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This paper pioneers research on the relationship between oil price shocks and current account dynamics in Nigeria, a country that doubles as an oil exporter and importer. Structural vector autoregression is applied to quarterly data from 1970Q1 to 2008Q4 to identify oil price shocks and to evaluate its net effect on Nigeria's current account balances. After introducing three control variables (output gap, real exchange rate misalignment and the lagged values of current account ratio), we impose six structural restrictions on the model to help track and identify the structural shocks of oil prices on current account balances. Overall, we find that oil price shocks have a significant short‐run effect on current account balances for Nigeria. Specifically, the impulse response of the current account ratio to oil price shocks increases speedily in the first six quarters, and then, it declines afterwards until the 30th quarter. The variance decomposition analysis shows that approximately 15.77 per cent of the variations in current account dynamics are caused by oil price shocks. The insight we draw from this finding is that there is no one‐for‐one relation between oil price shocks and current account dynamics. Exchange rate misalignment provides the offsetting effect as revealed from our results. The implication for policy is that reserve‐augmenting strategies, lax monetary policy and intensified international financial integration would need to be enhanced and sustained by policy‐makers to reinforce the positive effects of oil price shocks on the Nigerian economy.

Oil price shocks do not only originate from the supply‐side of the crude oil market but may also be demand driven. The impact of oil price shocks on stock market activities may be different depending on its origin (i.e. demand and supply shocks). This paper provides the first examination of the impact of the origin of oil price shocks on Nigeria's stock market for the period 1995:1–2011:12. Oil price shocks is decomposed into oil supply shocks, aggregate demand shocks and oil‐specific demand shocks using a structural vector auto‐regression model, and their impacts on stock market prices were analysed using impulse response and variance decomposition analysis. The impulse response results show that stock market's response to oil supply shocks is insignificantly negative but significantly positive to aggregate demand and oil‐specific demand shocks. The cumulative effects of the oil price shocks account for about 47 per cent of the variation in stock prices in the long term. These results suggest that the origin of oil price shocks is crucial for understanding the volatility in Nigeria's stock market. Future policy direction should focus on diversifying the economy to reduce its vulnerability to oil price fluctuations while addressing the inefficiencies in the stock market.

How important is trade openness as a vehicle for driving productivity in developing countries? We offer a sector-specific analysis with focus on the manufacturing sector for meaningful policy insights. Using a modern econometric technique—the autoregressive distributed lag approach to cointegration—this article attempts to establish the relationship between openness to trade and manufacturing performance in Nigeria for the period 1970–2008. The results suggest that trade openness has a significant positive impact on manufacturing productivity in Nigeria both in the short and long run. These coefficient estimates are robust and stable over the time. Therefore, the policy direction for the manufacturing sector in Nigeria should focus more on open policies through trade liberalisation as a long-term plan. Reduction in trade restrictions and implementation of appropriate incentives are vital for resuscitating the performance of the sector. In this aspect, policy-makers should leverage the benefits of openness to the comparative advantages in the liberalised sector. JEL Classification: F41, C22, O55

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