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| Title: | Fueling Inflation: The Impact of Energy Prices on Price Stability in Nigeria |
| Author(s): | OLISE O. T., EWUBARE D. B., AMADI S.N. & CHUKWU S.N. |
| Abstract: | This paper investigates the impact of energy prices on inflation in Nigeria. The study analyzed the influence of the log of international crude oil and natural gas prices, as well as the log domestic prices of Premium Motor Spirit (PMS) and Automotive Gas Oil (AGO), on the log of Nigeria’s inflation rate. Secondary data from the National Bureau of Statistics (NBS), CBN statistical bulletin and the World Bank from 1990 to 2024 were utilized. The study employed the Autoregressive Distributed Lag (ARDL) estimation technique to model to identify both short-run and long-run effects. It was found that in the short run lnOP, lnNGP and lnAGO had significant influence on lnINF at 5 percent level of significance. However, they had no long run impact. On the hand, lnPMS exerted no significant impact on lnINF in the short or long run. Post estimation tests using Serial Correlation LM test, Heteroskedasticity Test, and Ramsey RESET test, and the Cumulative Sum of Squares (CUSUMSQ) Recursive Plots showed that the model, at 5 percent level, had no problems of serial correlation, heteroskedasticity, or misspecification. It also had structural stability. The study concludes that energy prices significantly influence Nigeria's inflation in the short term, primarily through cost-push effects while having no long-run impact. The study recommends that Nigeria should adopt policies that promote transparent stable energy pricing mechanisms, targeted subsidies, and diversification to reduce inflationary vulnerabilities tied to fossil fuel pricing. |
| Keywords: | Energy prices, inflation, ARDL, crude oil prices, natural gas prices, Premium Motor Spiri |
| Journal: | Journal of World Economics and Financial Report Vol 2 No 1 |
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