Domestic Oil Price Variation and Economic Performance in Nigeria
Abstract
This analysis uses quarterly data from 2017Q1 to 2023Q4 to examine the consequences of the variations in oil prices on Nigeria's economic performance. In particular, domestic oil prices, the official exchange rate, the consumer price index, and economic performance with real GDP as the proxy for financial performance. The results, which were obtained using the ARCH/EGARCH models, show that rising domestic petrol prices significantly worsen economic performance. This is probably because they result in higher production and consumer expenses. On the other hand, real GDP is positively linked with favorable exchange rates and moderate inflation. The findings also revealed an asymmetric volatility pattern, which reflects increased uncertainty during downturns and is characterized by negative economic shocks increasing volatility more than positive shocks. The research concluded that the variation in the pump price of petrol in Nigeria is detrimental to the economy. The research recommended that increasing energy efficiency and using other energy sources can help the economy become less dependent on petroleum, which lowers the risks related to fluctuating fuel prices. Investments in renewable energy and cutting-edge technologies, such as electric cars, can strengthen the economy's resilience to fluctuations in the global energy market.
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References
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