Asymmetric Adjustment Pass-Through of Oil Price on Transportation Cost
DOI:
https://doi.org/10.24191/jibe.v11i1.7674Keywords:
Asymmetric Adjustment, Nigeria, Oil Price, Pass-Through, Transportation CostAbstract
This study investigates how petroleum pump prices affect Nigeria's transportation costs asymmetrically. The momentum autoregressive (MTAR) and threshold autoregressive (TAR) models were used to analyse the monthly data from January 1995 to December 2023. Based on the findings, asymmetric cointegration was found in the MTAR consistent model. The influence of oil prices on transportation costs is signified as asymmetric in the nature of adjustment to the equilibrium position. Once oil prices fluctuate, increases in oil prices push the transportation cost upward, while decreases in oil prices have an insignificant effect on the cost of transportation. Furthermore, long-run results also reveal a positive correlation between oil prices and transportation cost, exchange rate, and GDP per capita. Based on the outcomes, the exchange rate is also a determinant of transportation cost. Once the exchange rate is depreciated, the effects will pass through to the high import costs of petroleum products. To stabilize the Nigerian transportation system, the government should consider both direct and indirect effects. Direct asymmetric effect through input cost, while the indirect effect is through the exchange rate.
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