Time-Gap effects of crude oil prices on the foreign exchange rates: Evidence from Nigeria


  • Nenubari Ikue John
  • Emeka Nkoro University of Port Harcourt, Rivers State
  • Jeremiah Anietie




Heij-Coefficient Dynamic-Multiplier LVAR-Causal-Model Forcing-Process. Exchange-Rate


There is a pool of techniques and methods in addressing dynamics behaviors in higher frequency data, prominent among them is the ARCH/GARCH techniques. In this paper, the various types and assumptions of the ARCH/GARCH models were tried in examining the dynamism of exchange rate and international crude oil prices in Nigeria. And it was observed that the Nigerian foreign exchange rates behaviors did not conform with the assumptions of the ARCH/GARCH models, hence this paper adopted Lag Variables Autoregressive (LVAR) techniques originally developed by Agung and Heij multiplier to examine the dynamic response of the Nigerian foreign exchange rates to crude oil prices. The Heij coefficient was used to calculate the dynamic multipliers while the Engel & Granger two-step technique was used for cointegration analysis.  The results revealed an insignificant dynamic long-term response of the exchange rate to crude oil prices within the periods under review. The coefficient of dynamism was insignificantly in most cases of the sub-periods. The paper equally revealed that the significance of the dynamic multipliers depends greatly on external information about both market indicators which are two-way interactions. Thus, the paper recommends periodic intervention in the foreign exchange market by the monetary authorities to stabilize the market against any shocks in the international crude oil market, since crude oil is the main source of foreign exchange in Nigeria.


Download data is not yet available.


Abraham, T. W. (2016). Exchange rate policy and falling crude oil prices: Effect on the Nigerian stock market. CBN Journal of Applied Statistics. 111-123.

Agung, I.G.N. (2009). Time series data analysis using, Eviews. Singapore: John Wiley & Son.

Ahmed, R., Qaiser, I., & Yaseen, M. R. (2016). Nexus between exchange rate volatility and oil price fluctuations: evidence from Pakistan. Pakistan Journal of Commerce and Social Sciences , Vol. 10 (1), 122-148.

Aliyu, S. U. (2009). Impact of oil price shock and exchange rate volatility on economic growth in Nigeria: An Empirical Investigation. MPRA Paper No. 16319, posted 18. 2009 11:43 UTC .

Aloui, R., Aïssa, M. S., & Nguyen, D. K. (2013). Conditional dependence structure between oil prices and exchange rates: A copula-GARCH approach. Journal of International Money and Finance . 719-738.

Babatunde, O. A. (2013). Stock Market Volatility and Economic Growth in Nigeria 1980-2010. International Review of Management and Business Research. 2(1); 201-209.

Basher, S. A., Haug, A. A., & Sadorsky, P. (2015). The impact of oil shocks on exchange rates: A Markov-switching approach. Energy Economics .

Bloomberg, S.B., Harris, E.S., 1995. The commodity]consumer price connection: fact or Fable? Fed. Reserve Board N.Y. Econ. Policy Rev., October, 21-38.

Bollerslev, T. (2007). Modeling the Coherence in Short-Run Nominal Exchange Rates: A Multivariate Generalized ARCH Model. Review of Economics and Statistics. 7(2); 498-505.

Dickey, D.A., Fuller, W.A., 1979. Distribution of the estimators for autoregressive time series with a unit root. J. Am. Stat. Assoc. 74(366); 427-431.

Donaldson, R.G. and M. Kamstra (1997), An artificial neural network GARCH model for international stock return volatility, Journal of Empirical Finance, 4(1); 17-46.

Enders, W. (2004) Applied Econometric Time Series. Hoboken, NJ: John Wiley and Sons, Inc.

Engle, R.F. (1990), Discussion: Stock Market Volatility and the Crash of ‘87, Review of Financial Studies, 3, 103-106.

Engle, R.F. (1982), Autoregressive Conditional Heteroskedasticity with Estimates of the Variance of U.K. Inflation, Econometrica, 50, 987-1008.

Engle, R.F., Granger, C.W.J., 1988. Co-integration and error-correction: representation, estimation, and testing. Econometrica 55, 251-276.

Faruqee, Hamid 1995, Pricing to market the real exchange rate. IMF staff papers, 42(4), pp 855-81

Gbosi A.N. (2015). Naira Exchange Rate Movements and Macroeconomic Stability in Nigeria. Journal of Achievement In Economics, Finance and Accounting Washington D.C

Ghosh, S. (2011). Examining crude oil price – exchange rate nexus for India during the period of extreme oil price volatility. Applied Energy , 1886-1889.

Golub, S., 1983.Oil prices and exchange rates.Econ.J. 93, 576]593.

Hamilton JD. 2003. Causes and consequences of the oil shock of 2007–08. Brookings Papers on Economic Activity 1Spring: 215 261.

Heij, C., De, Boer, P., Frances, P.H., Kloek, T., Van Dijk, H.K. (2004), Econometric methods with application in business and economics.clareendon: Oxford University Press.

Higgins, M.L. and A.K. Bera (1992), A class of nonlinear ARCH Models, International Economic Review, 33, 137-158.

Hussain, M., Gilney, Z. F., Usman, B., & Ding, D. (2016). Oil price and exchange rate co-movements in Asian countries detrended cross-correlation approach. Physica A (2016), http://dx.doi.org/10.1016/j.physa..08.056 , 1-22.

Ikue-John N.& A. Jeremiah,(2018)Modeling the Dynamics of the Nigerian FOREX Market and International Crude Oil Prices: A LVAR Approach. Brazilian Journal of Arts & Science, (Physical and Social), 12(2), 67-80.

Klüppelberg, C., A. Lindner and R. Maller (2004), A Continuous Time GARCH Process Driven by a Lévy Process: Stationarity and Second Order Behaviour, Journal of Applied Probability, 41, 601-622.

Krugman, P., 1983a. Oil and the dollar. In: Bhandari, J.S., Putnam, B.H. _Eds.., Economic Interdependence and Flexible Exchange Rate. Cambridge University Press.

Krugman, P., 1983b. Oil shocks and exchange rate dynamics. In: Frankel, J.A. _Ed.., Exchange Rates and International Macroeconomics. University of Chicago Press, Chicago.

Lawal, A. I., Somoye, R. O., & Babajide, A. A. (2016). Impact of oil price shocks and exchange rate volatility on stock market behavior in nigeria. Binus Business Review , 171-177.

Lee, S. and M. Taniguchi (2005), Asymptotic Theory for ARCH-SM Models: LAN and Residual Empirical Processes, Statistica Sinica, 15, 215-234.

Lizardo, R. A., & Mollick, A. V. (2010). Oil price fluctuations and U.S. dollar exchange rates. Energy Economics , 399-402.

Medee, P. N. &N. Ikue-John (2017). Modeling the Dynamic Relationship between International Crude Oil Price and the Exchange Rate in Nigeria, 2002 – 2017 Australian Journal of Humanities and Social Science. 2(2), 36-51.

Medee P. N & Ikue-John N. (2017) Foreign exchange market and the capital market in Nigeria: A VAR in-1stDifference/ VECM Approach, Nigerian Journal of Financial Research.

Mishra, S., & Debasish, D. S. (2017). Analysis of volatility spill over between oil price and exchange rate in India: GARCH approach. Electronic copy available at: https://ssrn.com/abstract=2892670 .

Mordi, N. O. (2006). Challenges of exchange rate volatility in economic management in Nigeria. Central Bank of Nigeria Bullion, 30(3), 17-25.

Nazlioglu, S., UgurSoytas, & Gupta, R. (2015). Oil pricesand financial stress:Avolatilityspilloveranalysis. Energy Policy .

Nelson, D.B. (1991), Conditional Heteroskedasticity in Asset Returns: A New Approach, Econometrica, 59, 347-370.

Osarumwense, O.-I. (2015). Impact of oil price shock on foreign currency and stock markets: The Nigeria perspective. Journal of Applied Science, Engineering and Technology , 34-42.

Reboredo, J. C. (2012). Modelling oil price and exchange rate co-movements. Journal of Policy Modeling, 419–440.

Salisu, A. A., & Mobolaji, H. (2013). Modeling returns and volatility transmission between oil price and US–Nigeria exchange rate. Energy Economics , 169-176.

Salisua, A. A., & Oloko, T. F. (2015). Modelling spillovers between stock market and FX market: Evidence for Nigeria. Centre for Econometric and Allied Research (CEAR), University of Ibadan, Nigeria .

Song, C., & Li, C. (2015). Relationship between Chinese and international crude oil prices: A VEC TARCH Approach. Hindawi Publishing Corporation Mathematical Problems in Engineering , 10-18.

Tiwari, A. K., Dar, A. B., & Bhanja, N. (2013). Oil price and exchange rates: A wavelet based analysis for India. Economic Modelling , 412-422.

Zhang, Y.-J., Fan, Y., Tsai, H.-T., & Wei, Y.-M. (2008). Spillover effect of US dollar exchange rate on oil prices. Journal of Policy Modeling , 973–991.




How to Cite

Ikue John, N., Nkoro, E., & Anietie, J. (2021). Time-Gap effects of crude oil prices on the foreign exchange rates: Evidence from Nigeria. Bussecon Review of Social Sciences (2687-2285), 3(3), 31–44. https://doi.org/10.36096/brss.v3i3.296



International Political Economy and Development