Crude oil price and exchange rate: An econometric analysis on commodity price in Nigeria

This study empirically examined the effects of crude oil price and exchange rate on commodity price in Nigeria from 1990 to 2022 employing Autoregressive Distributed Lag (ARDL) testing procedures. Commodity price index is utilised to proxy commodity price while the adopted independent variables are crude oil price and exchange rate, with government capital expenditure and interest rate employed as control variables. The study utilized time series data sourced from Central Bank of Nigeria (CBN) statistical bulletin and World Development Indicators (WDIs) of the World Bank. Diagnosis for unit roots in the time series data were conducted employing the Augmented Dickey Fuller method and the upshots suggested mixture of I(0) order and I(1) order of integration, with the Bounds cointegration estimate showing long-run relationship. The ARDL upshots showed that crude oil price contributed long-run direct and substantial effects on commodity price index in Nigeria but negatively in the short-run while rise in official exchange rate positively and substantially contributed to long-run and short-run CPI effects. The study therefore concluded that upsurge in crude oil price and exchange rate are major determinants of commodity price level in Nigeria. It is thus recommended among others that Nigeria's heavy earnings from crude oil exports which is vulnerable to fluctuations in global oil prices should be supported with strengthening the non-oil sector to stabilize commodity prices in the long-run. Also, the CBN should ensure real non-oil sector friendly revaluation of the Naira relative to the US Dollar as this will strengthen the domestic economy and curb future inflationary pressures. Keywords: Crude Oil Price Per Barrel, Official Exchange Rate, Commodity Price Index, ARDL Testing Procedure and Nigeria.