Oil price shock and agricultural commodity prices in Nigeria: A Non-Linear Autoregressive Distributed Lag (NARDL) Approach
AbstractThis study analyzed the impact of oil price shocks on agricultural commodity prices in Nigeria using monthly data on oil prices, maize, wheat and soybean and exchange rate from 1997 to 2016. Data on oil price and exchange rate were obtained from the central bank statistical bulletin while those of agricultural commodities were obtained from Food Agricultural Organization (FAO) website. Dummy variables were used to capture periods of structural breaks in the selected agricultural commodity prices. Linear ARDL and Non-linear ARDL with and without breaks were estimated.Â Asymmetric test using Wald Statistics revealed evidence of asymmetries in all the cases implying that positive and negative shocks of the same magnitude did not have equal impact on agricultural commodity prices. The study found significant positive oil price changes in all cases with the expected positive sign, implying that increases in oil price lead to increases in agricultural commodities. Similarly, exchange rate (a control variable) showed positive significant relationship with agricultural commodities. It is concluded that oil price has overall positive relationship and significant effect on agricultural commodity prices. The study recommended that since oil price was important in agricultural commodities prices, efforts should be geared towards local development of the oil sector as this will bring about positive spillover effect on the agricultural sector and ensure food availability at affordable prices thereby improving standard of living and welfare.
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