Asymmetric Impact of Crude Oil Price on Domestic Price of Goods in Nigeria

Abstract

This study investigated the asymmetric impact of crude oil price on domestic price of goods in Nigeria. Using a quarterly data covering 1999Q1 to 2023Q4, a Non-Linear Autoregressive Distributed Lag (NARDL) method was used for the analysis. Results from the estimate indicated that an increase in crude oil prices caused increases in Nigeria's petroleum product prices, manufacturing food prices, and primary food prices as measures of domestic pricing. However, a drop in the price of crude oil led to a slow decline in petroleum product prices, manufacturing food prices, and primary food and the drop in the marginal cost of production, which eventually led to a moderating of domestic prices. Additionally, when exchange rate is excluded from the models, negative oil price shocks resulted in higher domestic prices in Nigeria, showing the passed through effect of exchange rate and its absorbed effects of crude oil price shocks. Additionally, a manufacturing food pricing reacts to rising crude oil prices more than primary food prices. The study therefore, recommend that the Central Bank of Nigeria should concentrate its monetary policy rate efforts by reducing the rate of borrowing by this sectors on containing manufacturing food prices during periods of significant increases in crude oil price. Similarly, the monetary authority should step up its efforts to ensure domestic sustainability and boost food production through its manufacturing and agricultural sectors intervention programs to further reduce the impact of crude oil prices on domestic prices.