Volume 10, Issue 5, May – 2025 International Journal of Innovative Science and Research Technology

ISSN No:-2456-2165 https://doi.org/10.38124/ijisrt/25May371

Crude Oil Price Volatility and its Impact on

Nigeria’s Balance of Trade: An Empirical
Assessment (2000–2023)
Adaji Obaje1; Barisua F. Nwinee2; Dennis B. Eme3
1
Emerald Energy Institute, University of Port Harcourt, Nigeria
2
Department of Finance/Banking, University of Port Harcourt, Nigeria
3
Department of Civil and Environmental Management, University of Port Harcourt, Nigeria

Publication Date: 2025/05/19

Abstract: This study investigates the impact of crude oil price volatility on Nigeria’s balance of trade from 2000 to 2023,
incorporating the Consumer Price Index (CPI) as a moderating variable to capture inflationary dynamics. Using quarterly
time-series data, the study explores both the direct effect of oil price volatility and the moderating influence of domestic
price levels on trade performance. Preliminary tests confirm stationarity of the variables at I(1), allowing for the
application of a cointegrating regression framework. Although the initial econometric model satisfied all diagnostic tests—
including serial correlation, heteroskedasticity, and stability tests, the residuals failed the normality assumption.
Consequently, the Dynamic Ordinary Least Squares (DOLS) technique was employed to obtain robust long-run estimates,
given its efficiency in addressing endogeneity and serial correlation in small sample sizes. Empirical findings reveal a
significant long-run relationship between crude oil price volatility and the balance of trade, with CPI playing a moderating
role by amplifying the trade imbalance in periods of rising domestic prices. The study highlights the dual vulnerability of
oil-dependent economies like Nigeria to both external price shocks and internal inflationary pressures. Policy implications
emphasize the need for trade diversification, macroeconomic stabilization mechanisms, and inflation-targeted monetary
policies to cushion the adverse effects of oil price fluctuations on trade outcomes.

Keywords: Crude Oil Price Volatility, Balance of Trade, Nigeria, ARDL, Dynamic Ordinary Least Squares (DOLS), Consumer
Price Index (CPI), Macroeconomic Stability, Economic Diversification.

How to Cite: Adaji Obaje; Barisua F. Nwinee; & Dennis B. Eme, (2025). Crude oil price volatility and its impact on Nigeria’s
Balance of Trade: An empirical assessment (2000–2023). International Journal of Innovative Science and Research
Technology,10(5), 498-510. https://doi.org/10.38124/ijisrt/25May371

I. INTRODUCTION II. LITERATURE REVIEW

Nigeria, as a leading oil-exporting nation, has  Conceptual and Theoretical Framework

historically experienced fluctuating economic performance Crude oil price volatility plays a crucial role in shaping
due to crude oil price volatility. The country’s trade balance, Nigeria’s economic stability, particularly its balance of trade
heavily dependent on crude oil exports, faces significant risks (BOT) [3]. As a country heavily reliant on crude oil as its
when oil prices decline [1]. This study investigates the extent primary export, fluctuations in global oil prices directly
to which crude oil price fluctuations impact Nigeria’s balance impact foreign exchange earnings, government revenue, and
of trade, exploring both short- and long-term relationships trade performance.
through empirical analysis.
This study defines oil price volatility as the
Oil price shocks can arise from various global events, unpredictable fluctuations in oil prices caused by geopolitical
including geopolitical tensions, changes in production quotas tensions, supply-demand imbalances, speculative activities,
by OPEC, and fluctuations in global demand and supply. and broader macroeconomic uncertainties. The BOT, a key
Nigeria’s economic reliance on crude oil revenue exacerbates component of the current account in the balance of payments,
its exposure to these shocks, leading to foreign exchange measures the difference between a country’s export and
instability, fiscal imbalances, and trade deficits during periods import values. Given that petroleum exports constitute over
of declining oil prices [2]. This research highlights the 90% of Nigeria’s total export revenue, BOT is highly
historical trends of oil price volatility and its corresponding sensitive to oil price shocks [4]. The effects of these
effects on Nigeria’s balance of trade. fluctuations are transmitted through exchange rate
movements, inflation, import costs, and foreign direct

IJISRT25MAY371 www.ijisrt.com 498

Volume 10, Issue 5, May – 2025 International Journal of Innovative Science and Research Technology
ISSN No:-2456-2165 https://doi.org/10.38124/ijisrt/25May371
investment (FDI). A decline in oil prices reduces government indicated that trade balance deteriorates significantly during
revenue, depreciates the local currency, raises import costs, oil price crashes but improves during price surges. This study
and leads to trade deficits [5]. Conversely, rising oil prices introduced a time-frequency approach (wavelet analysis) to
boost export earnings and improve the trade balance. understand the dynamic relationship between oil prices and
However, these gains are often undermined by structural trade balance over different time horizons. However, the study
challenges such as low export diversification and poor failed to incorporate policy responses and fiscal adjustments
economic management [6]. to oil price fluctuations. Further research should explore how
government interventions, such as foreign exchange controls
Several economic theories help explain the relationship and fiscal policies, impact BOT dynamics.
between oil price volatility and Nigeria’s BOT. The Balance
of Payments (BOP) Theory highlights how oil price Jimoh and Olayemi (2019) applied a non-linear
fluctuations influence foreign exchange reserves and trade autoregressive distributed lag (NARDL) model to analyze
stability [7]. The Dutch Disease Hypothesis explains how asymmetric effects of oil price shocks on Nigeria’s trade
high oil prices cause currency appreciation, reducing the balance. Their study found that negative oil price shocks have
competitiveness of non-oil exports and increasing dependency a more severe impact on trade deficits than positive shocks
on oil revenue [8]. The Terms of Trade (TOT) Theory have on surpluses, suggesting that Nigeria struggles to
illustrates how shifts in oil prices alter the ratio of export to leverage oil booms effectively. This study highlighted the
import prices, affecting the country’s trade balance [9]. asymmetric nature of oil price shocks, showing that Nigeria’s
Additionally, the Purchasing Power Parity (PPP) Theory economy lacks the resilience to fully capitalize on oil price
suggests that exchange rate fluctuations adjust over time to increases. However, the research did not examine sectoral
maintain trade equilibrium, but in Nigeria’s case, sharp contributions to the trade balance beyond crude oil. Future
declines in oil prices lead to currency depreciation and trade studies should explore how different economic sectors
deficits [10]. Lastly, the Structuralist Theory of Trade Balance respond to oil price shocks and their role in stabilizing trade
argues that external shocks, such as oil price volatility, have a balance outcomes.
more significant impact on economies with weak export
diversification [11]. Hamilton (1983) conducted an early empirical analysis
of oil price shocks and exchange rate fluctuations in oil-
Since Nigeria remains dependent on crude oil exports, exporting economies. His findings suggested that oil price
external price shocks directly affect its BOT, contributing to declines lead to currency depreciation and trade imbalances.
economic instability [12]. Without proactive policies aimed at This study established the fundamental link between oil price
diversifying the economy and stabilizing the trade balance, volatility and exchange rate fluctuations in oil-exporting
the country will remain vulnerable to oil price fluctuations nations. However, it did not account for country-specific
and their adverse effects on long-term economic growth. economic policies that could influence exchange rate
responses. Future research should incorporate fiscal and
 Empirical Review monetary policy mechanisms to understand their moderating
Empirical research on the relationship between crude oil effects on exchange rate volatility. Similarly, Adebiyi (2009)
price volatility and Nigeria’s balance of trade (BOT) has employed an autoregressive conditional heteroskedasticity
provided critical insights into how oil price fluctuations affect (ARCH) model to examine oil price volatility’s impact on
foreign exchange earnings, trade performance, and overall exchange rate stability in Nigeria. His results showed that oil
macroeconomic stability. However, these studies also exhibit price fluctuations lead to increased exchange rate volatility,
gaps and areas for further research, particularly in addressing making imports more expensive and exacerbating trade
policy responses and structural weaknesses in Nigeria’s trade deficits. This study provided statistical evidence that oil price
system. volatility increases exchange rate instability, which directly
influences the trade balance. However, it did not consider
Olomola and Adejumo (2006) employed a vector external shocks such as global financial crises or geopolitical
autoregression (VAR) model to examine the impact of oil events that affect oil prices. A more comprehensive model
price shocks on Nigeria’s macroeconomic performance. Their incorporating external shocks and geopolitical risks would
findings revealed that oil price increases enhance trade provide deeper insights into exchange rate dynamics.
balance due to higher foreign exchange earnings, while
declines in oil prices lead to trade deficits. The study provided Blanchard and Gali (2007) compared the effects of oil
empirical evidence linking oil price fluctuations to Nigeria’s price shocks in the 1970s and 2000s, concluding that trade
BOT, highlighting the direct effects of oil price shocks on balance deterioration is more pronounced in economies with
trade performance. However, it did not account for non-oil weak foreign exchange reserves. This study provided a
exports and other external factors influencing the trade historical comparison, showing how the impact of oil price
balance. Future studies should incorporate structural breaks shocks has evolved over time. However, it did not focus
and examine the role of economic diversification in mitigating specifically on Nigeria, limiting its direct applicability to the
oil price shocks. country’s economic context. A country-specific adaptation of
their methodology could better illustrate Nigeria’s
Similarly, Adeniyi, Abiodun, and Abiola (2021) utilized vulnerabilities to oil price fluctuations.
wavelet analysis to assess the long-run and short-run effects
of oil price volatility on Nigeria’s BOT. Their findings

IJISRT25MAY371 www.ijisrt.com 499

Volume 10, Issue 5, May – 2025 International Journal of Innovative Science and Research Technology
ISSN No:-2456-2165 https://doi.org/10.38124/ijisrt/25May371
Kilian (2009) distinguished between supply-driven and The Dynamic Ordinary Least Squares (DOLS) method,
demand-driven oil price shocks, showing that inflationary introduced by Stock and Watson (1993), provides a robust
pressures are more severe when oil price shocks originate approach for estimating long-run relationships among
from supply disruptions. This study contributed to the cointegrated variables while correcting for endogeneity and
understanding of how different sources of oil price shocks serial correlation. This technique is especially relevant for
uniquely impact inflation and trade balance. However, it did studies, such as this one, that confront non-normal residuals or
not explore policy interventions to mitigate inflationary small sample biases.
effects. Further research should examine how fiscal and
monetary policies can counteract inflationary pressures Narayan and Narayan (2004) demonstrate the
resulting from oil price volatility. In a similar study, Ratti and applicability of such cointegration techniques in modeling
Vespignani (2015) employed a structural VAR model to export demand functions, offering insights on how inflation
examine the pass-through effects of oil price volatility on (measured via CPI) can moderate external trade outcomes.
inflation and trade balance in Nigeria. Their findings Pesaran, Shin, and Smith (2001) further advance the bounds
suggested that high inflation during oil price declines erodes testing approach for cointegration, applicable in small samples
Nigeria’s export competitiveness and leads to persistent trade with mixed order integration, thereby justifying the use of
deficits. This study confirmed the role of inflation as a DOLS and related methods.
transmission mechanism linking oil price shocks to trade
balance deterioration. However, it did not consider the role of The reviewed literature reveals consistent evidence that
government subsidies and other inflation control measures. crude oil price volatility negatively affects Nigeria’s trade
Future research should investigate how subsidy removal, balance and overall macroeconomic stability. However, most
exchange rate policies, and inflation targeting impact trade studies focus on direct relationships and do not incorporate
balance outcomes. moderating variables like CPI that may influence the strength
or direction of these effects. Moreover, while methodologies
Balcilar, Ozdemir, and Yetkiner (2019) examined the such as VAR and ARDL are frequently used, relatively fewer
asymmetric effects of oil price shocks on economic growth in studies employ Dynamic Least Squares (DOLS)—especially
oil-exporting and oil-importing countries. Their study found in the context of residual normality violations.
that oil price crashes have a disproportionately negative effect
on trade balance and macroeconomic stability in oil- The empirical literature consistently demonstrates that
dependent economies like Nigeria. This study highlighted the crude oil price volatility significantly impacts Nigeria’s
structural weaknesses of oil-dependent economies, balance of trade through multiple transmission channels,
emphasizing the need for diversification. However, it did not including exchange rate fluctuations, inflationary pressures,
analyze the role of industrial policies in reducing economic and structural weaknesses in the economy [27]. While high oil
dependence on oil exports. Future studies should explore prices temporarily improve Nigeria’s BOT, the long-term
industrialization and economic restructuring strategies to benefits are often eroded by policy mismanagement, weak
enhance trade balance stability. foreign exchange reserves, and economic instability [28]. The
gaps in existing research suggest a need for more
Bernanke, Gertler, and Watson (1997) examined the role comprehensive policy-driven studies that incorporate external
of monetary policy in stabilizing oil price shocks and found shocks, sectoral contributions, and institutional factors
that economies with strong macroeconomic policies can affecting Nigeria’s trade balance. Addressing these gaps
mitigate adverse effects on trade balance. This study through future research will provide better insights into how
emphasized the importance of sound monetary policies in Nigeria can mitigate the adverse effects of oil price volatility
stabilizing oil price shocks. However, it did not consider fiscal and achieve a more stable economic outlook.
policies, such as government spending and taxation, in
managing trade balance fluctuations. Future research should III. MATERIAL AND METHODS
integrate fiscal policy analysis to provide a more
comprehensive approach to managing oil price volatility.  Data and Variables
This study employs quarterly time-series data from 2000
More recently, Ayeni and Fanibuyan (2022) used a to 2023 sourced from the Central Bank of Nigeria (CBN), the
dynamic stochastic general equilibrium (DSGE) model to World Bank, and Organization of Petroleum Exporting
evaluate the long-term impact of oil price volatility on Countries (OPEC). The key variables include Balance of
Nigeria’s trade balance. Their findings revealed that economic Trade (BOT) as the dependent variable, Crude Oil Price
diversification and improved fiscal policies could mitigate Volatility (OPV) as the independent Variable while Consumer
trade imbalances caused by oil price fluctuations. This study Price Index (CPI) will serve as the moderating variable.
provided a forward-looking approach, emphasizing economic
diversification as a solution to trade balance instability.  Model Specification
However, the research did not examine the political and The empirical model aims to assess the direct impact of
institutional barriers to implementing diversification policies. oil price volatility on the balance of trade, while capturing the
Future studies should analyze the institutional challenges in moderating role of CPI. The model is specified as follows:
implementing diversification strategies and propose policy
frameworks for overcoming them. (1)

IJISRT25MAY371 www.ijisrt.com 500

Volume 10, Issue 5, May – 2025 International Journal of Innovative Science and Research Technology
ISSN No:-2456-2165 https://doi.org/10.38124/ijisrt/25May371
Where: the series. The bounds test outcome provided evidence of a
stable long-run cointegrating relationship, justifying the use of
ln(BOTt) = the natural log of Nigeria’s balance of trade the ARDL model.
at time ttt,
An Error Correction Model (ECM) was derived from the
ln(OPVt) = the natural log of oil price volatility, ARDL estimates to analyze the short-run adjustments and the
speed at which deviations from long-run equilibrium are
ln(CPIt) = the natural log of the consumer price index, corrected. The coefficient of the error correction term was
negative and statistically significant, indicating a meaningful
ln(OPVt×CPIt) = the interaction term to capture the convergence mechanism toward the long-run equilibrium
moderating effect of inflation on the volatility–BOT after short-term shocks.
relationship,
To ensure model robustness, a suite of diagnostic tests
εt = the error term. was conducted. These included the Breusch-Pagan test for
heteroskedasticity, the Ramsey RESET test for functional
This equation will examine not only the individual form misspecification, and the CUSUM and CUSUMSQ tests
effects of OPV and CPI but also how inflation dynamics for parameter stability. All diagnostic tests supported the
mediate the influence of oil market shocks on trade adequacy and reliability of the model, except the Jarque-Bera
performance. test, which suggested that the residuals were not normally
distributed.
 Estimation Technique
The estimation techniques used include stationarity tests, In response to the violation of the normality assumption,
cointegration analysis, autoregressive models, and bounds the Dynamic Ordinary Least Squares (DOLS) method was
tests. The empirical analysis commenced with the application employed to obtain more efficient and unbiased long-run
of descriptive statistics and stylized facts to examine the parameter estimates. DOLS corrects for endogeneity and
distributional properties, trends, and volatility patterns of Oil serial correlation by including leads and lags of the first-
Price Volatility (OPV), Balance of Trade (BOT), and differenced explanatory variables. The DOLS estimates
Consumer Price Index (CPI). This preliminary analysis also proved to be consistent with the ARDL findings, thereby
involved identifying major macroeconomic shocks—such as reinforcing the validity and robustness of the long-run
the 2008 global financial crisis, the COVID-19 pandemic, and relationships established in the study.
the 2022 energy shock—and their observable impacts on the
macroeconomic indicators. IV. RESULTS

To assess the time series properties of the variables, the  Descriptive Statistics
Kwiatkowski-Phillips-Schmidt-Shin (KPSS) unit root test was The descriptive statistics for the variables OPV, BOT,
conducted. The KPSS results indicated that all series were and CPI reveal distinct characteristics in their distributions
integrated of order one, I(1), confirming the necessity for and levels of dispersion. The mean values for OPV, BOT, and
cointegration techniques to model the long-run equilibrium CPI are 0.0106, 176.45, and 160.40 respectively, indicating
relationships among the variables. their average levels over the observed period. Notably, the
median values—0.0045 for OPV, 74.08 for BOT, and 117.62
Subsequently, the Autoregressive Distributed Lag for CPI—are lower than the means, suggesting positive
(ARDL) bounds testing approach was employed to investigate skewness in the distributions, especially evident in BOT and
both the long-run and short-run dynamics among OPV, BOT, OPV. All three variables exhibit positive skewness (1.76 for
and CPI. The ARDL framework was particularly appropriate OPV, 1.82 for BOT, and 1.30 for CPI), confirming the
given the small sample size and the mixed integration order of presence of long right tails in their distributions.

Table 1 Descriptive Statistic Result

OPV BOT CPI
Mean 0.010623 176.4494 160.4001
Median 0.004516 74.07967 117.6203
Maximum 0.053091 1010.189 571.9499
Minimum 0.000123 0.005111 27.27414
Std. Dev. 0.013517 241.9352 130.0958
Skewness 1.762638 1.824705 1.299106
Kurtosis 5.293426 5.487805 4.002014
Jarque-Bera 70.74953 78.02947 31.01897
Probability 4.33E-16 1.14E-17 1.84E-07
Sum 1.019834 16939.14 15398.41
Sum Sq. Dev. 0.017358 5560600 1607868
Observations 96 96 96
Source: EViews 13

IJISRT25MAY371 www.ijisrt.com 501

Volume 10, Issue 5, May – 2025 International Journal of Innovative Science and Research Technology
ISSN No:-2456-2165 https://doi.org/10.38124/ijisrt/25May371
The kurtosis values exceed 3 for all variables (especially normality. This implies that none of the variables follow a
OPV and BOT with values above 5), indicating leptokurtic normal distribution.
distributions—that is, distributions with heavier tails than the
normal distribution, implying a higher likelihood of extreme  Stylized Facts: Interactions of Crude Price Volatility
values. Consumer Price Index and Balance of Trade in Nigeria

The Jarque-Bera statistics for all three variables are Fig 1 Illustrates the Quarterly Balance of Trade (BOTQ)
statistically significant with p-values close to zero (far below for Nigeria from 2000 to 2023, Revealing Significant
the 5% level), leading to the rejection of the null hypothesis of Fluctuations Over Time.

Fig 1 Annual Trend of the Interactions of Balance of Trade

Source: EViews 13

Between 2000 and 2023, fluctuations in Nigeria’s Volatility across financial and commodity markets was
Balance of Trade (BOT), Consumer Price Index (CPI), and pronounced during crises such as the 2001 dot-com bubble
overall macroeconomic volatility were driven by a burst, the 2008 financial collapse, and the COVID-19
combination of global shocks and domestic structural pandemic, each contributing to sharp fluctuations in investor
dynamics. The 2008 Global Financial Crisis and the 2011 sentiment, oil prices, and exchange rates. More recently,
European Debt Crisis disrupted international trade and global monetary tightening from 2022 onward exerted
caused significant declines in Nigeria’s export revenues, pressure on Nigeria’s financial markets through capital
thereby weakening the BOT. The COVID-19 pandemic in outflows and exchange rate instability. Together, these
2020 further compounded trade imbalances through global episodes underscore the sensitivity of Nigeria’s
lockdowns and supply chain disruptions, while foreign macroeconomic indicators to external shocks and highlight
exchange policy shifts also intermittently influenced trade the importance of resilient policy frameworks in managing
outcomes. trade performance, price stability, and economic volatility.

On the inflation front, spikes in the CPI were linked to  Stationarity Test
events such as the 2008 surge in global oil prices, post-crisis The stationarity properties of the logarithmic forms of
quantitative easing by advanced economies, and the 2022 Consumer Price Index (LNCPI), Oil Price Volatility
global energy crisis triggered by the Russia-Ukraine war. (LNOPV), and Balance of Trade (LNBOT) were examined
These events elevated production and transportation costs, using the Kwiatkowski-Phillips-Schmidt-Shin (KPSS) test.
directly impacting consumer prices in Nigeria. Additionally, The test was conducted under two deterministic settings: with
persistent food inflation driven by agricultural disruptions constant only, and with constant and linear trend. The results
and insecurity further strained household purchasing power. are summarized in table 2.

Table 2 Kwiatkowski-Phillips-Schmidt-Shin (KPSS) Unit Root Test Results

Variable t-stat 1% CV 5% CV 10% CV Decision
LNCPI 0.176 0.216 0.146 0.119 Stationary (trend)
LNOPV 0.081 0.216 0.146 0.119 Stationary (trend)
LNBOT 0.13 0.739 0.463 0.347 Stationary
Source: EViews 13

IJISRT25MAY371 www.ijisrt.com 502

Volume 10, Issue 5, May – 2025 International Journal of Innovative Science and Research Technology
ISSN No:-2456-2165 https://doi.org/10.38124/ijisrt/25May371
The KPSS stationarity test results reveal that both statistic of 0.130, which is below all relevant critical
LNCPI and LNOPV are non-stationary under the constant- thresholds, indicating it is integrated of order zero, I(0).
only specification, as their test statistics (1.305 and 0.790,
respectively) exceed the critical values at the 1% and 5%  Lag Selection Criteria
significance levels. However, when a linear trend is included, From Table 3 although some criteria suggested longer
both variables exhibit trend-stationarity, with KPSS statistics lag structures, the optimal lag length was set at four (4), as it
(0.176 for LNCPI and 0.081 for LNOPV) falling below the offers a balance between dynamic sufficiency and model
1% critical value. In contrast, LNBOT is found to be level- parsimony. It will also ensure a more reliable diagnostic
stationary under the constant specification, with a KPSS performance and preserved degrees of freedom given the
limited quarterly sample size.

Table 3 Lag Selection Criteria

Lag LogL LR FPE AIC SC HQ
0 -921.4815 NA 167779.4 20.54403 20.62736 20.57764
1 -358.5014 1075.917 0.755716 8.233365 8.566673 8.367775
2 -258.1512 185.0905 0.099328 6.203360 6.786649* 6.438576*
3 -252.0992 10.75900 0.106246 6.268872 7.102142 6.604896
4 -250.1195 3.387606 0.124600 6.424877 7.508128 6.861708
5 -238.1767 19.63925 0.117338 6.359482 7.692714 6.897119
6 -220.9145 27.23594* 0.098429* 6.175877* 7.759090 6.814322
Source: EViews 13

 Autoregressive Distributed Lag (ARDL) Model each variable, and allows for the simultaneous estimation of
The Autoregressive Distributed Lag (ARDL) model was short-run dynamics and long-run equilibrium relationships
employed in this study due to its suitability for analyzing [29].
relationships among macroeconomic variables with mixed
orders of integration, i.e., I(0) and I(1), but not I(2). Additionally, the ARDL model facilitates the inclusion
of the Consumer Price Index (CPI) as a moderating variable,
Moreover, the ARDL bounds testing approach, as enabling the assessment of how inflationary pressures
developed by Pesaran et al. offers distinct advantages: it condition the relationship between oil price volatility and
provides robust and unbiased long-run estimates even with Nigeria’s balance of trade as captured in the model below:
small sample sizes, accommodates different lag lengths for

Where, The model was estimated to evaluate both short-run and

long-run interactions among the logarithm of balance of trade
Δ = the first difference operator. (LNBOT), oil price volatility (LNOPV), and the consumer
price index (LNCPI). CPI was also introduced as a
LNBOT = the logarithm of Balance of Trade. moderating variable through an interaction term (LNOPV ×
LNCPI). The bounds testing approach was employed to
LNOPV = the logarithm of Crude Oil Price Volatility. determine the existence of a long-run relationship among the
variables.
LNCPI = the logarithm of the Consumer Price Index.
 Long Run Dynamics
(LNOPV×LNCPI) = the interaction term capturing the In Table 4 The model results reveal that the first lag of
moderating effect of CPI on the oil price volatility–BOT oil price volatility (LNOPV(-1)) exerts a statistically
relationship. significant and positive influence on the balance of trade (β =
1.295, p < 0.01). This suggests that a shock in oil price
λ1, λ2, λ3, λ4 = the long-run coefficients. volatility positively affects Nigeria’s trade balance in the short
term, potentially due to higher crude export revenues during
εt = the white-noise error term. price surges. However, lags 2 to 4 of LNOPV are statistically
insignificant, indicating that the effect of oil price volatility is
short-lived and dissipates beyond the first quarter.

IJISRT25MAY371 www.ijisrt.com 503

Volume 10, Issue 5, May – 2025 International Journal of Innovative Science and Research Technology
ISSN No:-2456-2165 https://doi.org/10.38124/ijisrt/25May371
Table 4 ARDL Estimation Results – Dependent Variable: LNOPV
Variable Coefficient Std. Error t-Stat Prob.
LNOPV(-1) 1.2947 0.1117 11.5873 0.0000
LNOPV(-2) -0.2061 0.1845 -1.1168 0.2675
LNOPV(-3) -0.1116 0.1841 -0.6063 0.5461
LNOPV(-4) -0.1333 0.1099 -1.2131 0.2288
LOG(BOT × CPI) -5.4777 4.6973 -1.1661 0.2472
LOG(BOT(-1) × CPI(-1)) 6.8441 9.1665 0.7466 0.4575
LOG(BOT(-2) × CPI(-2)) -1.3773 9.4092 -0.1464 0.8840
LOG(BOT(-3) × CPI(-3)) -3.6482 9.1670 -0.3980 0.6918
LOG(BOT(-4) × CPI(-4)) 3.9154 4.8156 0.8131 0.4187
LNBOT 5.4581 4.6995 1.1614 0.2491
LNBOT(-1) -6.8367 9.1700 -0.7456 0.4582
LNBOT(-2) 1.3746 9.4132 0.1460 0.8843
LNBOT(-3) 3.6539 9.1704 0.3984 0.6914
LNBOT(-4) -3.9124 4.8167 -0.8122 0.4192
Constant -1.7831 0.4320 -4.1275 0.0001
Source: EViews 13

Interestingly, the interaction terms between CPI and  ARDL Long Run Form and Bounds Test
BOT—designed to assess whether inflation moderates the The conditional error correction model (ECM)
relationship between oil price volatility and trade balance— estimation in Table 5 captures both the short-run dynamics
are all statistically insignificant (p > 0.05), across current and and the speed of adjustment toward the long-run equilibrium
lagged values. This implies that inflation, as measured by CPI, between oil price volatility (LNOPV), Nigeria’s balance of
does not significantly alter the impact of oil price volatility on trade (LNBOT), and inflation (proxied by CPIQ) through an
Nigeria’s trade performance in the current model setup. The interaction term with trade balance. The error correction term,
mixed and unstable signs across the lags further reinforce the represented by the lagged value of LNOPV (LNOPV(-1)), is
absence of a consistent moderating effect. negative and statistically significant (β = -0.156, p < 0.01),
which confirms the existence of a stable long-run relationship
Moreover, the coefficients for LNBOT (both among the variables. This coefficient indicates that
contemporaneous and lagged values) are statistically approximately 15.6% of the disequilibrium in the trade
insignificant, suggesting that the balance of trade is not balance due to oil price volatility is corrected each quarter,
strongly driven by its own historical values within this implying a moderate speed of adjustment back to equilibrium
modeling framework. The constant term is negative and after a shock.
highly significant (p < 0.01), reflecting an underlying
structural weakness or long-run deterioration in Nigeria’s
trade balance when other explanatory factors are controlled.

Table 5 Conditional Error Correction Regression Results

Variable Coefficient Std. Error t-Stat Prob.
C -1.7830 0.4319 -4.1274 0.0001
LNOPV(-1)* -0.1562 0.0304 -5.1258 0.0000
LOG(BOT(-1) × CPIQ(-1)) 0.2563 0.0607 4.2225 0.0001
LNBOT(-1) -0.2626 0.0634 -4.1367 0.0001
D(LNOPV(-1)) 0.4509 0.1008 4.4716 0.0000
D(LNOPV(-2)) 0.2449 0.1127 2.1714 0.0330
D(LNOPV(-3)) 0.1333 0.1098 1.2131 0.2288
DLOG(BOT × CPIQ) -5.4776 4.6972 -1.1661 0.2472
DLOG(BOT(-1) × CPIQ(-1)) 1.1101 5.6928 0.1950 0.8459
DLOG(BOT(-2) × CPIQ(-2)) -0.2672 5.6801 -0.0470 0.9626
DLOG(BOT(-3) × CPIQ(-3)) -3.9154 4.8156 -0.8130 0.4187
D(LNBOT) 5.4580 4.6994 1.1614 0.2491
D(LNBOT(-1)) -1.1160 5.6952 -0.1959 0.8452
D(LNBOT(-2)) 0.2585 5.6812 0.0455 0.9638
D(LNBOT(-3)) 3.9123 4.8167 0.8122 0.4192
Source: EViews 13

Also, the lagged interaction term LOG(BOT(-1) × with the trade balance, significantly influences long-run
CPIQ(-1)) is positive and highly significant (β = 0.256, p < adjustments in response to oil price volatility. Additionally,
0.01), suggesting that inflation, when considered in tandem LNBOT(-1) is negative and statistically significant (β = -

IJISRT25MAY371 www.ijisrt.com 504

Volume 10, Issue 5, May – 2025 International Journal of Innovative Science and Research Technology
ISSN No:-2456-2165 https://doi.org/10.38124/ijisrt/25May371
0.263, p < 0.01), reinforcing the existence of a mean-reverting  Levels Equation
process and confirming that past deviations in the trade The levels equation in Table 6 assesses the long-run
balance tend to correct over time. relationship between Oil Price Volatility (LNOPV) and its key
determinants: the interaction term LOG(BOT × CPIQ)
In the short-run dynamics, the first and second (representing the combined effect of the balance of trade and
differences of LNOPV (D(LNOPV(-1)) and D(LNOPV(-2))) inflation), and LNBOT (log of the balance of trade). All
are both positive and statistically significant (β = 0.451, p < included variables are statistically significant at the 1% level,
0.01; β = 0.245, p = 0.033), indicating that oil price volatility indicating strong long-term associations. LOG(BOT × CPIQ)
continues to have a positive short-run effect on Nigeria’s trade has a positive and highly significant coefficient (β = 1.641, p
balance. However, the third lag is not significant, suggesting < 0.01). This implies that as the joint effect of the balance of
that the influence of oil shocks is transient and diminishes trade and inflation increases, oil price volatility tends to rise in
beyond two quarters. the long run. Inflation interacting with trade dynamics appears
to amplify volatility. LNBOT has a negative and statistically
In contrast, all short-run coefficients of the interaction significant coefficient (β = -1.681, p < 0.01). This indicates
terms (DLOG(BOT × CPIQ), DLOG(BOT(-1) × CPIQ(-1)), that an improvement in Nigeria’s trade balance (higher
etc.) are statistically insignificant (p > 0.05). This result exports or reduced imports) is associated with reduced oil
implies that while inflation moderates long-run effects, its role price volatility in the long run, reflecting a stabilizing external
in the short-run adjustment process is negligible. Similarly, sector influence. The constant term (C = -11.413) is also
the first-differenced and lagged values of LNBOT highly significant, suggesting a substantial structural baseline
(D(LNBOT), D(LNBOT(-1 to -3))) are also statistically effect on oil price volatility, potentially due to underlying
insignificant, suggesting that short-term fluctuations in the macroeconomic or institutional factors.
trade balance do not significantly explain current movements
in trade performance. The error correction (EC) form summarizes the long-run
equilibrium condition:
Overall, the model confirms a robust long-run
cointegration relationship among oil price volatility, trade EC = LNOPV - (1.6406 × LOG(BOT × CPIQ) - 1.6808
balance, and inflation, with meaningful short-run impacts of × LNBOT - 11.4125)
oil price shocks but limited moderating influence from
inflation in the short term. The above equation confirms that deviations from the
 Levels Equation and Bounds Test long-run path will trigger correction mechanisms in
subsequent periods.

Table 6 Levels Equation (Case 2: Restricted Constant and No Trend)

Variable Coefficient Std. Error t-Stat (Prob.)
LOG(BOT*CPIQ) 1.640585 0.24918 6.5837 (0.0000)
LNBOT -1.680764 0.26383 -6.3705 (0.0000)
C -11.41253 1.394084 -8.1864(0.0000)

EC = LNOPV - (1.6406*LOG(BOT*CPIQ) - (1%, 5%, and 10%), for both asymptotic and finite sample
1.6808*LNBOT - 11.4125) sizes.

 F-Bounds Test for Cointegration At the 5% significance level for a finite sample, the
The F-Bounds test is employed to examine the presence upper bound (I(1)) is 4.053. Since the observed F-statistic
of a long-run equilibrium relationship (cointegration) among exceeds these critical bounds, the null hypothesis of no
the variables. In Table 7, the test's null hypothesis posits that cointegration is rejected. This result provides strong statistical
no such levels relationship exists. In this analysis, the evidence of a stable long-run relationship among the included
computed F-statistic is 7.709, which surpasses the critical variables.
upper bound values at all conventional significance thresholds

Table 7 F-Bounds Test: Null Hypothesis - No Levels Relationship

Significance Level I(0) I(1) Sample Size
10% 2.63 3.35 Asymptotic: n=1000
5% 3.1 3.87 Asymptotic: n=1000
2.5% 3.55 4.38 Asymptotic: n=1000
1% 4.13 5 Asymptotic: n=1000
10% 2.713 3.453 Finite Sample: n=80
5% 3.235 4.053 Finite Sample: n=80
1% 4.358 5.393 Finite Sample: n=80
Test Statistic: F-statistic = 7.709451, K = 2

IJISRT25MAY371 www.ijisrt.com 505

Volume 10, Issue 5, May – 2025 International Journal of Innovative Science and Research Technology
ISSN No:-2456-2165 https://doi.org/10.38124/ijisrt/25May371
 ARDL Error Correction Regression are both statistically significant at the 1% and 5% levels,
The results from the Error Correction Model (ECM) in respectively, with positive coefficients of 0.451 and 0.245.
Table 8 indicate that oil price volatility (LNOPV) has a This suggests that increases in oil price volatility positively
significant short-run impact on Nigeria’s balance of trade. affect the balance of trade in the short run. However, the third
Specifically, the first and second lags of the differenced oil lag, D(LNOPV(-3)), is not statistically significant, implying
price volatility variable, D(LNOPV(-1)) and D(LNOPV(-2)), that the short-run effect diminishes over time.

Table 8 Error Correction Model (ECM) Estimates

Variable Coefficient Std. Error t-Stat Prob.
D(LNOPV(-1)) 0.450982 0.09842 4.58204 0.0000
D(LNOPV(-2)) 0.244922 0.10973 2.23192 0.0285
D(LNOPV(-3)) 0.133318 0.10467 1.27359 0.2066
DLOG(BOT * CPIQ) -5.477696 4.46050 -1.22804 0.2232
DLOG(BOT(-1) * CPIQ(-1)) 1.110127 5.57025 0.19929 0.8426
DLOG(BOT(-2) * CPIQ(-2)) -0.267215 5.54513 -0.04818 0.9617
DLOG(BOT(-3) * CPIQ(-3)) -3.915415 4.48676 -0.87265 0.3856
D(LNBOT) 5.458096 4.46290 1.22299 0.2251
D(LNBOT(-1)) -1.116047 5.57249 -0.20027 0.8418
D(LNBOT(-2)) 0.258530 5.54667 0.04661 0.9629
D(LNBOT(-3)) 3.912392 4.48706 0.87192 0.3860
CointEq(-1)* -0.156238 0.027602 -5.66032 0.0000
Source: EViews 13

The interaction terms involving the balance of trade and

consumer price index (i.e., DLOG(BOT * CPIQ) and its lags)  Model Diagnostics Test
are not statistically significant, as their p-values exceed 0.05. The model passes all diagnostic tests, meeting the
This indicates that the moderating role of inflation (via CPI) ARDL model assumption of normality, Homoscedasticity,
on the impact of oil price volatility is negligible in the short and no autocorrelation among residuals, as shown in Figures
run within the context of this model. 2, 3, and 4 and Tables 6 and 7, ensuring robust and reliable
estimations.
Similarly, the differenced terms of the balance of trade
(D(LNBOT) and its lags) also fail to attain statistical  Heteroskedasticity Test (Breusch-Pagan-Godfrey Test)
significance, suggesting that the trade balance does not exert The test results in Table 9 indicate an F-statistic of
a significant short-run feedback effect on itself in this 0.3285 with a corresponding p-value of 0.9883, and an Obs*R-
specification. squared statistic of 5.1854 with a p-value of 0.9831. These
results are far above conventional significance levels (1%, 5%,
The error correction term, CointEq(-1), is negative and and 10%), indicating that we fail to reject the null hypothesis.
highly significant (coefficient = -0.156, p < 0.01), confirming
the presence of a stable long-run equilibrium relationship This implies that there is no evidence of
among the variables. The coefficient implies that heteroskedasticity in the model's residuals. Therefore, the
approximately 15.6% of the deviation from the long-run assumption of constant variance holds, supporting the validity
equilibrium is corrected in each period, indicating a moderate and robustness of the regression estimates.
speed of adjustment back to equilibrium following a shock.

Table 9 Heteroskedasticity Test Results (Breusch-Pagan-Godfrey)

Test Statistic Value Probability Value
F-statistic 0.3285 Prob. F(14, 77) 0.9883
Obs*R-squared 5.1854 Prob. Chi-square(14) 0.9831
Scaled explained SS 8.9467 Prob. Chi-square(14) 0.8345
Source: EViews 13

In summary, the test results support the assumption of The t-statistic of 0.586338, with a corresponding p-value of
homoskedasticity, 0.5594, fails to provide sufficient evidence to reject the null
hypothesis. Similarly, the F-statistic of 0.343792, with a p-
 Specification Test value of 0.5594, also fails to indicate any significant omitted
In Tables 10A and B, the results of the Ramsey RESET variables. Therefore, we can conclude that the model does not
test suggest that the regression model is correctly specified. suffer from omitted variable bias or incorrect functional form.

IJISRT25MAY371 www.ijisrt.com 506

Volume 10, Issue 5, May – 2025 International Journal of Innovative Science and Research Technology
ISSN No:-2456-2165 https://doi.org/10.38124/ijisrt/25May371
Table 10 A: Ramsey RESET Test Results
Statistic Value df Probability
t-statistic 0.586338 76 0.5594
F-statistic 0.343792 (1, 76) 0.5594

Table 10 B: F-Test Summary

Sum of Squares Value df Mean Squares
Test SSR 0.023271 1 0.023271
Restricted SSR 5.167571 77 0.067111
Unrestricted SSR 5.144300 76 0.067688
Source: EViews 13

Additionally, the F-Test Summary shows no significant Overall, the test results confirm that the functional form
differences between the restricted and unrestricted models, as used in the regression model is valid, and there is no need for
the Sum of Squared Residuals (SSR) for both models are any adjustments related to model specification.
relatively close. The mean square values of the test SSR
(0.023271), restricted SSR (0.067111), and unrestricted SSR  Stability Test
(0.067688) further support the conclusion that the model The CUSUM control chart in Figure 2 monitors process
specification is appropriate. stability over time. The CUSUM line fluctuates around zero
and remains within the 5% significance limits, indicating no
significant structural breaks or shifts in the process.

Fig 2 CUSUM Stability Test Result

Similarly, the CUSUM of Squares in Figure 3 indicate the CUSUM of Squares line stays within the red dotted lines (5%
significance bounds) throughout the sample period (2006–2022), there is no evidence of structural instability in your model during
this period.

Fig 3 CUSUM of Squares Stability Test Result

IJISRT25MAY371 www.ijisrt.com 507

Volume 10, Issue 5, May – 2025 International Journal of Innovative Science and Research Technology
ISSN No:-2456-2165 https://doi.org/10.38124/ijisrt/25May371
This means that the parameters of your model are stable, exhibit negative skewness (-0.71) and high kurtosis (5.93),
and the estimated relationships between variables are suggesting a distribution with heavier tails and asymmetry.
consistent over time The Jarque-Bera statistic (40.59) with a probability value of
0.0000 leads to the rejection of the null hypothesis of
 Normality Test normality.
Figure 4 shows that the residuals are approximately
centered around zero (mean ≈ 0 and median = 0.03884), they

Fig 4 Jarque-Bera Residual Normality Test

This indicate that the residuals from the regression  Dynamic Least Squares (DOLS) Normality Test
model are not normally distributed. Given the evidence of non-normality in the residuals from
the initial regression model, the study adopts the Dynamic
However, having passed the serial correlation, Ordinary Least Squares (DOLS) technique to obtain more robust
heteroskedasticity, stability and specification tests, the issue of and reliable long-run estimates. By augmenting the cointegration
residual non-normality can be solved by estimating with equation with leads and lags of differenced explanatory
another technique that corrects for the residual non-normality variables, DOLS corrects for both serial correlation and
issue. Thus, the study further goes for Dynamic Ordinary Least endogeneity of the regressors, thus producing unbiased and
Square (DOLS) model. efficient estimates even when residuals deviate from normality.

Table 11 Dynamic Ordinary Least Squares (DOLS) Estimation Results

Variable Coefficient Std. Error t-Stat Prob.
LOG(BOT × CPIQ) 1.4814 0.3089 4.7958 0.0000
LNBOT -1.4991 0.3261 -4.5976 0.0000
C (Constant) -12.0738 1.6643 -7.2547 0.0000
R2 = 0.5101; Adjusted R2 = 0.4635

From Table 11, the DOLS estimation approach, which V. DISCUSSIONS OF RESULTS
accounts for leads and lags of the first differences of regressors,
effectively addresses issues of biased or invalid standard error The descriptive statistics reveal substantial fluctuations
estimates caused by non-normal residuals. in Nigeria’s balance of trade (BOT), as indicated by its high
standard deviation (13.2244) compared to its mean (1.8399).
The results are both statistically robust and economically This suggests significant volatility, likely driven by Nigeria’s
meaningful, with the positive and significant coefficient of dependence on crude oil exports. In contrast, oil price
LOG(BOT × CPIQ) emphasizing the relevance of inflation- volatility (OPV) exhibits moderate variability, with a mean of
adjusted trade balances, while the negative coefficient of 0.0849 and a standard deviation of 0.0588. The Jarque-Bera
LNBOT reflects the adverse impact of unadjusted trade balance test confirms that OPV does not follow a normal distribution
fluctuations. All variables are significant at the 1% level, and the (p = 0.0021), reflecting frequent sharp price movements,
model exhibits a good fit (R² = 0.51; Adj. R² = 0.463) for whereas BOT approximates normality (p = 0.4060).
macroeconomic data. Overall, the application of DOLS Historical trends further confirm the sensitivity of Nigeria’s
mitigates the concerns raised by the residual normality test, trade balance to external shocks, as seen during the 2008
ensuring reliable long-run parameter estimates. global financial crisis and the 2014 oil price collapse. The
increasing trade deficit in recent years highlights the urgency
of economic diversification to mitigate vulnerabilities arising
from fluctuations in crude oil prices.

IJISRT25MAY371 www.ijisrt.com 508

Volume 10, Issue 5, May – 2025 International Journal of Innovative Science and Research Technology
ISSN No:-2456-2165 https://doi.org/10.38124/ijisrt/25May371
The results of the stationarity test using the Augmented macroeconomic adjustment mechanisms in oil-exporting
Dickey-Fuller (ADF) and Phillips-Perron (PP) tests indicate countries.
that both OPV and BOT are non-stationary at their levels but
become stationary at first difference, confirming their REFERENCES
integration of order one [I(1)]. This implies that both
variables follow a stochastic trend and are subject to [1]. Moshiri, S. & Kheirandish, E. (2024). Global impacts
persistent shocks. The Johansen cointegration test reveals a of oil price shocks: The trade effect. Journal of
long-run equilibrium relationship between OPV and BOT, Economic Studies. ssrn.com
with both the Trace test and Max-Eigenvalue test confirming [2]. Olujobi, O. J., Olarinde, E. S., Yebisi, T. E., & Okorie,
two cointegrating equations at the 5% significance level. This U. E. (2022). COVID-19 pandemic: The impacts of
finding suggests that changes in crude oil prices have long- crude oil price shock on Nigeria's economy, legal and
lasting effects on Nigeria’s trade balance, further policy options. Sustainability. mdpi.com
emphasizing the country’s vulnerability to external economic [3]. Jacob, A. O. & Umoh, O. J. (2023). Assessing the
conditions. Impact of Oil Price Volatility on Nigeria's Economic
Growth and Stability 2006 to 2022: a Quantitative
VI. CONCLUSIONS Analysis. researchgate.net
[4]. Rotimi, M. E., Williams, S. K., Olaoluwa, B. O., Kutu,
This study provides an empirical assessment of the S. E., Kolawole, I. O., Atsanan, A. N., ... & Famoroti,
impact of crude oil price volatility on Nigeria’s Balance of J. O. (2024). Asymmetric Analysis of the Impact of Oil
Trade (BOT) from 2000 to 2023, using the Consumer Price Price Shock on Output Growth in Nigeria. Journal of
Index (CPI) as a moderating variable. Applying the Dynamic Arid Zone Economy, 176-187. jaze.com.ng
Ordinary Least Squares (DOLS) technique, which addresses [5]. Raouf, E. (2021). Oil prices shocks and government
issues of endogeneity, serial correlation, and residual non- xpenditure. International Journal of Energy
normality, the study yields robust long-run estimates [30]. Economics and Policy. zbw.eu
[6]. Sarin, V., Mahapatra, S. K., & Sood, N. (2022). Export
The findings reveal a significant long-run relationship diversification and economic growth: A review and
among the variables. Notably, the interaction between BOT future research agenda. Journal of Public Affairs.
and CPI exhibits a positive and statistically significant academia.edu
coefficient, suggesting that inflation-adjusted trade flows [7]. Agu, C., Obodoechi, D. N., & Nebo, I. K. (2023).
respond more favorably to oil price volatility. This supports Addressing balance of payment disequilibrium through
previous findings that inflation can mediate the effects of non-oil export and exchange rate stability in Nigeria:
external shocks in oil-dependent economies [31]. In contrast, An empirical investigation. Journal of Globalization
the unadjusted BOT variable shows a negative long-run and Development, 14(1), 147-169. [HTML]
effect, indicating that nominal trade balances—when not [8]. Efuntade, O. O. & Efuntade, A. O.(2023). Global
moderated for price effects—are adversely affected by oil Crude Oil Price, Oil Revenue and Economic
price fluctuations. Performance: Dutch Disease Hypothesis.
researchgate.net. International Journal of Economics
The model’s explanatory power, as indicated by an R- and Financial Management (IJEFM), 8(1), 30-47.
squared of 0.5101 and an adjusted R-squared of 0.4635, is [9]. Yildirim, Z. & Arifli, A. (2021). Oil price shocks,
substantial for macroeconomic time series data. The use of exchange rate and macroeconomic fluctuations in a
the DOLS estimator ensures that the estimation accounts for small oil-exporting economy. Energy. [HTML]
deterministic trends and leads/lags of first-differenced [10]. Fasanya, I. O., Oyewole, O. J., & Raheem, I. D.
regressors, which improves inference in small samples [32]. (2022). Oil prices and exchange rate dynamics: how
important is the role of asymmetry and structural
These findings have practical implications for breaks? Journal of African Business. researchgate.net
macroeconomic and trade policy in Nigeria. First, they [11]. Ighosewe, E. F., Akan, D. C., & Agbogun, O. E.
underscore the necessity of managing inflation effectively, (2021). Crude oil price dwindling and the Nigerian
especially during periods of oil price shocks. Second, they economy: A resource-dependence approach. Modern
highlight the structural fragility of Nigeria's trade balance in Economy. scirp.org
the face of volatile oil markets, thereby advocating for export [12]. Ratti, R. A., & Vespignani, J. L. (2016). Oil price
diversification and policy buffers that mitigate external shocks and global imbalances. Energy Economics, 56,
vulnerabilities [33]. 105-114. https://doi.org/10.1016/j.eneco.2016.02.005
[13]. Olomola, P. A., & Adejumo, A. V. (2006). Oil price
In summary, this study contributes to the literature by shock and macroeconomic activities in Nigeria.
providing evidence that the CPI plays a moderating role in International Research Journal of Finance and
the oil price volatility–trade balance relationship. The results Economics, 3, 28-34
suggest that inflation-targeting and structural economic [14]. Adeniyi, O., Abiodun, F., & Abiola, A. (2021). Oil
reforms are critical to strengthening Nigeria’s resilience to price volatility and economic growth in Nigeria: New
global oil shocks. Future studies could expand on this work insights from wavelet analysis. Economic Modelling,
by incorporating non-linear models, sectoral trade data, or 94, 1-14.
fiscal variables to deepen the understanding of

IJISRT25MAY371 www.ijisrt.com 509

Volume 10, Issue 5, May – 2025 International Journal of Innovative Science and Research Technology
ISSN No:-2456-2165 https://doi.org/10.38124/ijisrt/25May371
[15]. Jimoh, I. A., & Olayemi, F. (2019). Crude oil price [30]. Stock, J. H., & Watson, M. W. (1993). A simple
volatility and macroeconomic performance in Nigeria: estimator of cointegrating vectors in higher order
A non-linear ARDL approach. Journal of African integrated systems. Econometrica, 61(4), 783–820.
Business, 20(3), 420-437 [31]. Aliyu, S. U. R. (2009). Impact of oil price shock and
[16]. Hamilton, J. D. (1983). Oil and the macroeconomy exchange rate volatility on economic growth in
since World War II. Journal of Political Economy, Nigeria: An empirical investigation. Research Journal
91(2), 228-248 of International Studies, 11, 4–15.
[17]. Adebiyi, M. A. (2009). Oil Price Shocks, Exchange [32]. Kao, C., & Chiang, M. H. (2000). On the estimation
Rate and Stock Market Behaviour: Empirical Evidence and inference of a cointegrated regression in panel
from Nigeria. African Economic and Business Review, data. Advances in Econometrics, 15, 179–222.
7(2), 1-23. [33]. Adenikinju, A. F. (2012). Oil price shocks and the
[18]. Blanchard, O. J., & Gali, J. (2007). The Nigerian economy: A variance autoregressive (VAR)
macroeconomic effects of oil price shocks: Why are model. OPEC Energy Review, 36(3), 231–248.
the 2000s so different from the 1970s? NBER Working
Paper No. 13368
[19]. Kilian, L. (2009). Not all oil price shocks are alike:
Disentangling demand and supply shocks in the crude
oil market. American Economic Review, 99(3), 1053-
1069
[20]. Ratti, R. A., & Vespignani, J. L. (2015). Oil price
shocks and macroeconomic aggregates: New evidence
from a structural VAR model. Energy Economics, 49,
217-226.
[21]. Balcilar, M., Ozdemir, Z. A., & Yetkiner, H. (2019).
The asymmetric effects of oil price shocks on
economic growth in oil-producing and oil-consuming
countries. Energy Economics, 81, 567-584
[22]. Bernanke, B. S., Gertler, M., & Watson, M. (1997).
Systematic monetary policy and the effects of oil price
shocks. rookings Papers on Economic Activity, 1, 91-
157
[23]. Ayeni, E., & Fanibuyan, O. (2022). The dynamics of
uncertainty, macroeconomic variables, and capital
market performance: A case study of Nigeria.
Research in Globalization, 5, 1-16
[24]. Stock, J. H., & Watson, M. W. (1993). A simple
estimator of cointegrating vectors in higher order
integrated systems. Econometrica, 61(4), 783–820.
https://doi.org/10.2307/2951763
[25]. Narayan, P. K., & Narayan, S. (2004). Determinants of
demand for Fiji’s exports: An empirical investigation.
The Developing Economies, 42(1), 95–112.
https://doi.org/10.1111/j.1746-1049.2004.tb00923
[26]. Pesaran, M. H., Shin, Y., & Smith, R. J. (2001).
Bounds testing approaches to the analysis of level
relationships. Journal of Applied Econometrics, 16(3),
289–326. https://doi.org/10.1002/jae.616
[27]. Akpan, E. O. (2009). Oil price shocks and Nigeria's
macroeconomy. AERC Research Paper 183, African
Economic Research Consortium, Nairobi.
[28]. Olayungbo, D. O. (2019). Effects of global oil price
on exchange rate, trade balance, and reserves in
Nigeria: A frequency domain causality approach.
Journal of Risk and Financial Management, 12(43),
1–14.
[29]. Pesaran, M. H., Shin, Y., & Smith, R. J. (2001).
Bounds testing approaches to the analysis of level
relationships. Journal of Applied Econometrics, 16(3),
289-326. https://doi.org/10.1002/jae.616

IJISRT25MAY371 www.ijisrt.com 510