This study examines the effect of oil price volatility on macro-economic variables in Nigeria as it affects consumer price index, gross domestic product, government expenditure and real effective exchange rate using monthly data covering the period 1975-2014. The empirical analysis is carried out by an unrestricted VAR approach. Generalized impulse response function and generalized forecast variance decomposition were employed to analyze the effects of oil price volatility on the Nigerian economy. The findings revealed that oil price volatility does not affect GDP and inflation rate in Nigeria but does significantly affect real exchange rate and government expenditure. There is a strong need for policy makers to focus on policies and strategies to meet the macroeconomic structure of the Nigeria economy with specific focus on alternative source of government revenue.