The Asymmetric Impact of Oil Price Volatility on Nigeria's Inflation

Bello Abdullahi Muhammad, Muhammad Shehu Shuaibu, Mohammad Junaid Alam and Lawan Nasiru Salisu
Additional contact information
Bello Abdullahi Muhammad: Department of Economics and Development Studies, Federal University of Kashere, Gombe State, Nigeria
Muhammad Shehu Shuaibu: School of Business Studies, Sharda University, Greater Noida, Uttar Pradesh, India
Mohammad Junaid Alam: Sharda School of Humanities & Social Sciences, Sharda University, Greater Noida, Uttar Pradesh, India
Lawan Nasiru Salisu: Department of Economics and Development Studies, Federal University of Kashere, Gombe State, Nigeria

Economics and Applied Informatics, 2023, issue 3, 5-16

Abstract: Nigeria, as one of the top exporters of crude oil worldwide, is heavily reliant on revenue generated from oil exports through aggregate export earnings. In addition, the Nigerian economy's reliance on crude oil revenues as a key source of income prompts worries about the influence of oil price volatility on macroeconomic indicators. This paper empirically examines the asymmetric effect of oil price volatility on inflation in Nigeria. Using annual time series data for the years 1980 to 2020, the study used the Nonlinear Autoregressive Distributive lag Model, the empirical evidence from the asymmetric analysis shows that the rise in oil prices, interest rates, and real effective exchange rate tends to lessen inflationary pressures in the country. On the other hand, the fall in oil prices, interest rates, and real effective exchange rates have a greater impact on exacerbating Nigeria's inflationary pressures. However, it was discovered that negative oil price shocks have a larger and more significant impact on inflation than positive oil price shocks. The study recommends that the Nigerian government needs to diversify away from oil as a main source of revenue and instead focus on other sectors such as services, agriculture, and manufacturing. It also suggests that the central bank of Nigeria should focus its efforts on controlling other macroeconomic variables that cause inflation in the country while maintaining exchange rate stability through the implementation of effective monetary policy measures.

Keywords: oil price shock; inflation; interest rate; exchange rate; nonlinear autoregressive distributed lag (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://eia.feaa.ugal.ro/images/eia/2023_3/Muhammad_Shuaibu_Alam_Salisu.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ddj:fseeai:y:2023:i:3:p:5-16

DOI: 10.35219/eai15840409355

Access Statistics for this article

More articles in Economics and Applied Informatics from "Dunarea de Jos" University of Galati, Faculty of Economics and Business Administration Contact information at EDIRC.
Bibliographic data for series maintained by Gianina Mihai ().