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Impact of Oil Price Fluctuation on the Economy of Nigeria, the Core Analysis for Energy Producing Countries

In: Global Trade in the Emerging Business Environment

Author

Listed:
  • Gylych Jelilov
  • Abdullahi Ahmad Jibrin
  • Bilal Celik
  • Abdurrahman Isik

Abstract

The study aims to find the short-run empirical analyses of the impact of oil price fluctuation on the monetary instrument (Exchange rate, Inflation, Interest rate) in Nigeria. We explored the frequently used Toda-Yamamoto model (TY) model, by adopting the TY Modified Wald (MWALD) test approach to causality, Forecast Error Variance Decomposition (FEVD) and Impulse Response Functions (IRFs).The study covered the period 1995 to 2018 (monthly basis), and our findings from MWALD test indicated that there is a uni-directional causality of the log of oil price (lnoilpr) to log of the exchange rate (lnexchr) at 10% level of significance, also there is a contemporaneous response of log of consumer price index (lncpi) to log of exchange rate (lnexchr) and log of interest rate (lnintr), and jointly (lnoilpr, lncpi and lnintr) granger cause lncpi. Also at 5% level of significance lnintr responded due to positive change in lnoilpr and lnexchr, and jointly causes lnintr at 5% level of significance. This is complimented with our findings in FEVDs, and IRFs. The empirical analyses shows that oil price is a strong determining factor of exchange rate, cost of borrowing and directly influences inflationary or deflationary tendencies in Nigeria.

Suggested Citation

  • Gylych Jelilov & Abdullahi Ahmad Jibrin & Bilal Celik & Abdurrahman Isik, 2022. "Impact of Oil Price Fluctuation on the Economy of Nigeria, the Core Analysis for Energy Producing Countries," Chapters, in: Muhammad Mohiuddin & Jingbin Wang & Md. Samim Al Azad & Selim Ahmed (ed.), Global Trade in the Emerging Business Environment, IntechOpen.
    • Handle: RePEc:ito:pchaps:219285
    DOI: 10.5772/intechopen.94055
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    More about this item

    Keywords

    oil Price; exchange rate; inflation; interest rate; Toda-Yamamoto;
    All these keywords.

    JEL classification:

    • F10 - International Economics - - Trade - - - General

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