Oil Price Fluctuations and Ination Rate in Nigeria

This study examined effects of oil (crude and premium motor spirit (PMS)) price fluctuations on ination rate in Nigeria using annual time series data spanning from 1980 to 2023.Augmented Dickey Fuller (ADF) test was used for unit root test to avoid spurious regression estimates. In addition, the study employed Nonlinear Autoregressive Distributed Lag Model (NARDL) Bound test within the ARDL framework to capture asymmetries effects of oil price fluctuations on ination rate. The study further employed Granger causality test to assess for causal relationship among the variables. The NARDL Bound test of cointegration conrmed long-run relationships between oil price fluctuations and ination rate. The result of NARDL revealed that positive uctuation in crude oil price has negative relationship with ination in Nigeria both in the long-run and short- run while negative uctuation in crude oil price has positive relationship with inflation in the long-run but has negative relationship with ination in the short run. Similarly, positive and negative fluctuations in the price of PMS have positive relationship with ination in the long run and negative in the short run. The short run negative uctuation in the price of PMS reduced ination in the short run. Granger causality test indicated bi-directional relationship between price of PM S and ination rate in Nigeria. In line with the findings, the study recommended that, Nigerian national petroleum company and government should intensify effort to increase national petroleum rening capacity, attract more private investors to build more reneries and promote indigenous modular reneries, promote local contents, reverse the subsidy removal and technically remove it in phases.