SOURCE:

Faculty: Management Sciences
Department: Banking And Finance

CONTRIBUTORS:

Izekor A. Osaretin
Okaro C. Sunday
Ezeabasili N. V

ABSTRACT:

This study assessed the effect of financial crisis, crude oil price shocks on the Nigerian foreign exchange reserves. The global financial crisis was initially believed would not affect Nigeria, thus crude oil price shocks, resulted to the lingering adverse pressure on Nigerian foreign reserves. Specifically, the study ascertained the effect of financial crisis on the Nigerian foreign exchange reserves; examined the relationship between crude oil price shocks and the Nigerian foreign exchange reserves; studied the relationship between exchange rate and Nigerian foreign exchange reserves; evaluated the relationship between net trade of crude oil and Nigerian foreign exchange reserves; and determined if financial crisis, crude oil price shocks, exchange rate and net trade of crude oil granger cause the Nigerian foreign exchange reserves and vice versa. Data were sourced from Central Bank of Nigeria Statistical Bulletin, World Bank data base, Index mundi data base, Organisation of Petroleum Exporting Countries data base and International Monetary Fund data base. The period covered is 1993 to 2016. Ex post facto research design using time series econometric techniques was applied to execute the descriptive analysis and inferential analyses of the data using e-views software. The study ascertained that the fluctuations in the Nigerian foreign reserves were not caused by the financial crisis but induced by other factors. Thus, there was established relationship between crude oil price shocks and the Nigeria foreign reserves as exchange rate adversely related but was a weak determinant of the Nigerian foreign reserves. Apparently, net trade of crude oil caused the significant instability in the Nigerian foreign reserves. This study recommends among others that the Nigerian government should enact modular oil refinery policy in order to partner with illegal oil refineries as well as enact policy on the standard and limit on foreign travels such as tourism, medical vacations for government officials including the presidency.