Macroeconomic and Distributional Consequences of Energy Supply Shocks in Nigeria

"Nigeria continues to experience sporadic domestic oil supply shortages. The shortages have resulted in huge economic and non-economic costs to the economy. This study investigates the causes of the shortages and provides quantitative estimates of the economic costs to the Nigerian economy using a survey and a computable general equilibrium (CGE) model. The findings from this study show very clearly that oil sector supply shocks are costly both directly and indirectly. Oil supply shocks result in lower real GDP, higher average prices and greater balance of payment deficits. Other macroeconomic variables such as private consumption, investment, government revenue and employment also decline. In addition, the distributional impact of the quantitative energy supply shocks is higher for poor households than rich households."