The asymmetry of shocks in crude oil price in Nigeria

Abstract

While studies in Nigeria have focused on the consequences of oil price shocks on the economy, they implicitly assumed that oil price changes are symmetrical without specifically testing for asymmetry. This study concentrated on the shock asymmetries and crude oil price volatility in Nigeria. Used were time series data for the years 1981 to 2022 from the Statistical Bulletin of the Central Bank of Nigeria and the World Bank. The data were analyzed using the Exponential Generalized Autoregressive Conditional Heteroskedasticity (EGARCH) model, and the findings showed that there is a general tendency for oil price shocks to be around 1.83 percent bigger in declining oil prices than in rising prices. The asymmetric shocks to the price of oil completely dominate positive leverage. In order to minimize the economy's reliance on crude oil exports as its main export (and source of revenue), measures for export promotion and diversification should be put in place.