Petroleum Pricing and Inflation Rate in Nigeria
This study examined the impact of petroleum product prices on inflation in Nigeria over the period 1980–2020. Specifically, it assessed the effects of the prices of Premium Motor Spirit (PMS), Automotive Gas Oil (AGO/diesel), and Dual-Purpose Kerosene (DPK) on the inflation rate. The study employed the Autoregressive Distributed Lag (ARDL) method to estimate the specified model. The findings revealed that PMS price had a significant positive short-run effect on inflation, but its long-run effect was not significant. The prices of diesel and kerosene were found to have no significant effect on inflation in either the short or long run, although the long-run coefficient of kerosene was positive. The study concludes that petroleum price increases contribute to Nigeria's inflation problem, particularly through changes in PMS prices. It therefore recommends that the government ensure a stable supply of petroleum products and avoid unnecessary increases in PMS prices, while maintaining stable diesel and kerosene prices to minimize inflationary pressures.
