On Establishing Empirical relationship between Global Crude oil Market and the Nigerian Stock Exchange using Vector Autoregressive Model

Abstract

This research work is purposed to undercover the empirical relationship residing in-between the global crude oil market and Nigerian stock exchange from 1997 to 2019. Variables chosen for this study are crude oil price, crude oil export, crude oil production, all share index, consumer price index and exchange rate and were analyzed using the model. The results from our analyses show that firstly, the global crude oil market has a positive correlation with the Nigerian stock exchange. That implies that as the values of the global crude oil market rises (falls), the values of the Nigerian stock exchange also rises (falls). Secondly, the Granger Causality test confirmed that the consumer price index is helpful in forecasting the future values of exchange rate. Furthermore, the variance decomposition and impulse response revealed that to stabilize the value of all share index, we literally optimize the exchange rate by encouraging mechanized farming to boost the export of cash crops, encouraging and enhancing our local firms and diversification of the Nigerian economy.