Assessing the Impact of the COVID-19 Pandemic on Nigeria's Economic Performance Using VAR Model: Evidence from Key Economic Indicators

Aim: This study aimed to model and analyze the impact of the COVID-19 pandemic on economic growth and stability in Nigeria using the Vector Autoregressive (VAR) model. The study specifically focused on understanding the short-term interactions among confirmed COVID-19 cases, the Nigerian Stock Exchange All Shares Index (ASI), Nigerian crude oil prices (OP), and the Nigerian Naira to US Dollar exchange rate (NGNUSD). Study Design: A comparative analysis approach was employed using VAR and ARDL models to examine the interconnectedness and dynamic relationships between COVID-19 health indicators and key economic variables. The study covered a post-pandemic period in Nigeria, assessing the short-term and potential long-term impacts. Methodology: Daily time series data for the four variables were collected from May 26, 2020, to May 25, 2022, comprising 501 observations. A VAR(8) model was developed to capture the short-run dynamics,. Diagnostic tests including stability tests, Granger Causality/Block Exogeneity Wald Tests, and variance decomposition were conducted to validate the model and interpret the results. Results: The VAR(8) model results indicated the presence of only short-run relationships among the four variables, as confirmed by the absence of cointegration. Stability test results confirmed the reliability of the model, and Granger causality tests revealed significant causal effects between confirmed COVID-19 cases and key economic indicators such as ASI, OP, and NGNUSD. Furthermore, variance decomposition highlighted robust forecasting capabilities of the VAR model, demonstrating the immediate impacts of the pandemic on economic dynamics in Nigeria. Conclusion: The study concluded that the COVID-19 pandemic had significant short-run effects on economic growth and stability in Nigeria. The VAR model proved effective in capturing these short-term dynamics, highlighting the importance of understanding the interplay between health crises and economic variables for informed policymaking. The findings emphasized the need for strategic interventions to stabilize the economy during health-related external shocks.