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Effects of Crude Oil Price and Exchange Rate on Education Price Index in Nigeria

Dennis Brown EWUBARE, Sonny Nwonodi AMADI, Sancho Nwobuisi CHUKWU, Victor Oyaretor EBOHOIN

Abstract

This study determined the effects of oil price and exchange rate on education price index in Nigeria from 2001Q1 to 2023Q4. Crude oil price-real exchange rate interaction, crude oil price and real exchange rate are the selected indicators of oil price and exchange rate. Theoretically, the study leveraged on the Asymmetric Price Transmission (APT) Theory and Monetarist Theory of Inflation. Data were sourced from the Central Bank of Nigeria (CBN) statistical bulletin, World Development Indicators (WDI) of the World Bank and International Energy Agency. The descriptive statistics test, the pre-diagnostic analyses of Augmented Dickey-Fuller stationarity, the correlation matrix and the bounds cointegration were conducted, the Autoregressive Distributed Lag (ARDL) model is applied for the model estimation while Ramsey Reset, serial correlation, heteroscedasticity, normality and CUSUM stability post-diagnostic tests were conducted to confirm if the model’s analyses results are acceptable for policy. The empirical analyses of the study indicated that the crude oil price and real exchange rate interaction, and the real exchange rate indicated significant positive effects on education price index while the crude oil price exerted significant negative effects on education price index. Therefore, the study concluded that oil price and exchange rate have exerted significant exacerbating influence on education price index in Nigeria over the sampled period. The researcher therefore recommended market friendly interest rate adjustments to counteract inflationary pressures arising from real exchange rate fluctuations, which should be complemented by effective management of foreign reserves to stabilize the currency. The study also strongly recommended economic diversification, to reduce the economy’s vulnerability to crude oil price shocks.

Keywords

Oil PriceExchange RateInteractionNigeriaARDL

References

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