MODELING THE DYNAMICS OF CRUDE OIL PRICES AND ITS INTERACTION WITH EXCHANGE RATE IN NIGERIA | Journ

Researchers and stakeholders have expressed genuine interest in how the oil price dynamics impact Nigeria's exchange rate performance since the outbreak of the coronavirus epidemic and the subsequent global recession. This interest stems from the tremendous volatility of the time and the failure of many countries to cope with it, leading to economic recession in many, including Nigeria. Coronavirus interrupted the worldwide supply of commodity products and services, causing major markets, such as crude oil, to plummet. Oil prices fell from $67.12 per barrel on 2 January 2020 to $12.22 on 22 April 2020, and again to $40.91 on 22 October 2020, during the moderate stage of the epidemic. As a result of these events, this research looks into the dynamism on the performance and exchange rate of the crude oil market The impulse response function, variance decomposition, and granger causality were calculated using the Toda-Yamamoto model using monthly data from 2000m1 to 2020m6. The data show that the Nigerian stock market is predominantly controlled by macroeconomic global factors. Specifically, when the oil price becomes erratic and unpredictable, investors prefer to keep their money in cash rather than engage in the market. The data show that oil price shock, rather than oil price fluctuation, has a significant impact on the exchange rate. Furthermore, the exchange rate reacts unfavourably to oil price shocks but favourably to volatility in oil prices. The granger causality finding, on the other hand, reveals that the oil price is causative.

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