51 Volume 3 Issue 2 2018 Amity Journal of Economics AJECO ADMAA Amity Journal of Economics 3 (2), (51-62) ©2018 ADMAA Oil Price Movements, Defcit Financing and Economic Growth in Nigeria: A Simultaneous Equation Approach Presley K Osemwengie & Ibrahim Shaibu University of Benin, Benin City, Nigeria Abstract The study investigates the inter-relationships between deficit financing (DF), oil price movement and economic growth in Nigeria. The paper employed annual time series data from 1980 to 2014. The causality between these variables were also examined. The study employed granger causality test and the 2SLS estimation techniques in a semi-log form after first considering the status of identification of the equations in the system. Both rank and order conditions of identification showed that the model was identified. The findings revealed the existence of a strong relationship between real GDP and oil price movement while deficit financing (DF) proved to be weak determinant of real GDP. In the model of oil price movement, only real GDP proved to be significant at 5 per cent while DF managed to explain oil price movement at 10 per cent level. Both real GDP and oil price movement proved to be significant determinants of DF. Uni-directional relationship exists between real GDP and DF; oil price movement and DF while a bi-directional relationship exists between real GDP and oil price movement. Keywords: Real GDP, Oil Price Movement, Deficit Financing, 2SLS & Granger Causality JEL Classification: F43, H62, C26 Paper Classification: Research Paper Introduction Over the years, growth has been the major goal of most developing economies. Hence most emerging economies play key importance on drivers of economic growth. Evidence has shown in the literature that several factors such as capital, labour, technology, exports, foreign direct investment etc are significant determinants of economic growth in developing countries. Recently, especially in oil producing states, evidence of oil-led growth has also emerged. This is why most of the oil-rich nations (like Saudi Arabia) are experiencing accelerated growth in their economies. But for most developing countries, particularly in Africa, the abundance of oil could not explain why most of the states are poor, the presence of high level poverty and stunted growth rate. Intuitively, it can be argued that mismanagement or misallocation of oil resources, DUTCH disease syndrome, oil price fluctuations and the lack of policy direction on the part of African leaders may explain the reason for stunted growth amidst oil abundance.