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Effect of Oil Price Fluctuations on Nigeria’s Exchange Rate Movements

Effect of Oil Price Fluctuations on Nigeria’s Exchange Rate Movements


This study examined the effect of oil price fluctuations on the Nigerian exchange rate movements using monthly secondary data for the period from January 1997 to August, 2020. The two variables were tested and found stationary at first difference but not at second difference. Consequently, the study employed the Nonlinear Autoregressive Distributed Lag approach for the estimation. The results suggest that while both an increase and decrease of oil price will have an opposite impact on the exchange rate, only the impact created on exchange rate by a decrease in oil price is significant. Hence, a decrease in oil price has a greater and stronger impact on exchange rate than an increase in oil price in Nigeria. The results also show the existence of asymmetry between oil price changes and exchange rate movements. For policy relevance, the findings suggest that policymakers should be cognizant of oil prices in determining an appropriate exchange rate equilibrium.

Keywords: Oil Price Fluctuations, Exchange rate Movements, Nonlinear Autoregressive Distributed Lag


Elias igwebuike Agbo
Department of Accounting and Finance
Faculty of Management and Social Sciences
Godfrey Okoye University, Ugwuomu-Nike, Emene, Enugu State, Nigeria

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