Oil Price Fluctuations, Inflation, and Exchange Rate Dynamics in Nigeria
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| Formato: | Recurso digital |
| Lenguaje: | inglés |
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2026
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| _version_ | 1866902123492409344 |
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| author | Yahaya, Onipe Adabenege |
| author_facet | Yahaya, Onipe Adabenege |
| contents | <p class="MsoNormal"><span>Nigeria's macroeconomic stability remains deeply tethered to the global oil market, exposing the domestic economy to the volatility inherent in commodity price cycles. This study investigates how fluctuations in international crude oil prices affect Nigeria's inflation rate and exchange rate over the period 1986–2025, while controlling for money supply growth (M2), the monetary policy rate (MPR), foreign reserves, the Central Bank of Nigeria (CBN) benchmark inflation rate, and the output gap. Anchored in the imported inflation theory, the Dutch Disease hypothesis, and the monetary transmission mechanism, the study employs an Autoregressive Distributed Lag (ARDL) bounds testing framework supplemented by a Vector Error Correction Model (VECM) to capture both short-run dynamics and long-run equilibrium relationships. Diagnostic and post-estimation checks—including tests for serial correlation, heteroskedasticity, structural stability, and multicollinearity—are conducted to validate the robustness of the estimated models. Results indicate that oil price increases exert a statistically significant depreciatory pressure on the Nigerian naira in the short run but paradoxically contribute to inflationary spirals rather than exchange rate appreciation, particularly when fiscal expenditure from oil windfalls is monetised. Money supply growth and the output gap emerge as the most potent domestic amplifiers of both inflation and exchange rate instability. Foreign reserves act as a significant buffer, moderating exchange rate volatility, while the MPR demonstrates limited but directionally consistent counter-inflationary efficacy. These findings carry profound policy implications for Nigeria's monetary authority, fiscal managers, and international development institutions navigating the post-pandemic, energy-transition era. The study contributes novel empirical evidence to the Nigeria-specific macroeconomic literature and fills critical gaps in the integration of fiscal-monetary interaction under oil price shocks.</span></p> |
| format | Recurso digital |
| id | zenodo_https___doi_org_10_5281_zenodo_20392708 |
| institution | Zenodo |
| language | eng |
| publishDate | 2026 |
| publisher | Zenodo |
| record_format | zenodo |
| spellingShingle | Oil Price Fluctuations, Inflation, and Exchange Rate Dynamics in Nigeria Yahaya, Onipe Adabenege Oil Price Fluctuations, Inflation, Exchange Rate, Nigeria, ARDL, Dutch Disease, Monetary Policy Rate, Money Supply, Foreign Reserves, Output Gap <p class="MsoNormal"><span>Nigeria's macroeconomic stability remains deeply tethered to the global oil market, exposing the domestic economy to the volatility inherent in commodity price cycles. This study investigates how fluctuations in international crude oil prices affect Nigeria's inflation rate and exchange rate over the period 1986–2025, while controlling for money supply growth (M2), the monetary policy rate (MPR), foreign reserves, the Central Bank of Nigeria (CBN) benchmark inflation rate, and the output gap. Anchored in the imported inflation theory, the Dutch Disease hypothesis, and the monetary transmission mechanism, the study employs an Autoregressive Distributed Lag (ARDL) bounds testing framework supplemented by a Vector Error Correction Model (VECM) to capture both short-run dynamics and long-run equilibrium relationships. Diagnostic and post-estimation checks—including tests for serial correlation, heteroskedasticity, structural stability, and multicollinearity—are conducted to validate the robustness of the estimated models. Results indicate that oil price increases exert a statistically significant depreciatory pressure on the Nigerian naira in the short run but paradoxically contribute to inflationary spirals rather than exchange rate appreciation, particularly when fiscal expenditure from oil windfalls is monetised. Money supply growth and the output gap emerge as the most potent domestic amplifiers of both inflation and exchange rate instability. Foreign reserves act as a significant buffer, moderating exchange rate volatility, while the MPR demonstrates limited but directionally consistent counter-inflationary efficacy. These findings carry profound policy implications for Nigeria's monetary authority, fiscal managers, and international development institutions navigating the post-pandemic, energy-transition era. The study contributes novel empirical evidence to the Nigeria-specific macroeconomic literature and fills critical gaps in the integration of fiscal-monetary interaction under oil price shocks.</span></p> |
| title | Oil Price Fluctuations, Inflation, and Exchange Rate Dynamics in Nigeria |
| topic | Oil Price Fluctuations, Inflation, Exchange Rate, Nigeria, ARDL, Dutch Disease, Monetary Policy Rate, Money Supply, Foreign Reserves, Output Gap |
| url | https://doi.org/10.5281/zenodo.20392708 |