OIL PRICE AND EXCHANGE RATE VOLATILITY IN NIGERIA

Format: MS WORD | Chapter: 1-5 | Pages: 77 | 1113 Users found this project useful | Price NGN5,000

OIL PRICE AND EXCHANGE RATE VOLATILITY IN NIGERIA

ABSTRACT

Nigeria is a mono-product economy, where the main export commodity is crude oil, changes in oil prices has implications for the Nigerian economy and, in particular, exchange rate movements. The latter is mostly important due to the double dilemma of being an oil exporting and oil-importing country, a situation that emerged in the last decade. The study examined the effects of oil price, external reserves and interest rate on exchange rate volatility in Nigeria using yearly data from the year 1970 to 2011. The theoretical framework of this study is based on Generalized Autoregressive Conditional Heteroskedasity modeled by Tim Bolerslev (1986) and Exponential General Autoregressive Conditional heteroskedastic modeled by Daniel Nelson (1991). The models are used to estimate the relationship between oil price changes and exchange rate. Relevant descriptive and econometric analyses were employed. The econometric tests used include the unit root tests, Johansen co-integration technique and the Vector Error Correction Model (VECM) when the unit root tests were carried out; all the variables were stationary at first difference. The long run relationship among the variables was determined using the Johansen Co-integration technique while the vector correction mechanism was used to examine the speed of adjustment of the variables from the short run dynamics to the long run. It was observed that a proportionate change in oil price leads to a more than proportionate change in exchange rate volatility in Nigeria by 2.8%. I therefore recommend that the Nigeria government should diversify from the Oil sector to other sectors of the economy so that Crude oil will no longer be the mainstay of the economy and frequent changes in crude oil price will not influence exchange rate volatility significantly in Nigeria.

CHAPTER ONE

INTRODUCTION

1.1 BACKGROUND OF STUDY

“There are various evidences, particularly over the post-Breton woods era, pointing to the vital role of oil price fluctuations in the determination of the path of the exchange rate” (Adeniyi et al, 2004). According to Krugman (1983), exchange rate appreciates in response to rising oil prices and depreciates with response to falling oil prices in oil exporting countries, while the opposite is expected to be the case in oil importing countries.Volatility is the fluctuation in the value of a variable, especially price (Routledge, 2002). According to Englama et al (2010), a volatile exchange rate makes international trade and investments more difficult because it increases exchange rate risk. Exchange rate volatility tends to increase the risk and the uncertainty of external transactions and predisposes a country to exchange rate related risks (Jin, 2008).

According to Adedipe (2004), when Nigeria gained politically independence in October 1960, agricultural production was the main stay of the economy, contributing about 70% of the Gross domestic product (GDP), also employing about seventy percent of the working population and responsible for about ninety percent of foreign government revenue. The initial period of post-independence till mid – 1970s witness a fast advancement of industrialized capacity and output, as the contributions made by the manufacturing sector to GDP rose from 4.8% to 8.2%. This pattern changed when crude oil became very important to the world economy.

According to Englama et al (2010), crude oil became an export commodity in Nigeria in 1958, following the discovery of the first producible well in 1956. The contribution of oil to the federal government revenue in 1970 rose to 82.1% in 1974 from 26.3% and in 2008 constituted 83% of the federal government revenue, largely on account of increase in oil prices in the international market. The gigantic rise in oil revenue was caused by the Middle East war of 1973. It created extraordinary, surprising and unforeseen wealth for Nigeria and the naira appreciated as foreign exchange influxes offset outflows and Nigeria foreign reserves assets increased (Adedipe, 2004). The economy of Nigeria gradually became dependent on crude oil as productivity declined in other sectors (Englama et al, 2010).Nigeria is a mono – product economy, according to OPEC statistical bulletin (2010/2011) the value of Nigeria’s total export revenue in 2010 was US$70,579 million and the revenue of petroleum exports from the total export revenue was US$61,804 million which is 87.6% of total export revenue this means that Nigeria’s economy will be vulnerable to the movements of oil prices.During periods of favorable oil price shocks triggered by conflict in oil – producing areas of the world, the rise in the demand for the commodity by the consuming nations, seasonality factors, trading positions etc. Nigeria experiences favorable terms of trade evidenced by a large current account surplus and exchange rate appreciation. On the converse, when crude oil prices are low, occasioned by factors such as low demand, seasonality factors, excess supply, the Nigeria experiences unfavorable terms of trade evidenced by budget deficit and slow economic growth (Englama, 2010). An example was a drop in the revenue from oil exports during the global financial crisis in 2009. According to, OPEC statistical bulletin (2010/2011), oil export revenue dropped from US$74,033 million in 2008 to US$43,623 million in 2009 and the naira depreciated to N148.902 in 2009 from N118.546 in 2008.

DOWNLOAD THE COMPLETE PROJECT

Project information

Project Price

NGN5,000
Number of Pages

77
Number of Chapters

1-5
Additional Content

Abstract, Table of Content & Questionnaire

OIL PRICE AND EXCHANGE RATE VOLATILITY IN NIGERIA

Not The Topic You Are Looking For?

For Quick Help Chat with Us Now!

+234 813 292 6373

+233 55 397 8005

Search for your project topic

HOW TO GET THE COMPLETE PROJECT ON OIL PRICE AND EXCHANGE RATE VOLATILITY IN NIGERIA INSTANTLY

Click on the Download Button above.
Select any option to get the complete project immediately.
Chat with Our Instant Help Desk on +234 813 292 6373 for further assistance.
All projects on our website are well researched by professionals with high level of professionalism.

Here's what our amazing customers are saying

Uduak From Uniuyo

IProjectMaster is the best project site for students. Their works are unique and free of plagiarism!

Excellent

Emmanuel Essential

Kogi state University

I actually took the risk,you know first time stuff But i was suprised i received as requested. I love you guys 🌟 🌟 🌟 🌟

Very Good

Abdul Mateen Iddrisu

UDS

At first I taught is a site full of fraudsters until I saw my project in my Gmail after my payment.. THANK YOU IPROJECTMASTER and May God the almighty bless u guys abundantly

Excellent

Peace From Unilag

I cried not knowing how to go about my project but the day i searched online and saw iprojectmaster, i called and got my full project in less than 15minutes, i was shocked!

Excellent

JONNAH EHIS

Ajayi Crowther University, Oyo

I was scared at first when I saw your website but I decided to risk my last 3k and surprisingly I got my complete project in my email box instantly. This is so nice!!!

Excellent

Gbadamosi Solomon Oluwabunmi

Lasu

Swift delivery within 9 minutes of payment. Thank you project master

Excellent

Musa From Ahmadu Bello University

Thank you iprojectmaster for saving my life, please keep it up and may God continue to bless you people.

Excellent

Abdulrazak Bello Marsha

Usman Dan fodio University

It was quite a better guide for project and paper presentation purpoting. Many thanks.

Average

Abdulrahman Jibrin

Nti Abaji

Nice one work prompt delivery tanx

Very Good

Merry From BSU

I am now a graduate because of iprojectmaster.com, God Bless you guys for me.

Excellent

View All Reviews

FREQUENTLY ASKED QUESTIONS

How do I get this complete project on OIL PRICE AND EXCHANGE RATE VOLATILITY IN NIGERIA? Simply click on the Download button above and follow the procedure stated.
I have a fresh topic that is not on your website. How do I go about it?
How fast can I get this complete project on OIL PRICE AND EXCHANGE RATE VOLATILITY IN NIGERIA? Within 15 minutes if you want this exact project topic without adjustment
Is it a complete research project or just materials? It is a Complete Research Project i.e Chapters 1-5, Abstract, Table of Contents, Full References, Questionnaires / Secondary Data
What if I want to change the case study for OIL PRICE AND EXCHANGE RATE VOLATILITY IN NIGERIA, What do i do? Chat with Our Instant Help Desk Now: +234 813 292 6373 and you will be responded to immediately
How will I get my complete project? Your Complete Project Material will be sent to your Email Address in Ms Word document format
Can I get my Complete Project through WhatsApp? Yes! We can send your Complete Research Project to your WhatsApp Number
What if my Project Supervisor made some changes to a topic i picked from your website? Call Our Instant Help Desk Now: +234 813 292 6373 and you will be responded to immediately
Do you assist students with Assignment and Project Proposal? Yes! Call Our Instant Help Desk Now: +234 813 292 6373 and you will be responded to immediately
What if i do not have any project topic idea at all? Smiles! We've Got You Covered. Chat with us on WhatsApp Now to Get Instant Help: +234 813 292 6373
How can i trust this site? We are well aware of fraudulent activities that have been happening on the internet. It is regrettable, but hopefully declining. However, we wish to reinstate to our esteemed clients that we are genuine and duly registered with the Corporate Affairs Commission as "PRIMEDGE TECHNOLOGY". This site runs on Secure Sockets Layer (SSL), therefore all transactions on this site are HIGHLY secure and safe!