ABSTRACT 

The consumption of petroleum products has continued to grow as level of economic activities and changes in demographic composition are pushing up the demand for energy in Nigeria. This article conducts a modelling of consumption function of petroleum products in Nigeria using a quarterly time series data covering 1980q1-2014q4. Results from Johansen’s cointegration test shows the series employed in this modelling are cointegrated in the long run. It is also found that economic growth and gross capital investment have a significant positive influence on the consumption of petroleum products in the long run, while the influence of oil prices on the consumption of petroleum products is negative and statistically significant in the long run. It was also observed that oil imports have short-run negative but statistically insignificant influence on the consumption of petroleum products in Nigeria. However, the inverse nature of the oil imports is an indication that continuous import dependence may affect the consumption of petroleum products in the long run. The article concludes that there is the need to reduce Nigeria`s dependence on imported petroleum products. This is possible by ensuring all petrol-chemical refineries in the country operate to their full capacity. There is also the need to resolve the current controversy on the privatisation of petroleum refineries, and more private investors should be encouraged, and licenses given to them to establish new refineries to minimise the negative effect of oil imports. Finally, there is also the need to eliminate the entire petroleum subsidy from the country`s economy. KEYS WORDS: Petroleum Products, Consumption, Johansen Cointegration, Vector-