The Effect of Inflation Rate, Exchange Rate, Oil Price and Wage Rate Structure on the Nigerian Economy

Idowu A. Okeowo; Ifarajimi Gilbert; Olusola Oni; Segun A. Adewale; Aderowola T. Bakare; Joyce M. Sadiq

Idowu A. Okeowo Department of Economics, Caleb University, Lagos State, Nigeria
Ifarajimi Gilbert Department of Economics, Caleb University, Lagos State, Nigeria
Olusola Oni Department of Economics, Caleb University, Lagos State, Nigeria
Segun A. Adewale Department of Economics, Caleb University, Lagos State, Nigeria
Aderowola T. Bakare Department of Economics, Caleb University, Lagos State, Nigeria
Joyce M. Sadiq Department of Economics, Caleb University, Lagos State, Nigeria

Keywords: Exchange rate, Inflation, Wage Structure, Oil price

Abstract

This study primarily looks at the effects of exchange rates, oil prices, and wage structures on economic growth. Additionally, their intricate relationship to economic growth will be covered in this paper. The study employs annual time series data from 1991 to 2022 (covering 31 observations). Accordingly, the data are sourced from the statistical bulletin of the central bank of Nigeria and World bank development indicators, 2022. The study employs real GDP (RGDP) as the dependent variable, which is a stand-in for economic growth, and exchange rate (REXRATE), oil price (OPR), and inflation as independent variables, which are stand-ins for exchange rate fluctuations in Nigeria. In order to empirically analyze the long- and short-term effects of exchange rates, oil prices, and wage structures on economic growth in Nigeria from 1991 to 2022, Pesaran et al. (2001) proposed the multiple Autoregressive Distributed Lag (ARDL) approach to co-integration, which was implemented using the E-Views 10 statistical software. In the short-run analysis, INFLARATE and WAGSTR have positive relationship with the dependent variable whereas EXCRATE and OILPRICE have a negative relationship with the dependent variable. However, in the Long-run analysis EXCRATE, INFLRATE AND WAGSTR have a positive relationship with the dependent variable while OILPRICE has a negative relationship with the dependent variable. Based on the strength of the findings in this study, the following recommendations were suggested: Adopt Comprehensive Exchange Rate Policies, Foster International Trade Relations, Diversify the Economy, Implement Effective Wage Policies, Promote Investment in Human Capital, etc. The findings conclude that economic stability and growth are contingent upon managing these macroeconomic variables effectively. Exchange rate volatility, oil price shocks, and wage disparities can collectively impede economic stability and growth if not appropriately managed.

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