Examining the Effects of Oil Price Shocks on Unemployment in South Africa and Nigeria

Abstract

This study investigates the impact of oil price shocks on unemployment dynamics in South Africa and Nigeria, two major economies in Africa with significant oil sectors. The relationship between oil price fluctuations and unemployment is analysed using time- series data spanning from 1976 to 2021, employing the Autoregressive-distributed lag (ARDL) and the Nonlinear ARDL models. The ARDL model in South Africa shows a significant long-term increase in unemployment due to increased oil prices, while in Nigeria, it indicates a negative relationship. In the short run, in South Africa oil price shocks have an insignificant effect, while in Nigeria, they have a significant negative impact. The NARDL model also reveals asymmetrical effects. The NARDL model revealed asymmetrical long-run and short-run effects. In South Africa, the magnitude of the impact of increasing oil prices on unemployment is larger than of falling oil prices in both the short-run and long-run, while for Nigeria, falling prices have a larger magnitude.