings from this study revealed a significant disruption in oil supply demand with a price surge above the $100 mark in almost a decade. Owing to the Ukraine-Russia Crisis. The empirical finding indicates pipeline vandalization, oil theft, corruption, attacks on oil installations, lack of sectorial infrastructures, illegal oil bunkering, and general insecurity in the Niger Delta region as factors responsible for Nigeria’s inability to benefit from the oil price windfall and close the oil supply-demand gap. This study recommends among others things stability, sectorial infrastructural development, security of region revival, and remodeling of the local refineries with sophisticated equipment to circumvent the exchange of crude oil for petroleum products with foreign refineries through a third party under Direct Sale Direct Purchase (DSDP). This implies that Nigeria will earn substantial foreign income from federation export.