Dynamics of Oil Price, Exchange Rate and the Trade Performance of Quoted Industrial Sectors at the All Securities Market (Asem) in Nigeria

Ajeigbe, Omowumi Monisola

doi:10.14738/assrj.94.12106

Cited by 3 publications

(3 citation statements)

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“…This study confirms the debilitating effects of oil price shock on exchange rate dynamics in Nigeria. Empirical studies that found the same results for net oil-exporting countries are Tian et al (2020), Nwosa (2020), Abdullah and Muhammad (2021); Igbinovia and Ogiemudia (2021); Li (2021); Touil and Merabet (2021); Das (2021) and Ajeigbe (2022). Interestingly, the effects of the monetary policy rate, trade balance and the price level on global oil price are negligible.…”

Section: Discussion Of Findingsmentioning

confidence: 75%

“…The empirical literature on the nexus between oil price dynamics and exchange rate behaviour is already proliferated with studies targeted at net oil exporters and net oil importers, while a few other studies combined panel of countries without recourse to the specificity of their trading status. The first category includes studies conducted by Abdullah and Muhammad (2021); Ajeigbe (2022); Das (2021); Igbinovia and Ogiemudia (2021); Li (2021); Nwosa (2020); Tian et al (2020); Touil and Merabet (2021); among others. For the second category, the studies of Baghestani and Toledo (2019); Vochozka et al (2020); Castro & Jimenez‐Rodrıguez, 2020; Allam et al 2020 are few of the recent studies while Baek (2020) combined a panel of net oil importers and net oil exporters.…”

Section: Literature Reviewmentioning

confidence: 99%

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Modelling oil price shocks and exchange rate behaviour in Nigeria – A regime‐switching approach

2022

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Consequent upon the intermittent variations in the global oil prices over the years and its attendant effects on exchange rate dynamics of oil‐rich economies, the study investigates the regime‐switching behaviour of oil price shocks and exchange rate behaviour in Nigeria. The period of investigation spans 1980q1 – 2020q4 and the technique of analysis is the Markov‐Switching Dynamic Regression. Predicated on an extended portfolio balancing theory, the unit‐root test with structural break confirms break points in the data. The Markov‐Switching Dynamic Regression shows the presence of two regimes of low and high global oil price shocks in the data. Additional results show that expectation plays a huge role in the oil price and exchange rate nexus in Nigeria and that the regime of low global oil price comes with more shock effects than that of high global price of oil. With short memory property, both the low and high global prices of oil exhibit high persistence level above 70 percent but the duration of persistence for the latter is half‐life the former. The study recommends that the monetary authority should introduce exchange rate policy surprise and further diversify the economy from oil dependence.

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Section: Discussion Of Findingsmentioning

confidence: 75%

Section: Literature Reviewmentioning

confidence: 99%

Modelling oil price shocks and exchange rate behaviour in Nigeria – A regime‐switching approach

2022

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“…examined the effect of the exchange rate shocks on ten (10) sectoral stock returns in Nigeria from 2007 to 2018; examined symmetric and asymmetric relationship between exchange rate and sectoral stock returns. The autoregressive distributed lag and nonlinear autoregressive distributed lag only financial service sector moves in an asymmetric fashion in the short and long period without taking account of structural breaks and with structural breaks, non of the sectorial stock returns were asymmetric Ajeigbe (2022). examined the dynamic interaction among oil price, exchange rate and the trading performance of quoted industrial sectors at the Nigerian stock exchange from 1980 to 2020 a panel vector error correction mechanism (PVECM) framework long run relationships were established for oil price, exchange rate and the stock market performance of the industrial sectors; a long run negative relationship among oil prices, exchange rate and the stock market performance of industrial sector Fapetu et al (2017).…”

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confidence: 99%

Assessing Literatures on the Dependence of Stock Market Development on Upstream Oil Royalty Revenue and Systematic Risk Factors: Highlighting the Relevance of Dutch Disease Theory and Capital Asset Pricing Model

Efuntade¹,

Olusegun²

2022

IJSSMR

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The paper assessed past literatures on the dependence of stock market financial development on upstream oil royalty revenue account and systematic risk factors and evaluating the relevance of Dutch Disease theory and capital asset pricing model. Theoretical approach supports the role of oil royalty revenue vis-à-vis oil price volatility, foreign exchange rate risk, financial liquidity risk and interest rate risk in determining the performance and financial development of stock market. It is well documented in research that stock prices react to information on oil revenue, crude oil production, monetary policy interest rate, foreign exchange rate uncertainty and diaspora cash remittances. Traditional valuation of stock is based on capital asset pricing model but the modern relevance is in doubt due to anomalous performance of investors and behavioural sentiments. Stock markets of emerging economies over the past few decades have witnessed remarkable growth as indicated by the value and volume of trade in the markets along with the level of capital inflows from developed markets, thereby providing numerous opportunities for investments. The development of the stock market is vital as it provides more opportunities for greater mobilization of funds from with and diaspora remittances and better efficiency in resource allocation. Nevertheless, investment returns in the stock market of developing economies continue to be more reactive to changes in economic fundamentals due to their fragile and volatile nature. This makes them even more unpredictable and unstable unlike the stock markets of developed economies, which are known to be more stable. Stock market financial development is not symptomatic of Dutch Diseases based on the fact that Oil-induced Dutch Disease assumes an oil sector which largely contributes to the economy while so many vital systematic risk factors affects stock market development. Optimistically this study along with other previous and future studies will increase the knowledge about Dutch Disease and will contribute to lessen the harmful effects that Dutch Disease causes. In spite of the common perception that oil is extremely important for financial and economic dynamics, there is, unexpectedly, a dearth of research on how oil revenue and prices influence stock market financial development.

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Reactions of stock returns to asymmetric changes in exchange rates and oil prices

Umoru

Effiong

Umar

et al. 2023

CGOBR

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When an economy does well as a result of crude oil proceeds, it is expected that its financial market records a boost. So, when the economy regresses due to fluctuations in oil prices, its financial market also reacts in tandem. To shed light on the uninterrupted fluctuations, we empirically estimated the effect of changes in exchange rates and oil prices on stock returns in developing countries using the nonlinear autoregressive distributed lag (NARDL) methodology. Results reveal that a 1 percent negative shock to the exchange rate diminished returns significantly by 1.015 percent and 2.191 percent for Egypt and Nigeria respectively whereas, in Tunisia, Morocco, and Tanzania, stock returns increased significantly by 0.118 percent, 0.176 percent, and 1.145 percent respectively. For every 1 percent positive shock to exchange rates in Egypt, Nigeria, Tunisia, Morocco, and Tanzania, returns declined by 1.012 percent, 1.04 percent, 0.015 percent, 0.112 percent, and 0.214 percent respectively. A 1 percent positive shock in oil price negatively influences returns by 0.02 percent, 0.05 percent, 0.18% percent, 1.09 percent, and 0.25 percent in Egypt, Nigeria, Tunisia, Morocco, and Tanzania while a 1 percent negative shock stimulated stock returns by 1.02 percent, 0.128 percent, 0.199 percent, 1.029 percent and 0.091 percent in Egypt, Nigeria, Tunisia, Morocco, and Tanzania respectively. Different policy reaction functions should be executed differently for depreciation, appreciation, and oil price shock to enhance the favorable flow of returns in stock markets

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Dynamics of Oil Price, Exchange Rate and the Trade Performance of Quoted Industrial Sectors at the All Securities Market (Asem) in Nigeria

Cited by 3 publications

References 0 publications

Modelling oil price shocks and exchange rate behaviour in Nigeria – A regime‐switching approach

Modelling oil price shocks and exchange rate behaviour in Nigeria – A regime‐switching approach

Assessing Literatures on the Dependence of Stock Market Development on Upstream Oil Royalty Revenue and Systematic Risk Factors: Highlighting the Relevance of Dutch Disease Theory and Capital Asset Pricing Model

Reactions of stock returns to asymmetric changes in exchange rates and oil prices

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