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This study examined effects of oil (crude and premium motor spirit (PMS)) price fluctuations on ination rate in Nigeria using annual time series data spanning from 1980 to 2023.Augmented Dickey Fuller (ADF) test was used for unit root test to avoid spurious regression estimates. In addition, the study employed Nonlinear Autoregressive Distributed Lag Model (NARDL) Bound test within the ARDL framework to capture asymmetries effects of oil price fluctuations on ination rate. The study further employed Granger causality test to assess for causal relationship among the variables. The NARDL Bound test of cointegration conrmed long-run relationships between oil price fluctuations and ination rate. The result of NARDL revealed that positive uctuation in crude oil price has negative relationship with ination in Nigeria both in the long-run and short- run while negative uctuation in crude oil price has positive relationship with inflation in the long-run but has negative relationship with ination in the short run. Similarly, positive and negative fluctuations in the price of PMS have positive relationship with ination in the long run and negative in the short run. The short run negative uctuation in the price of PMS reduced ination in the short run. Granger causality test indicated bi-directional relationship between price of PM S and ination rate in Nigeria. In line with the findings, the study recommended that, Nigerian national petroleum company and government should intensify effort to increase national petroleum rening capacity, attract more private investors to build more reneries and promote indigenous modular reneries, promote local contents, reverse the subsidy removal and technically remove it in phases.
Danjuma et al. (Fri,) studied this question.