THE RESPONSE OF NIGERIAN ECONOMY TO COVID-19 PANDEMIC AND GLOBAL OIL PRICE EFFECTS: EMPIRICAL EVIDENCE FROM MIXED FREQUENCY BAYESIAN VECTOR-AUTOREGRESSION

Abstract

Recently, the covid-19 pandemic has affected millions and brings economic activities to a near stand-still as countries imposed tight restrictions on movement to halt the spread of the virus. Emerging market and developing economies were buffeted by economic challenges from multiple quarters: pressure on weak health care systems, loss of trade and tourism, dwindling
remittances, subdued capital flows, and tight financial conditions amid mounting debt. Exporters of crude oil like Nigeria or industrial commodities were particularly hard hit. The pandemic and efforts to contain it triggered an unprecedented collapse in oil demand and a crash in oil prices. This study utilized data from world development indicators, United States’ Federal
Reserve Bank from 1980 to 2020 and examined the response of Nigerian economy to Covid-19 pandemic and global oil price effects using Mixed Frequency Bayesian Vector Autoregression. Nigeria’s Industrial Production, Gross Domestic Product (GDP) and Imports are all in quarterly observations while Global Oil Price and US Industrial Production are in monthly observation. It is found that Nigerian economy is highly influenced by changes in global oil price but there is little or no influence from the activities of US industrial production. Hence, the Nigerian policy makers should endeavor to diversify the economy, and reduce the reliance on crude oil proceeds for growth and development in the country. Digital economy should be enhanced in order to smoothen economic activities in the event of any lockdown or related emergency.