Oil Export Revenue and Exchange Rate: AN Investigation of Asymmetric Effects on Households' Consumption Expenditure in Nigeria

Oil Export Revenue and Exchange Rate: AN Investigation of Asymmetric Effects on Households' Consumption Expenditure in Nigeria

Author by Dr. Andy Okwu

Journal/Publisher: Babcock Journal Of Economics

Volume/Edition: 7

Language: English

Pages: 13 - 28

Abstract

Oil export constitutes the major source of external revenue, and exchange rate determines the naira amount of the revenue and, thus, is perceived to affect aggregate consumption expenditure in Nigeria. This employed non-linear ARDL approach to examine the short-run and long-run asymmetric of oil export earnings and exchange rate on aggregate consumption in Nigeria from 1981 to 2016. Variables of interest in the paper were oil export earnings (OEE), consumer price index (CPI) as proxy for inflation, nominal effective exchange rate (NEER) and final consumption expenditure (FCE). Based on bound testing, long-run cointegration among the variables was established. Furthermore, Wald test was used to establish the presence od asymmetry between FCE abd OEE and NEER. Results from the study indicated that in the short-run, negative shocks to exchange rate exerted significant positive effect on consumption, and negative effect at a higher lag, while positive shocks to exchange rate exerted negative effetc on consumption. Still in the short-run, negative shocks until the first lag exerted a negative and significant effect on consumption; at lag two, the effect become positive but insignificant. In the long-run, positive and negative to both exchange rate and oil export earnings exerted positive and significant effect on consumption. 


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