Asymmetric Impact of Oil Price Shocks on GDP and Exchange Rate Dynamics in Nigeria

This study investigates the asymmetric impact of oil price shocks on Nigeria’s GDP and exchange rate dynamics from 1986 to 2022. Employing a non-linear econometric framework, the study examines three key objectives: the relationship between oil price shocks and Nigeria’s GDP, the asymmetric effects of oil price increases and decreases on economic growth, and the influence of oil price shocks on exchange rate dynamics. The findings reveal a significant relationship between oil price fluctuations and GDP, with increases in oil prices positively impacting economic growth, while decreases in oil prices result in pronounced economic contractions. The analysis further highlights the asymmetric effects of oil price shocks, where the magnitude of economic contraction during price decreases surpasses the growth effects of price increases. Additionally, oil price shocks are shown to significantly influence exchange rate dynamics, with depreciation more severe during periods of price declines than the appreciation observed during price increases. These findings underscore the structural vulnerabilities of the Nigerian economy, heavily reliant on oil exports, and highlight the importance of economic diversification, exchange rate stabilization, and strategic policy measures to mitigate the adverse effects of oil price volatility. The study contributes to the understanding of oil price asymmetries and provides actionable insights for policymakers aiming to enhance Nigeria’s economic resilience.