OIL PRICE SHOCKS AND EXCHANGE RATE DYNAMICS IN NIGERIA
- Afeikhena Jerome
- David Nabena
- Uzochukwu Alutu
- ( paper pages. 1 - 27 )
Abstract
Nigeria’s persistent exchange rate crises are fundamentally linked to oil priceshocks. The most recent oil bust of mid-2014 which ignited internalmacroeconomic dislocations, including an economic recession, coupled withrising inflation, saw the country recording a double-digit decline in the value ofthe naira. This paper examines exchange rate management in Nigeria in theperiods of oil boom and bust. Findings indicate that the oil price collapse of 2014triggered a currency crisis in the country. The devaluation of the nairaexacerbated the very problem it was meant to solve, which is the scarcity offoreign exchange and a widening gap between the official rate and the parallelmarket rate. While a currency float remains the most efficient policy option, thecountry must avoid ad-hoc interventions and manage its exchange ratetransparently to curtail the dominance of speculation and arbitrage in theexchange market. Complementary measures are also needed to tackle structuralchallenges affecting currency inflows, including the high dependence on thepetrodollar and the prevalent black market.
Citation
Afeikhena Jerome, David Nabena, Uzochukwu Alutu.
2018.
"OIL PRICE SHOCKS AND EXCHANGE RATE DYNAMICS IN NIGERIA"
The Nigerian Journal of Economic and Social Studies,
60 (1): 1 - 27.
JEL Classification
E3, 024, P42
