Macroeconomic Disturbances and the Nigeria Oil Economy: Are Monetary and Fiscal Policy Tools Relevant?
Keywords:
Oil Price Volatile, Consumer Price Index, Gross National Product, Exchange Rate, GasolineAbstract
This paper examines the connection between the consumer price index (CPI) and crude oil price volatility. Due to her hazardous reliance on a single commodity (crude oil), the Nigerian economy frequently suffers shocks as a result of commodity price volatility. The paper explores the path taken by oil price shocks from the global commodities market to domestic Nigerian macroeconomic to impact variables like the CPI. The researcher also incorporates imported gasoline, foreign reserves, the domestic interest rate, and other variables that are thought to be responsible for macroeconomic distortions within the country in its study. We discovered that the variables in the study had a weak long-run cointegration connection using the Autoregressive Distributed Lag (ARDL) approach. However, the domestic consumer price index (CPI), oil volatility, foreign reserves, and gasoline import are all strongly correlated over the short term. Oil price volatility is not directly transferred to the domestic economy through exchange rate. Other factors such as grants, transfers, and remittances from the diaspora also influence how it behaves. We came to the conclusion that domestic consumer behavior, or the consumer price index (index), is largely a function of the volatility of crude oil prices, but that the same behavior is also influenced by factors like external reserves and the cost of imported gasoline. The pathway for imported inflation is not determined by exchange rates.
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