An Empirical Analysis of Crude Oil Price, Consumer Price Level and Exchange Rate Interaction in Nigeria: A Vector Autoregressive (VAR) Approach

摘要

This work investigated the interaction of Crude Oil Price, Consumer Price Level and Exchange Rate in Nigeria using the Vector Autoregressive (VAR) Model. A monthly data (January, 2007-February, 2015) obtained from the Central Bank of Nigeria was used for the analysis. The analysis showed that all the variables were integrated of order one I (1) and no long-run relationship existed among them. The work also revealed that a shock on crude oil price had a negative impact on exchange rate. More so, variation in exchange rate was substantially caused by crude oil price. Furthermore, a shock on exchange rate had a negative effect on consumer price level. Therefore, government was advised initiate policies that will diversify the income stream of Nigeria’s economy. Similarly, a policy that will promote an enabling environment for local investors to produce goods locally so as to conserve foreign exchange was equally encouraged.