The Aggregate Demand Channel of Oil Price Shocks: Implications for Nigeria’s Banking Sector

This paper employs a New Keynesian framework to examine the impact of oil price shocks on Nigeria’s banking system through the aggregate demand channel. The findings indicate that a negative oil price shock poses a threat to banking system stability, whereas an expansionary monetary policy response from the central bank enhances stability after two quarters. The paper’s identification of asymmetric behaviour represents a significant contribution to the literature.