Impact of Crude Oil Volatility on Stock Market Performance in Nigeria, over Two Decades

Alimi Tomigbekele Emmanuel¹ and Joseph E. Ekpenyong^2,

¹Department of Economics, University of Benin, Benin City, Nigeria

²Department of Petroleum Marketing and Business Studies, Petroleum Training Institute, Effurun, Nigeria

Cite this paper:
Alimi Tomigbekele Emmanuel and Joseph E. Ekpenyong. Impact of Crude Oil Volatility on Stock Market Performance in Nigeria, over Two Decades. International Journal of Econometrics and Financial Management. 2021; 9(1):23-33. doi: 10.12691/ijefm-9-1-3

Abstract

Since the discovery of crude oil in Nigeria, the Nigerian economy has moved its productive basis from agriculture to crude oil, making it a mono-product economy that is heavily influenced by crude oil price changes, particularly in relation to stock market performance. As a result, using the Fully Modified Ordinary Least Squares (FMOLS) approach and Error Correction Model (ECM). This work empirically explores the nexus between crude oil price variations and stock market performance in Nigeria for the period 1981-2019. The impact of the exchange rate, inflation rate, and interest rate on the performance of the Nigerian stock market is also examined in the study. According to the empirical findings, both crude oil price variations and the exchange rate have a beneficial impact on Nigerian stock market performance, whilst inflation and interest rates have a negative impact. As a result, this study recommends, among other things, that Nigeria's economy be stimulated and diversified in order to reduce the country's overdependence on crude oil and thus mitigate the negative impact of such external shocks on the domestic economy, and that macroeconomic policies be formulated and properly implemented in order to achieve macroeconomic objectives such as exchange rate stability, price stability, interest rate regime stability, and economic growth.

Keywords:
oil price economy price inflation Nigeria

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