Effects of Maritime Illegal Oil Trading on Economic Growth in Nigeria

Abstract

Illegal oil trading involves the theft of crude oil and its derivative products through a variety of different mechanisms with significant economic implications. This study therefore, investigates these implications covering the period of 1995-2012. Employing the e-views econometric software, the unit root, co-integration, and granger causality tests were carried out on the secondary data set to make it amenable to the application of the vector autoregressive (VAR) modeling of the ordinary least square multiple regression to reveal among others, that a significant relationship exists between the illegal oil trading and the economic growth in Nigeria. Other findings are that the volume of oil theft as an explanatory variable met the a priori expectation with its negative coefficient, but together with the one-year lagged variables of the dependent variables, was statistically significant in terms of contributions to the dependent variable. The study concludes that illegal oil trading has negative effects on the Nigerian economy, especially within the study period and should be checked by the law enforcement authorities. Prominent among the recommendations is the need to institute adequate and effective sanctions against offenders to serve as a deterrent.

Keywords: unit root, co-integration, granger causality, vector autoregressive