Crude Oil Price and Macro-Economic Uncertainty in Nigeria
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The recent perspective in the study of uncertainty which uses World Uncertainty Index (WUI) constructed from the frequency count of the word "uncertain" or its variants in the Economic Intelligence Unit (EIU) country reports has been extensively applied in evaluating the relationship between crude oil price and uncertainty in many developed and emerging nations of the world. It therefore became pertinent to apply this construct to Nigerian (a major oil revenue-fed economy) data to examine the relationship between crude oil price and uncertainty.Applying quarterly time series world uncertainty index and data from the Central Bank of Nigeriaspanning 2011:Q1 to 2020:Q1 in a vector autoregressive framework, the study finds a negative but insignificant relationship between uncertainty and crude oil price with no evidence of a causal relationship. However, a significant negative relationship and a uni-directional causality was found between gross domestic product and crude oil price. The study also established that crude oil price has the highest capacity to reduce spikes in uncertainty. The study therefore recommends among others a combination of policies such as diversification and development of alternative energy source aimed at reducing reliance on crude oil as the major driver of the economy which can potentially encourage stability in crude oil prices.