Oil Price Dynamic and Monetary Policy in Nigeria

Student: Lovelyn Onyedikachi UGWU (Project, 2025)
Department of Economics
Ekiti State University, Ado-Ekiti, Ekiti State

Abstract

ABSTRACT

This study investigated the relationship between oil price dynamics and monetary policy in Nigeria from 1990 to 2023. Data for the study was sourced from Central Bank of Nigeria (CBN) Statistical Bulletin. and organization of the petroleum exporting countries (OPEC) online database.

Vector autoregressive (VAR) and GARCH were adopted to achieve all the objectives set in the study. The model specification expresses monetary policy rate as a function of world oil price, real effective exchange rate, foreign interest rate, inflation rate and money supply, Result from unit root test showed that variable of interest are stationary at first difference I(1).

The result obtained showed that there was long-run co-integration between oil price dynamics and monetary policy in Nigeria during the study period. The findings further showed that oil price, real effective exchange rate fluctuations, inflation, and foreign interest rate significant and varying effects on monetary policy rate and money supply in Nigeria.

Based on the findings from the study,it concludes that both oil price shocks and volatility have varying impact on monetary policy in Nigeria.the study recommends that the behavior of crude oil price at international oil market should always be monitored when formulating monetary policy in Nigeria.

Keywords
price monetary policy nigeria interest showed dynamics effective exchange foreign
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