Effect of Oil Price Shock on Small Scale Agro Allied Enterprise from 1984-2014 in Benue State, Nigeria
- September 1, 2019
- Posted by: RSIS
- Category: Agriculture
International Journal of Research and Scientific Innovation (IJRSI) | Volume VI, Issue VIII, August 2019 | ISSN 2321–2705
Ugwuh Martha Gadzama1 and Muhammad Sani M. Jabo2
1,2Department of Agricultural Economics, Faculty of Agriculture, Usamanu Danfodiyo University, Sokoto, Nigeria
Abstract: – The impact of oil price shock on the performance of small scale agro allied enterprise in Benue State from 1984 to 2014 was examined. The long and short run relationship between world price, inflation rate, domestic oil price, exchange rate and other variables on small scale agro-allied enterprise was investigated. It was revealed that oil price shock affect small scale enterprise due to the increase in exchange rate, inflation rate and domestic oil price. The data used for the study were obtained from Central Bank of Nigeria (CBN) Bulletins and CBN porter. The result revealed that on the average values of the products; fish farming, garri, sesame, soybean and oil palm enterprise were N325,4158.217, N375,1207.576, N215, 1771.360, N846,672.655 and N1, 749,958.733 respectively. Investigating the active promotion of agro allied industry to strengthen the linkage effect of agriculture on the economy is recommended for future research.
I. INTRODUCTION
Oil price shocks are predominantly defined with respect to price fluctuations resulting from changes in either demand or supply side of the international oil market (Wakeford, 2006; Agbede, 2013). Oil being the mainstay of the Nigerian economy plays a vital role in shaping the economic and political destiny of the country. Although Nigeria’s oil industry was founded at the beginning of the century, it was not until the end of the Nigeria civil war (1967-1970) that the oil industry began to play a prominent role in the economic life of the country (Kwanashie et al., 1998; Energy Information Administration, 2013).
Agriculture by 1970s lost its pre-eminent position to mining and particularly to Petroleum due to the oil boom in the period (1970s). Oil was discovered in Nigeria in 1956 at Oloibiri in the Niger Delta after half a century of exploration (Hamilton, 2009; Bowler, 2014). Oil prices have witnessed profound fluctuations and this has implications on the performance of macroeconomic variables, posing great challenges for policy making. The transmission mechanisms through which oil prices have impact on real economic activity include both supply and demand channels. The supply side effects are related to the fact that crude oil is a basic input to production and consequently an increase in oil price leads to a rise in production costs that induce firms to lower output (Agbede, 2013).
