Petroleum Product Pricing and Inflation in Nigeria: An Autoregressive Distributive Lag (ARDL) Approach
Abstract
This study examined the effect of petroleum product pricing on inflation in Nigeria from 1990 to 2023. The study proxy petroleum product pricing by premium motor spirit price, household kerosene price and automotive gas oil price while inflation was measured by inflation rate. The study made use of annual time series data and the data were sourced mainly from Central Bank of Nigeria (CBN) statistical bulletin, World Bank Commodity Price Data and National Bureau of Statistics (NBS) report. The major techniques of data analysis adopted include: Augmented Dickey-Fuller (ADF) approach, bounds cointegration test and Autoregressive Distributive Lag (ARDL) approach. The findings of the showed that premium motor spirit price and household kerosene price have positive and significant effect on inflation rate in Nigeria while automotive gas oil price has a positive and non-significant effect on inflation rate in Nigeria. The study therefore concluded that petroleum product pricing contributes positively to inflation in Nigeria. It was recommended among others that Nigerian government should restructure fuel subsidies to reduce the fiscal burden while implementing targeted assistance programs to shield the most vulnerable households from sudden price hikes in premium motor spirit price, household kerosene price and automotive gas oil price. Through direct cash transfers, fuel vouchers, or subsidized transportation services for low-income families, the government can mitigate the impact of fuel price changes on household expenses and inflationary pressures.
