Petroleum Products Prices and Inflationary Dynamics in Nigeria

Perekunah Eregha, Ekundayo Mesagan and Olawale Ayoola

MPRA Paper from University Library of Munich, Germany

Abstract: It is well documented in the literature that there exists a positive relationship between oil price and inflation. In this study, we found that the price of Premium Motor Spirit (PMS) remained stable until the entry of the military into the administration of the country when the then military heads of state arbitrarily increased the prices of petroleum products. We also found that there exists high positive relationship between the prices of PMS and AGO and inflation in Nigeria. We therefore conclude that rises in petroleum products prices, especially PMS and AGO, significantly impact inflation in Nigeria. With this result, we recommend that government should shelve the idea of removing subsidy on PMS for now and should focus on deregulating the downstream sector to attract private investment with the aim of encouraging local refining of petroleum products instead of importing them. This will in turn reduce domestic prices for petroleum products and consequently inflation.

Keywords: Premium Motor Spirit; Automotive Gas Oil; Dual Purpose Kerosene; Inflation; Nigeria. (search for similar items in EconPapers)
JEL-codes: E31 Q4 Q43 (search for similar items in EconPapers)
Date: 2015-12
New Economics Papers: this item is included in nep-ene and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (17)

Published in The Empirical Econometrics and Quantitative Economics Letters 4.4(2015): pp. 108-122

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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:70251

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