CHAPTER ONE

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

domestic product (GDP) of a particular country. Nigeria as a country in naturally

endowed with crude oil which is GDP also the main generation of gross domestic

product (GDP). In West Africa Nation, it is most populous sources of income.

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.

Since the attainment of independence in 1960 it has experience ethnic,

regional and religious tension magnified by the significant disparities education and

environmental development in the south and north.

1
 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.

1.1 STATEMENT OF THE PROBLEM

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

2
still questionable, hence there is a need to evaluate the relative impact of oil export

on economic growth in Nigeria.

1.2 OBJECTIVE OF THE STUDY

The main objective of the research is to find a model that best fit the export of

crude oil in Nigeria and to provide a suitable way of forecasting it.

1.3 SCOPE AND LIMITATION OF THE STUDY

The research is limited to export of crude oil in Nigeria for the, period of 2007

- 2016. The data was obtained from the National Bureau of Statistics, statistical

bulletin (NBS) 2007 volume 18.

1.3.1 DEFINITIONS OF SOME BASIC TERMS

1.3.2 TIME SERIES

Is a set of numerical data that is observed at regular interval over a period of

time. In other word, a time series is a set of observation taken at specified time

usually at equal intervals.

1.3.3 LONG TERM TREND

A long term trend (also known as a secular trend) is a relative smooth pattern

or direction exhibited by series.

3
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

after equal interval of time.

1.3.5 SEASONAL EFFECT

This refers to the identical of all the same pattern which a time series seems

to follow during corresponding months of successive year such movement is due to

recurring of event place annually for example, temperature, wind and rainfall.

1.3.6 RANDOM VARIATION

This comprise the irregular changes in a time series that are not caused by any

other component. It trends to hide the existence of other more predicable

components.

1.3.7 MOVING TOTAL

The technique of using moving total is to replace a particular measurement by

the arithmetic means of a series or measurement which an odd or even number is

chosen.

4
1.3.8 MOVING AVERAGE

The technique of using moving average total is to replace a particular

measurement by the arithmetic mean of a series of measurement of which it is the

center.

5
 CHAPTER TWO

2.0 LITERATURE REVIEW

The relationship between export performances been given much attention by

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

economic growth export are engine of growth.

According to Helman J. & Kragmen B. (1985), Boomstorm A. (1986)

international trade promote specialization in production export production which in

term boost the general level of skills to rise in export sector.

Awokuse E. (2008), argued that an increase in foreign demand for domestic

exportable can cause an overall growth in output via an increase employment and

income in the exportable sectors.

Balassa A. (1978), Estahani T. (1991), Rodrik M. (1999), export can provide

foreign exchange which is critical to imports capital and intermediate goods that

inform raise of domestic production and thus stimulate out growth.

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

6
management styles and production techniques through the whole of the new

economy.

Williams D.C & Giles Cruise, (2006-2009) the entire economic would benefit

due to the dynamic spillover of the export sector growth.

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

loosen a binding foreign exchange constraint and allow increase in productivity

intermediate imports and hence result in growth of output. Third export growth may

result in enhanced efficiency and thus, may lead to greater output.

The contribution of export growth to economic growth has been tested by different

economist using econometric techniques.

Akanni J. (2007) examines it oil exporting courtiers grows as their earning on

oil rents• increase, using pc. GIVEIO, ordinary least saver regression). The result

7
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

development countries in Africa do not promote economic growth.

Idowu C.A (2005) a causality approach examines that there is a relationship

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

between exports and economic growth.

Hadi E (2009), investigated the impact of income generated from oil export

on economic growth in Iran using cob-Douglass production functions the economic

of Iran adjusts facts to shocks and there is progress in technology in Iran, oil export

contribute to real income thro9ugh real capital accumulation.

Muhammed A.and Amirahi S. (2010) examined if factor such as oil prices,

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

significant positive growth in its oil revenues.

Odular S. (2010) used Harrod D. Theory and Solow’s theory of economic

growth used ordinarily least square regression and cob Douglas production function

8
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

no significant improvement on economy growth of Nigeria.

9
 CHAPTER THREE

3.0 INTRODUCTION

The focus of the analysis carried out in this research work is to apply the Box

and Jenkins methodology for forecasting.

3.1 AUTO REGRESSIVE AR (p) PROCESS

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

current incidence residual et. The model can be expressed as:

Xt =□1 Xt-1 +□ 2 Xt-2 + ……… + □p Xt-p +£t

3.2 MOVING AVERAGE MA (q) PROCESS

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

€ (t), €(t- 1).... The model can be expressed as:

Xt =£t - ɵ1 £t-1- ɵ2£t-2……. - ɵq £t-q

10
3.3 AUTO REGRESSIVE MOVING AVERAGE ARMA (p,d,q)

ARMA models are a combination of AR and MA models, in which the current

value of the time series is expressed linearly in terms of its previous values and in

terms of current and previous residual series.

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,

transformation of the series to a stationary series has to be performed first. The

ARMA model is used purpose of this research.

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

(of infinite order).

Bail and peppers (1982) stated, “ARMA(p,q) is a complex technique, ii requires a

great of expense although it often produces a satisfactory result and those result

depend on the researchers level of expertise.

Haff(1983), Pankratz (1983) expressed ARMA(P,Q) as a model that gains enormous

popularity in many areas and confirm it power and flexibility.

11
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

often less than three.

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-

2...) and current and previous incidence residuals.

£t, £t-1…..

The model can be expressed as:

Xt =□1 Xt-1 +…..+□p Xt-p +£t - ɵ£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,

consists of three iterative steps: model identification, model estimation, and

diagnostic checking. Stationarity can be tested using Augmented Dickey-Fuller

(ADF) method and Kwiattkwoski, Philips and Shin 91992)(KPSS). The

identification step involves the process of determining seasonal and non-seasonal

orders using the autocorrelation functions (ACF) and partial autocorrelation

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

12
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

identified, and the selection of an optimum model is necessary. So the selection of

models is done based on the Akaike Information Criterion (AIC), Schwarz

Information Criterion (SIC) and Hannan — Quinn Criterion (HQC).

3.4 AUTO REGRESSIVE INTEGRATED MOVING AVERAGE (ARIMA)

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

how large the component is.

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.

13
3.5 STATIONARY/UNIT ROOT TEST

A test of stationarity (or non-stationarity)n that has become widely popular

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

should be subjected to stationarity conditions. A time series Xt is said to be weekly

stationary or wide sense stationary or covariance stationary or second order

stationarity if it satisfies the following three 3 condition.

I. E (Xt) =µ < ∞ (i.e constant mean)

II. Var (Xt) < ∞ (i.e constant variance)

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,

KYSS (Kwaiatwski, Philip, Schmidt and Shin) test, PP

(Phillips Peron) test, DF (Dickey Fuller) test, The ADF and KPSS tests are used in

this research work.

14
3.5.1 AUGMENTED DICKEY - FULLER (ADF) TEST

This test was first introduced by Dickey and Fuller in 1979 to test for the

presence of unit root and the ADF equation is given as

∆yt = yt-1 + Xt +β1∆yt-1 + β2∆yt-2 +……….+ βp∆yt-p

The hypothesis testing is

Ho: a = 0 (the series contains unit root)

H1: a<0 (the series is stationary)

Test statistic: t = /se( )

Decision Rule: Reject H0 if t is less than the asymptotic critical values (tabulated

values).

Where y1 is the differenced series

Yt-1- is the immediate previous observation

Xt is the optional exogenous regression which may be constant or a constant and

trend and δ are the parameter to be estimated

β1, β2,…. βp, is the coefficients of the lagged difference term up to lag p.

15
3.5.2 KWIATKOWSKI PHILLIPS SCHMIDT SHIN (KPSS) TEST

The integration properties of a series Yt may also be investigated by testing

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

presence of unit root and the hypothesis testing is

Ho: 2
=0 vs Hi: 2
≠0

That is, the null hypothesis that the data generating process is stationary is tested

against the alternative hypothesis (unit root).

Decision Rule:- Reject the null hypothesis if the test statistic is greater than the

asymptotic critical values (tabulated values).

3.6 ARIMA MODEL BUILDING STRATEGIES

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

of the Box - Jenkins methodology (Box and Jenkins, 1976).

 Model identification

 Model estimation

 Model checking

 Forecasting

16
3.6.1 MODEL IDENTIFICATION

The autoregressive integrated moving average [ARIMA (p, d, q)j model is

given as □(L) (I-L)d Xt = ɵ(L) £t

Where L is the lag operator, □(L) and ɵ(L) are the polynomial of orders p and q

representing with □0 = -1 and ɵ0 = 1.

Our aim is to find the order of the AR and MA processes. The order of differencing

has been decided upon already.

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

formulation of AIC’ is defined as

AIC (M)=inδ2 £t + 2M

Where M is the number of AR and MA parameters to be estimated. The model that

gives the minimum AIC is selected as a parsimonious model.

17
3.6.2 METHOD OF ESTIMATION OF THE MODEL

These methods make it possible to estimate simultaneously all the parameters

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

vector β = (d,□,ɵ)’ which maximizes the log - likelihood function L(β)

L(β) = -(n) In (2)-(1) InR- (1)X’R-1X

(2) (2) (2)

Where R is the variance — covariance matrix of the process,. The matrix R is a

complicated algebraic expression and it is difficult to calculate. We therefore use

methods base on an approximation of the likelihood function. The two main

techniques that are available for the spectra] approximation is that of fox and Taqqu

(1986) and the minimization of the conditional sum of squared residuals.

Asymptotically, these two methods converge on the exact maximum likelihood

estimator. The estimator suggested by Eo and Taqqu (1986) is the vector which

maximize the following expression

(n=l)

L (β) = ∑ [In (2 fx (ω) + Ir(ωi)

Fx (ωj)

(j-1)

This expression is easier to use but can display a basis in small samples,

18
3.6.3 MODELING CHECKING

After estimation of the model, the Box — Jenkins model building strategy

entails a diagnosis of the adequacy of the model. More specifically, it is necessary

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

the Jargue- Bera test for non - normality of residual.

AUTOREGRESSIVE CONDITION HETEROSCEDASTICITY (ARCH)

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

Ho: = 0 (The distribution is symmetry)

19
Hl: ≠ 0 (The distribution is non — asymmetry)

The test statistic has an asymptotic X- distribution

Decision Rule: the null hypothesis is rejected if the test statistic is greater than the

significant level a.

3.7 TIME SERIES FORECASTING

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

an understanding of the past to predict the future. The likelihood of serious

forecasting error increase with the length of the forecast.

20
 1. Identification of the model
(Choosing tentative p, d,q)

2. Parameter estimation of the chosen model

3. Model checking (Diagnostic)

(Are the estimated residual white noise?)

Yes No
(Go to steps 4) (Return to step 1)

4. Forecasting

Figure 3.3; illustration of Box-Jenkin strategy

21
 CHAPTER FOUR

4.0 DATA ANALYSIS

In this chapter, we used box-Jenkins methodology to identify and estimate a

model that best fit the monthly crude oil export in Nigeria. We begin by
investigating the properties of the data.

4.1 GRAPHICAL PROPERTIES OF THE SERIES

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

Fig 4.1: Time plot of monthly crude oil export.

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.

22
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

23
*|. | .|. | 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

24
 *|. | .|. | 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

Fig 4.2: The correlogram of crude oil export.

We observe from the ACF and PACF that there is evidence of serial correlation.

4.2 THE UNIT ROOT TEST

We perform the unit root test to ascertain the stationarity of the series. The
result of the test is shown in the table below:

25
Table 4.1: Result of the Augmented Dickey-Fuller test

Unit Root Test

Test T-statistics Critical value

ADF Level -4.1535 -3.4880

PP Level -9.9818 -3.4861

From the table above we observe that there exist a unit root in the data. The data is
stationary at the level.

4.3 MODEL IDENTIFICATION

We identify four (4) models that fitted the crude oil export data. The result is
displayed in the table below:

Candidate models

Models AIC SC S.E L.L

ARMA(1,1) -0.0543 0.0158 0.2356 6.2293

ARMA(2,1) -0.0440 0.0264 0.2338 5.5970

ARMA(1,2) -0.0527 0.0173 0.2328 6.1371

ARMA(2,2) -0.0387 0.0318 0.2344 5.2826

We observe from the above result that the model that fitted the data most is

ARMA (1, 2) has the least SE.

4.4 MODEL ESTIMATION

We use least square method to estimate the identified model; the result of the
estimation is given in the table below:

26
Table 4.3: The estimated model.

Dependent Variable: LOG(Y)

Method: Least Squares
Date: 10/13/17 Time: 10:55
Sample(adjusted): 2007:02 2016:12
Included observations: 119 after adjusting endpoints
Convergence achieved after 10 iterations
Backcast: 2007:01
Variable Coeffici Std. Error t-Statistic Prob.
ent
C 17.9830 0.026083 689.4645 0.0000
0
AR(1) 0.63374 0.571335 1.109243 0.2696
9
MA(2) - 0.612715 - 0.3647
0.55759 0.910036
3
R-squared 0.00982 Mean dependent 17.9834
2 var 6
Adjusted R- - S.D. dependent 0.23174
squared 0.00725 var 2
0
S.E. of 0.23258 Akaike info -
regression 0 criterion 0.05427
5
Sum squared 6.27486 Schwarz criterion 0.01578
resid 2 7
Log likelihood 6.22935 F-statistic 0.57535
2 6
Durbin-Watson 1.99556 Prob(F-statistic) 0.56410
stat 9 1
Inverted AR .63
Roots
Inverted MA .56
Roots

27
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

Lags F-statistics P-values

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

4.5.2 NORMALITY TEST

We use Jaqdue-Bera test to check whether the residuals are normally

distributed. The result is shown below.

28
 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

Fig 4.4: Histogram-Normality Test

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.

29
 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.

30
 CHAPTER FIVE

5.0 SUMMARY, CONCLUSION AND RECOMMENDATION

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

The Nigerian National Petroleum Corporation (NNPC) should diversity its

export basket through downstream production, this will help the refined petroleum
for export.

Government should establish an institution that will ensure that the

multinational are socially responsible to their host company.

The government should encourage more private company participation so that

better equipped refineries can built and the cost of refining crude oil will reduce.
31
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