Prague Economic Papers 2022, 31(2):195-213 | DOI: 10.18267/j.pep.801

Oil Price, Exchange Rate and Asymmetric Adjustment of Nigeria's Bilateral Trade

Oliver E. Ogbonnaa, Hyacinth E. Ichokua
a Department of Economics, University of Nigeria in Nsukka, Nigeria

Motivated by the persistent rise in bilateral trade imbalance in Nigeria, this paper empirically examines whether Nigeria's four trading partners (China, India, the UK and the US) respond asymmetrically to changes in the oil price and exchange rate using a nonlinear autoregressive distributed lag model over the period from January 1999 to December 2019. Interestingly, we find that oil price increase and decrease influence Nigeria's trade balance with four trading partners asymmetrically. Further evidence indicates that oil price increases predominantly exert greater influence than decreases. Furthermore, Nigeria's trade balances with India and the UK in the long run and the US in the short run significantly respond asymmetrically to changes in exchange rate. In addition the result establishes significant evidence of the J-curve pattern in the response of Nigeria's trade balance with the UK to differences in exchange rate.

Keywords: Trade balance, oil price, exchange rate, asymmetry, nonlinear ARDL
JEL classification: C22, F14, F31, F41, Q43

Received: October 20, 2021; Revised: March 17, 2022; Accepted: April 1, 2022; Prepublished online: May 6, 2022; Published: May 9, 2022  Show citation

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Ogbonna, O.E., & Ichoku, H.E. (2022). Oil Price, Exchange Rate and Asymmetric Adjustment of Nigeria's Bilateral Trade. Prague Economic Papers, 31(2), 195-213. doi: 10.18267/j.pep.801
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