Title: Domestic fuel price and the Nigerian macroeconomy

Authors: Philip Ifeakachukwu Nwosa

Addresses: Department of Accounting, Economics and Finance, College of Management Sciences, Bells University of Technology, P.M.B. 1015, Ogun State, Ota, Nigeria

Abstract: This study examined empirically a one-to-one nexus between domestic fuel price and various macroeconomic variables in Nigeria for the period spanning 1986 to 2011. The study adopted both a vector auto-regressive (VAR) and a vector error correction (VEC) models for appropriate analysis. For pairs of variables that are integrated of the same order but not co-integrated, the VAR model revealed that a unidirectional causation exist from domestic fuel price to short term interest rate while for the pair of variables that are integrated of the same order and are co-integrated the VEC model revealed the existence of causality from domestic fuel price to inflation rate in the long run and in the short run. The study recommended that serious caution should be taking by the government on domestic fuel price increase especially in an attempt to remove fuel subsidy and deregulate the downstream sector of the oil industry.

Keywords: domestic fuel prices; macroeconomic variables; vector error correction; VEC; vector auto-regressive; VAR; causality; Nigeria; fuel subsidies; deregulation; oil industry.

DOI: 10.1504/AJESD.2012.051560

African Journal of Economic and Sustainable Development, 2012 Vol.1 No.4, pp.353 - 365

Published online: 31 Jul 2014 *

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