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1.0 INTRODUCTION
Oil is a major source of one energy in Nigeria and the World in general oil
has been the mainstay of the Nigeria economy. It plays a very vital role in shaping
of economy. For instant, the export of crude oil bring profit and increase the gross
endowed with crude oil which is GDP also the main generation of gross domestic
The British discovered oil in the Niger delta in the late l950s, it was not until
the end of the Nigeria civil war (1967-1970) that the oil industry begin to play a
prominent role in the classified as a country that is primarily rural, which depends
on primary product export (especially oil exports). Nigeria is the fifteenth largest
producer of crude oil worldwide having the second largest known deposit of natural
gas in the world. The United States remains the largest importer of Nigeria’s crude
accounting for forty percent of the country’s total export and these export contribute
to the country.
regional and religious tension magnified by the significant disparities education and
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A time series is a set of numerical data that is observed at regular interval
overtime. Time series could be daily, hourly, weekly, monthly, quarterly or yearly
etc. there are four basic components of time series, and these are long term trend,
cyclical effect, seasonal effect and random variation. A trend (also known as secular
trend) is long term relatively smooth perfect or direction is more than one year. In
this research, we shall use the method of moving average to model the Nigeria’s oil
export.
Owing to both external and internal factors, the growth performance of the
Nigeria economy has been less than satisfactorily during the past three decades.
Since the first oil price shock of 1974, oil has annually produced over 90% of Nigeria
export income from 1970 to 1999, oil generated almost $231 billion rents for the
Nigeria economy and these rents have constituted between 21% and 48% of Gross
Domestic Product, but yet these rents have failed to raise Nigeria incomes and done
little to reduce poverty. Since 1970, Nigeria’s per capital income has fallen by about
4% in constant dollars. Also, since early 1970, the government has annually received
over half of its revenues from oil sectors which are about 85%. Although large
proceeds are obtained from the domestic sales and export of petroleum products, its
effect on the growth of the Nigeria economy as regards returns and productivity is
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still questionable, hence there is a need to evaluate the relative impact of oil export
- 2016. The data was obtained from the National Bureau of Statistics, statistical
time. In other word, a time series is a set of observation taken at specified time
A long term trend (also known as a secular trend) is a relative smooth pattern
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1.3.4 CYCLICAL EFFECT
This refers to a long term observation or swing about a trend line or curve, it
may not be periodic in the view that they may not precisely follow similar patterns
recurring of event place annually for example, temperature, wind and rainfall.
This comprise the irregular changes in a time series that are not caused by any
components.
chosen.
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1.3.8 MOVING AVERAGE
center.
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CHAPTER TWO
development economists. This has broadly classified economist into two, i.e. those
that supports the hypothesis that export growth has a positive impact in economic
growth and those that reject the hypothesis that there is positive impact on the
exportable can cause an overall growth in output via an increase employment and
foreign exchange which is critical to imports capital and intermediate goods that
Feder A. (1982) & Lucus R (1988) export leads to allocation of resources from
the inefficient room trade to the trade sector and dissemination of the news
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management styles and production techniques through the whole of the new
economy.
Williams D.C & Giles Cruise, (2006-2009) the entire economic would benefit
Strout N.S & Chenry J.N (1996) an increase in export improved that balance
of payment and enlarges to the foreign monetary reserves which enable increase of
investment goods import and facilitates necessary for the domestic production
growth.
Marshel Q & Jung C. (1985) argued that growth in real export trade to cause
growth in the real gross national product (G.N.P) for their reason. First export growth
may represent an increase real in the demand for the country’s output and thus serve
to increase real gross national product (GNP) second an increase in the export may
intermediate imports and hence result in growth of output. Third export growth may
The contribution of export growth to economic growth has been tested by different
oil rents• increase, using pc. GIVEIO, ordinary least saver regression). The result
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shows that there is a positive and significant relationship between investment and
economic growth and also on au rents. In conclusion oil results in most nich oil
between. export and economic growth in Nigeria using Johanne’s multivariate’s co-
integration techniques the result shows that there is stationary relationship between
exports and gross domestic production (GNP and there is feedback casuality
Hadi E (2009), investigated the impact of income generated from oil export
of Iran adjusts facts to shocks and there is progress in technology in Iran, oil export
world oil supply and demand product capitalities enhance export growth in Iran
using error correlation version of ARDL, it was found that there is an inverse
relationship between oil product consumption and oil export revenue Iran had a
growth used ordinarily least square regression and cob Douglas production function
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were employed to test other impact of crude oil on Nigeria economic performance.
The result show that crude oil production contributed to economic growth but have
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CHAPTER THREE
3.0 INTRODUCTION
The focus of the analysis carried out in this research work is to apply the Box
AR models express the current value of the time series linearly in terms of its
previous values and the current residual. In the AR model, the current incidence of
the time series xt is a linear function of its previous incidence (Xt-1, Xt-2...) and the
MA models express the current value of the time series linearly in terms of its
current and previous residual series. In the vIA model, the current incidence of the
time series x is a linear function of both its current and previous incidence residuals
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3.3 AUTO REGRESSIVE MOVING AVERAGE ARMA (p,d,q)
value of the time series is expressed linearly in terms of its previous values and in
The time series defined in ARMA, and ARMA models are stationary process, which
means that the mean of the series of any of these models and the covariance among
its observations do not change with time. For non- stationary time series,
Box and Jenkins (1976), Montgomery Johnson and Gardener (1990) slated, that
there is duality between the moving average MA(q) process and the autoregressive
AR(p) process, that is the moving average can be converted into autoregressive form
great of expense although it often produces a satisfactory result and those result
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The ARMA(p,q) process contain p+q plus two unknown parameter thus, can be
equally estimated from the data in practice. The value p.q is not greater than two and
Since the ARMA model combines AR and MA modeIs, in which the current
incidence of the time series xt is a linear function of its previous incidence (xt-1, xt-
£t, £t-1…..
The ARMA model is usually termed as ARMA (p, q). The ARMA
(p,q) modeling procedure for seasonal pattern, introduced by Box and Jenkins,
functions (PACXF) of the data. The ACE is a statistical tool that measures whether
earlier incidence in the series have some relation to later ones. The PACE captures
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the amount of correlation between the incidence at time t+1 through to the incidence
at time t+k-1 removed. It is possible that several ARMA (p,q) models may be
ARIMA model generally fits the non-stationary time series based on the
ARIMA model with a differencing process which effectively transforms the non-
stationary data into a stationary one. The ARIMA (p, d, q) model can degenerate to
ARMA (p,q) model when the value 0 (zero) is assigned to the differencing “d”. this
model has three components each of which helps to model different types of patterns.
The “AR” stands for autoregressive. The “I’ stands for integrated. The “MA” stands
for moving average. Each component has an associated model order which indicates
SARIMA models, which combine seasonal differencing with an ARIMA model, are
used when the time series data exhibits periodic characteristics i.e, when the data is
not stationary.
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3.5 STATIONARY/UNIT ROOT TEST
over the past several years is the unit root test. This is the test that is used to carry
out or to know the order of integration. To use the data for analysis, this time series
III. Cov (Xt, Xt-1)= yIj1 < ∞ (i.e covariance is independent t) and
IjI=±1,±2±3………, ∞
The unit root test is defined as the test used to carry out the order of integration.
Some of the most common unit root tests are ADF (Augmented Dickey Fuller) test,
(Phillips Peron) test, DF (Dickey Fuller) test, The ADF and KPSS tests are used in
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3.5.1 AUGMENTED DICKEY - FULLER (ADF) TEST
This test was first introduced by Dickey and Fuller in 1979 to test for the
Decision Rule: Reject H0 if t is less than the asymptotic critical values (tabulated
values).
β1, β2,…. βp, is the coefficients of the lagged difference term up to lag p.
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3.5.2 KWIATKOWSKI PHILLIPS SCHMIDT SHIN (KPSS) TEST
the null hypothesis that the series is stationary against the unit root. This test was
introduced by Kwiakowski, Phillips, Schmidt and Shin in 1992 to test for the
Ho: 2
=0 vs Hi: 2
≠0
That is, the null hypothesis that the data generating process is stationary is tested
Decision Rule:- Reject the null hypothesis if the test statistic is greater than the
The time series ARIMA modeling is a selection of the appropriate model for
the data in achieving an interactive procedure based on the four 4 fundamental steps
Model identification
Model estimation
Model checking
Forecasting
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3.6.1 MODEL IDENTIFICATION
Where L is the lag operator, □(L) and ɵ(L) are the polynomial of orders p and q
Our aim is to find the order of the AR and MA processes. The order of differencing
Box and Jenkins (1976) cited that the model should be parsimonious and therefore,
they recommend the need to use as few model paramelers as possible so that it fulfils
all the diagnostic checks. Akaike (1974) suggest a mathematical formulation of the
parsimony criterion of the model building as AIC (Akaike information criterion) for
the purpose of selecting an optional model fits to a given data. The mathematical
AIC (M)=inδ2 £t + 2M
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3.6.2 METHOD OF ESTIMATION OF THE MODEL
of the process, the order of integration coefficient and the parameters of an ARMA
structure. The estimator of the exact maximum likelihood by so well (1992a) is the
techniques that are available for the spectra] approximation is that of fox and Taqqu
estimator. The estimator suggested by Eo and Taqqu (1986) is the vector which
(n=l)
(j-1)
This expression is easier to use but can display a basis in small samples,
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3.6.3 MODELING CHECKING
After estimation of the model, the Box — Jenkins model building strategy
to ascertain in what way the model is adequacy and in what way it is inadequate.
This stages of the modeling strategy involves several steps (Kendall and Ord, 1990).
A good way to check the model adequacy of an overall Box -- Jenkins model is to
analyze the residual obtained from the model. The statistics have suggested
determining whether the first K sample autocorrelation indicate the adequacy of the
model and they are the Box — Pierce statistics and the Lung - Box statistics
(Portmanteau test). In spite of this, we can also check the model adequacy by
examining the sample autocorrelation function nithe residual (ACF) and the sample
partial autocorrelation function of the residual (PACF). We can conclude that the
model is adequate if there arc io spikes in the ACF and PACF. We can also employ
TEST
The ARCH test of the residuals was performed to check if the residuals are consistent
with a standard normal distribution. The ARCH test checks the pair of hypothesis
Decision Rule: the null hypothesis is rejected if the test statistic is greater than the
significant level a.
The future is always filled with uncertainty and there is no existing statistical
technique of forecasting the future state of an event with certainty. Even so, one of
the most compelling reason for studying past events is to allow the forecaster to use
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1. Identification of the model
(Choosing tentative p, d,q)
Yes No
(Go to steps 4) (Return to step 1)
4. Forecasting
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CHAPTER FOUR
The following plot is from the set of monthly crude oil export from 2007-2016
80000000
60000000
40000000
20000000
0
07 08 09 10 11 12 13 14 15 16
We observe from the plot above that there is evidence of the mean not changing with
time, this suggest stationarity in the data points. Next we plot the autocorrelation
function (ACF) and partial autocorrelation function (PACF) to check for serial
correlation in the data points.
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Date: 10/13/17 Time: 10:36
Sample: 2007:01 2016:12
Included observations: 120
Autocorrelatio Partial AC Q-
n Correlation PAC Stat Prob
.|* | .|* | 1 0.08 0.08 0.817 0.36
2 2 7 6
.|. | .|. | 2 0.04 0.04 1.112 0.57
9 2 7 3
.|. | .|. | 3 0.03 0.02 1.247 0.74
3 6 8 2
.|. | .|. | 4 0.01 0.00 1.278 0.86
6 9 9 5
.|. | .|. | 5 0.04 0.03 1.499 0.91
2 7 1 3
.|. | .|. | 6 0.02 0.01 1.590 0.95
7 9 3 3
.|. | .|. | 7 - - 1.634 0.97
0.01 0.02 3 7
8 6
.|. | .|. | 8 - - 1.641 0.99
0.00 0.00 8 0
8 8
.|. | .|. | 9 - - 2.011 0.99
0.05 0.05 8 1
3 2
*|. | *|. | 1 - - 2.700 0.98
0 0.07 0.06 9 8
2 5
*|. | *|. | 1 - - 3.809 0.97
1 0.09 0.07 3 5
1 9
.|. | .|. | 1 0.00 0.02 3.812 0.98
2 5 7 3 7
.|. | .|. | 1 - 0.01 3.812 0.99
3 0.00 0 4 3
1
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*|. | .|. | 1 - - 4.344 0.99
4 0.06 0.05 1 3
2 5
.|. | .|. | 1 - - 4.390 0.99
5 0.01 0.00 4 6
8 2
.|. | .|. | 1 - 0.01 4.391 0.99
6 0.00 2 3 8
3
.|. | .|. | 1 - - 4.487 0.99
7 0.02 0.02 7 9
6 4
.|. | .|. | 1 - - 4.605 0.99
8 0.02 0.03 5 9
9 3
.|. | .|. | 1 0.00 0.01 4.613 1.00
9 7 2 3 0
.|. | .|. | 2 0.04 0.03 4.861 1.00
0 1 6 6 0
.|. | .|. | 2 0.04 0.03 5.176 1.00
1 6 1 5 0
.|. | .|. | 2 0.01 0.00 5.221 1.00
2 7 6 1 0
.|. | .|. | 2 - - 5.286 1.00
3 0.02 0.02 0 0
1 6
.|. | .|. | 2 0.02 0.02 5.414 1.00
4 9 2 9 0
*|. | *|. | 2 - - 6.256 1.00
5 0.07 0.09 4 0
4 5
.|. | .|. | 2 0.01 0.02 6.297 1.00
6 6 1 5 0
.|. | .|. | 2 - - 6.541 1.00
7 0.03 0.04 4 0
9 3
.|. | .|. | 2 - - 7.023 1.00
8 0.05 0.05 4 0
5 7
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*|. | .|. | 2 - - 7.603 1.00
9 0.06 0.05 9 0
0 2
.|. | .|. | 3 - - 8.098 1.00
0 0.05 0.02 4 0
5 6
*|. | .|. | 3 - - 8.811 1.00
1 0.06 0.04 5 0
6 1
.|. | .|. | 3 - - 8.860 1.00
2 0.01 0.00 4 0
7 6
.|. | .|. | 3 - - 9.096 1.00
3 0.03 0.02 7 0
7 4
.|. | .|. | 3 0.01 0.02 9.124 1.00
4 3 3 9 0
.|. | .|. | 3 0.00 0.01 9.136 1.00
5 8 4 3 0
.|. | .|. | 3 0.02 0.01 9.244 1.00
6 5 4 0 0
We observe from the ACF and PACF that there is evidence of serial correlation.
We perform the unit root test to ascertain the stationarity of the series. The
result of the test is shown in the table below:
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Table 4.1: Result of the Augmented Dickey-Fuller test
From the table above we observe that there exist a unit root in the data. The data is
stationary at the level.
We identify four (4) models that fitted the crude oil export data. The result is
displayed in the table below:
Candidate models
We observe from the above result that the model that fitted the data most is
We use least square method to estimate the identified model; the result of the
estimation is given in the table below:
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Table 4.3: The estimated model.
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In other to assess the validity of the model, we perform some statistical tests on the
model residuals; in particular we perform the Bresuch-Godfrey Language Multiplier
(LM test), Jaqdue- Bera test as well as examine the ACF and PACF of residuals.
4.5.1 LM TEST
We perform the LM test for serial correlation, using five (5) different lags
and the results is shown in the table 4.4 below
LM TEST
2 0.0018 0.9982
4 0.0197 0.9992
6 0.0659 0.9988
8 0.1516 0.9962
10 0.1670 0.9981
We observe from the above table that, the P-value is greater than 5% level of
significance and this shows that there is no serial correlation in the residuals. That
is, the residual are independent
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50
Series: Residuals
Sample 2007:02 2016:12
40 Observations 119
Mean -0.000156
30 Median 0.017127
Maximum 0.196996
Minimum -2.316907
20 Std. Dev. 0.230601
Skewness -8.602968
Kurtosis 87.12517
10
Jarque-Bera 36558.23
Probability 0.000000
0
-2.0 -1.5 -1.0 -0.5 0.0
The above result indicated a p-value 0.000000 meaning that the residual are not
normally distributed.
4.5.3. FORECASTING
To further confirm the validity of the model we forecast for two years. And the
result is shown in the figure below.
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1.2E+08
Forec as t: YF
Ac tual: Y
1.0E+08 Forec as t s ample: 2007:01 2018:
Adjus ted s ample: 2007:02 2018:
Inc luded obs erv ations : 119
8.0E+07
R oot Mean Squared Error 7949163.
Mean Abs olute Error 5108433.
6.0E+07 Mean Abs . Perc ent Error14.66228
Theil Inequality C oeffic0.060805
ient
Bias Proportion 0.014822
4.0E+07 Varianc e Proportion 0.870610
C ov arianc e Proportion
0.114568
2.0E+07
08 09 10 11 12 13 14 15 16 17 18
YF ± 2 S.E.
From the result we observe that the rate of crude oil export in Nigeria is consistent
with the past.
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CHAPTER FIVE
5.1 SUMMARY
We use Box-jenkins ARMA methodology to fit a model that best describe the
monthly crude oil export in Nigeria, and is for the period of January 2007 to
December 2016. Using E-view software. Preliminary investigation revealed that the
series is stationery at the level.
Among the four (4) candidates model ARMA (1, 2) was found to be the best
fit. This confirmed through the result of diagnostics tests. Finally the model was used
to forecast the crude oil export in Nigeria for the next two years and result suggested
that the crude oil export is consistent with the past.
5.2 CONCLUSION
There are several tools that are used to model a time series. In this study we
used Box-Jenkins (1976) approach, however, more flexible tools can be used to
further investigate the monthly crude oil export in Nigeria.
5.3 RECOMMENDATION
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