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Petroleum Products Prices and Inflationary Dynamics in Nigeria

Author

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  • Eregha, Bright
  • Mesagan, Ekundayo
  • Ayoola, Olawale

Abstract

It is well documented in the literature that there exists a positive relationship between oil price and inflation. In this study, we found that the price of Premium Motor Spirit (PMS) remained stable until the entry of the military into the administration of the country when the then military heads of state arbitrarily increased the prices of petroleum products. We also found that there exists high positive relationship between the prices of PMS and AGO and inflation in Nigeria. We therefore conclude that rises in petroleum products prices, especially PMS and AGO, significantly impact inflation in Nigeria. With this result, we recommend that government should shelve the idea of removing subsidy on PMS for now and should focus on deregulating the downstream sector to attract private investment with the aim of encouraging local refining of petroleum products instead of importing them. This will in turn reduce domestic prices for petroleum products and consequently inflation.

Suggested Citation

  • Eregha, Bright & Mesagan, Ekundayo & Ayoola, Olawale, 2015. "Petroleum Products Prices and Inflationary Dynamics in Nigeria," MPRA Paper 70251, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:70251
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    File URL: https://mpra.ub.uni-muenchen.de/70251/1/MPRA_paper_70251.pdf
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    References listed on IDEAS

    as
    1. Christopher Ehinomen & Adepoju Adeleke, 2012. "An assessment of the distribution of Petroleum products in Nigeria," E3 Journal of Business Management and Economics., E3 Journals, vol. 3(6), pages 232-241.
    2. Regnier, Eva, 2007. "Oil and energy price volatility," Energy Economics, Elsevier, vol. 29(3), pages 405-427, May.
    3. Plourde, André & Watkins, G. C., 1998. "Crude oil prices between 1985 and 1994: how volatile in relation to other commodities?," Resource and Energy Economics, Elsevier, vol. 20(3), pages 245-262, September.
    4. World Bank, 2013. "World Development Indicators 2013," World Bank Publications - Books, The World Bank Group, number 13191, December.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Ekundayo P. Mesagan & Ismaila A. Yusuf, 2019. "Economic Stabilisation and Performance in West Africa: The Role of Fiscal and Monetary Policy," Working Papers of the African Governance and Development Institute. 19/097, African Governance and Development Institute..
    2. Eregha, Perekunah Bright & Mesagan, Ekundayo Peter, 2017. "Energy consumption, oil price and macroeconomic performance in energy dependent African countries," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 46, pages 74-89.
    3. Reza Najarzadeh & Alireza Keikha & Hassan Heydari, 2021. "Dynamics of consumption distribution and economic fluctuations," Economic Change and Restructuring, Springer, vol. 54(3), pages 847-876, August.
    4. Yusuf, Ismaila Akanni & Mesagan, Ekundayo Peter & Amadi, Agatha Nkem, 2020. "Effect of financial deepening on stock market returns: The case of military and democratic post-SAP regimes in Nigeria," BizEcons Quarterly, Strides Educational Foundation, vol. 6, pages 3-21.
    5. Mesagan, Ekundayo Peter & Eregha, Perekunah Bright, 2018. "Political Economy of Oil Resources Management in Nigeria: Lessons from Other Countries," MPRA Paper 95667, University Library of Munich, Germany, revised 15 Aug 2019.
    6. Ekundayo P. Mesagan & O. Yasiru Alimi & K. Adekunle Adebiyi, 2018. "Population Growth, Energy Use, Crude Oil Price, and the Nigerian Economy," Economic Studies journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 2, pages 115-132.
    7. Peter Ekundayo Mesagan & Akanni Ismaila Yusuf & Azubuike Isaac Ogbuji, 2019. "Natural resource endowment and output growth: How crucial is deficit financing in managing resource-rich African economies?," Journal of Social and Economic Development, Springer;Institute for Social and Economic Change, vol. 21(2), pages 353-369, December.
    8. Ekundayo P. Mesagan & Isaac A. Ogbuji & Yasiru O. Alimi & Anthonia T. Odeleye, 2019. "Growth Effects of Financial Market Instruments: The Ghanaian Experience," Working Papers 19/095, European Xtramile Centre of African Studies (EXCAS).
    9. Ismaila Akanni Yusuf & Agatha Nkem Amadi & Mohammed Bashir Salaudeen, 2020. "Effects of Risk Culture and Appetite on Effective Risk Management in Nigerian Banks: Case Study of United Bank for Africa Plc," Academic Journal of Economic Studies, Faculty of Finance, Banking and Accountancy Bucharest,"Dimitrie Cantemir" Christian University Bucharest, vol. 6(2), pages 81-87, June.
    10. Addae, Edna & Ackah, Ishmael, 2017. "Inflation dynamics in pre and post deregulation era in Ghana: Do petroleum prices have any influence?," MPRA Paper 77496, University Library of Munich, Germany.

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    More about this item

    Keywords

    Premium Motor Spirit; Automotive Gas Oil; Dual Purpose Kerosene; Inflation; Nigeria.;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • Q4 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

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