Abstract
The event of the covid-19 pandemic led to fluctuation in energy prices and different economies are still recovering from the impact of the pandemic. The pandemic also saw a rise in prices which made the cost of living difficult for the common man. This paper investigated the relationship between energy prices and inflation in Nigeria between the years 1985 to 2018. The unit root test performed on the data indicated that the ARDL method be used to analyze the data. The result of the bounds test shows the presence of long run relationship. The long run result shows that energy prices have no impact on inflation in the long run. In the short run the one-year lag of oil price has a negatively significant impact on inflation while, the one-year lag of gas price has a positively significant impact on inflation in Nigeria.
Highlights
Inflation is one of the foremost economic indicators that is of importance to any government
H02: There is no significant impact of gas prices on inflation in Nigeria. 4.2 Unit Root Test The Augmented Dickey-Fuller (ADF) was utilized to test for the existence of unit roots in the data at trend and intercept
The results above shows us that oil price (OILP) is stationary at level I(0) as the ADF calculated statistics is less than its critical values at both 5% and 10% level of significance
Summary
Inflation is one of the foremost economic indicators that is of importance to any government. As oil prices were seen to fall, the revenue of the Nigerian government fell; and this placed the government in a position where it could not meet up its expenses without borrowing This rise in borrowing was accompanied my high prices in the economy at that time. These movements of energy prices, inflation rate and external debt to finance the Nigerian economy is a serious cause for concern for policy makers. This has necessitated that this paper investigates the nature of the relationship that exists between energy prices and inflation in Nigeria. The paper will end with an interpretation of the result of the analysis and a conclusion
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