The Effect of Petroleum Product Prices Adjustment on Inflation Rate in Nigeria (1980-2021)
DOI:
https://doi.org/10.51699/ajdes.v15i.451Keywords:
Petroleum Products, Price Adjustment and Inflation RateAbstract
This paper examined the impact of petroleum products price regulation on inflation rate in Nigeria using secondary data extracted from the Central Bank of Nigeria annual report and National Bureau of Statistics publications spanning from 1980 - 2021. Descriptive statistics, unit root test, Johansen cointegration test and error correction model were employed to analyse the collected data. The result showed that a 1% increase in the prices of PMS and AGO increased inflation rate by 0.073985 and 0.021989 respectively. Although, PMS recorded the highest positive value, the prices of PMS and AGO have no statistical significant impact on inflation rate in Nigeria within the period of this study. The simple interpretation is that, Nigeria becoming importer of petroleum products and other macroeconomics variables such as misguided exchange rate policy should be blamed for the level of inflation rate in Nigeria. Based on the findings, the following were recommended; Government should reduce PMS Price by truly deregulating the downstream sector and equally inspiring private company participation in crude oil refining in order to inspire competition thus bringing down the price of PMS. Government should make sure that the existing refineries are functioning at full capacity and also build new ones; by so doing the existing refineries can meet Nigerians internal petroleum products needs and export the excess. This can be made possible when the nation refineries Turn-Around-Maintenance are consolidated with transparency and accountability.
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