Oil Price and Exchange Rate Nexus in Nigeria: Are there Asymmetries

Abubakar, Attahir Babaji

doi:10.33429/cjas.10119.1/6

Cited by 14 publications

(17 citation statements)

References 36 publications

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“…Several studies have been conducted in Nigeria on the nexus that exist between stable exchange rate and oil price volatilities. Notable amongst these studies is Mohammed et al (2019) and Abubakar (2019). Their conclusions revealed a positive relationship between exchange rate and crude oil price in Nigeria.…”

Section: Introductionmentioning

confidence: 92%

Do oil prices forecast the interbank market interest rates in Nigeria?

Ihediwa

Ahmed

2023

JGEB

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We aim to establish the nexus between crude oil price and the interbank interest rate in order to ascertain if crude oil prices possesses a predictive ability on the interbank interest rates in Nigeria by using monthly series ranging from 2002:1 to 2021:12. The result of the Johenson Conitegration test indicated the existence of a long-run relationship between interest rate and crude oil prices, the variance decomposition and impulse response function results trace the behaviour of interbank interest rate as accounted by shocks on oil prices. The test of volatility using GARCH (1,1) confirmed that volatility was quite persistent while the Granger Causality test confirmed that oil price granger caused interbank interest rate. Finally, the forecast of interbank interest rate using structural autoregressive moving average (SARMA) revealed that oil price adequately forecast the behaviour of interbank interest rate. It is therefore recommended that policies in tackling the impact of fluctuations in oil prices should be formulated which will serve as an important source of stabilizing the movements in the interbank interest rate. Considering the importance of oil to the development and growth of the Nigerian economy, a focus to diversify the Nigerian economy away from over-dependence on oil revenue to other productive sectors of the economy using the financial receipts from crude oil will help to stabilize the interbank rates.

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Section: Introductionmentioning

confidence: 92%

Do oil prices forecast the interbank market interest rates in Nigeria?

Ihediwa

Ahmed

2023

JGEB

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“…As a corollary, the studies on oil‐importing economies that found asymmetric relationships include Churchill et al, 2019; Kumar, 2019; Khraief et al, 2020; Bangura et al, 2021. By contrast, however, the studies of Abubakar (2019); and Ben‐Dhiab et al (2021) found no evidence for the existence of asymmetric relationships. Empirical studies that included a panel of oil‐importing and oil‐exporting countries and obtained asymmetric relationships include the studies of Kisswani et al, 2018; Salisu et al, 2020; Kisswani & Elian, 2021, while the studies of Saidu et al (2021) and Huang et al (2020) could not find evidence for asymmetric relationship.…”

Section: Literature Reviewmentioning

confidence: 99%

“…Salisu et al (2020) adopt a quasi‐GLS estimator, Abubakirova et al (2021) used the asymmetric non‐causality test of Hatemi‐J and Roca (2014) test while Nouira et al (2018) utilised the non‐causality test of Hatemi‐J (2012). The study of Huang et al (2020) employed the use of pairwise VAR technique while Olayeni et al (2020) and Abubakar (2019) adopt various threshold models.…”

Section: Literature Reviewmentioning

confidence: 99%

“…Among the users of its baseline form include Li (2021), Lin and Su (2020), Touil and Merabet (2021), Nwosa (2020), Ologbenla (2020), Delgado et al (2018); and associates the decision to its efficiency in tackling potential endogeneity among variables. Mukhtarov et al (2021), Abubakar (2019) and Ji et al (2020) used the Structural Vector Autoregressive (SVAR) method for their estimations perhaps due to the simplicity of the model in terms of avoiding structural modelling of all variables, as well as its ability to account for the feedback and relationship among all variables in the system. Yildirim and Arifli (2020) opted for the recursive (near) VAR model, as it gives room for the separation of the system into different blocks.…”

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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“…This implies, shock on crude oil prices is not inflationary. Abubakar (2019) adopt TAR and MTAR to examine the asymmetry of oil price and exchange rate in Nigeria. The study data range from 1986M01 to 2018M06.…”

Section: Empirical Literaturementioning

confidence: 99%

Pass-Through of Crude-oil Price Shocks to Consumer Prices in Nigeria: Pre and Post 2008 Global Financial Crisis

Otoakhia¹

2021

CBN-JAS

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This study investigates the responses of consumer price index (CPI) to crude oil price shocks in the pre- and post-2008 global financial crisis. The study used the Structural Vector Autoregressive model to analyse monthly data from 2000M01 to 2019M12. The impulse response analysis showed that for pre and post-crisis periods, oil price shocks have a positive impact on CPI. This impact was an insignificant direct momentary increase in pre-crisis CPI before dissipating. Conversely, the impact on post crisis CPI response tends to be stable and long-lasting starting from the third month. The confidence bands for the post crisis CPI are large, indicating the long-lasting positive response in the CPI pose no significant threat to price stability in the long run horizon. In conclusion, CPI response varies in terms of intensity for pre and post crisis periods. In terms of level of significance, the effect of the shocks on CPI is transient and insignificant in both periods. The post crisis oil price shock is not a significant channel that created price instability in Nigeria after the crisis and this study recommend partial deregulation of energy price should be maintained. Establishing oil price –inflation pass-through, external shocks like financial crisis should be accounted for.

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Oil Price and Exchange Rate Nexus in Nigeria: Are there Asymmetries

Cited by 14 publications

References 36 publications

Do oil prices forecast the interbank market interest rates in Nigeria?

Do oil prices forecast the interbank market interest rates in Nigeria?

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

Pass-Through of Crude-oil Price Shocks to Consumer Prices in Nigeria: Pre and Post 2008 Global Financial Crisis

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