The Macroeconomic Consequences of the Black Sunday in Nigeria
Efobi, U., Osabuohien, E., and Beecroft, I., (2013), "The Macroeconomic Consequences of the Black Sunday in Nigeria", in Adibe, J. (Ed.), The Politics and Economics of Removing Subsidies on Petroleum Products in Nigeria, Adonis & Abbey Publishers, London & Abuja.
15 Pages Posted: 14 Aug 2014
Date Written: December 1, 2013
The Nigerian government’s substantial reduction of fuel subsidy in January 2012 brought about shocks in some macroeconomic indicators. This paper examines the effect of the change in pump price of fuel on exchange rate, inflation and money supply. We developed an analytical model and the main variable that reflects the policy change is the pump price of fuel. Data was sourced from the Central Bank of Nigeria website-monthly data on macroeconomic indicators from January 2009 to December 2012. Chow test for structural break and the Vector Autoregressive impulse response was used as tools for the estimations. We find a break point in the trend of the selected macroeconomic variables. Our findings have some policy implications which include the need for the government to consider timing when taking policy actions.
Keywords: Exchange rate, Fuel subsidy, Inflationm Money demand
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