Asymmetric Effects of Oil Price Shocks on Macroeconomic Variables in Nigeria

This study examined the asymmetric effect of oil price shocks on macroeconomic variables in Nigeria ween 1990q1 and 2023q4. The study employed quarterly data which was sourced from the World Energy Information Online database and the International Monetary Fund (IMF) online database. The data sourced were estimated by the Asymmetric Autoregressive Distributed Model, Vector Autoregressive Distributed Model and Pairwise Granger Causality Test. Results the unit root test revealed that variables of interest were integrated of mixed orders, that is I(0) and I(1). The examined result showed that there was long-run co-movement between oil prices and the selected macroeconomic variables during the study period. The results further revealed that both in the short run and long run, the response of the selected macroeconomic variables to shocks from positive oil prices was positive but not significant, which their response to the shocks emanating from oil prices was negative and significant. The result from the pairwise Granger causality test showed bi-directional causality between oil price, real output growth and gross fixed capital formation, while uni-directional causality running from oil price to inflation, real effective exchange rate and real interest rate was established. The study concludes that there is asymmetry in the relationship between oil price and macroeconomic variables in Nigeria. Based on these findings, the study recommends that there is a need for economic diversification to reduce overreliance of the Nigerian economy on income from oil. Also, there is a need to intensify efforts on alternative sources of energy, particularly renewable energy.