Crude Oil Price Shock and the Nigerian Stock Market Performance in the Face of Covid-19 Pandemic Evidence from ARDL & Granger Causality Approach

Abstract

The study examined empirically the linear relationship between crude oil price shock and the Nigerian stock market performance, with the main objective of ascertaining the impact of the recent sharp decline in crude oil prices on stock market performance in the face of the global socio-economic challenge posed by COVID-19 pandemic. It used monthly time series data from the central bank of Nigeria (CBN) website (www.cbn.gov.ng) from 2017-2020 This period was chosen to capture the effects of changes in oil price on the performance of the Nigerian stock market within the context of the global economic challenges due to the COVID-19 pandemic. The auto-regressive distributed lag ARDL approach has been applied in the model specification and data analysis for the study. The results of the ARDL in both the short and long run revealed that the recent crude oil price shock has a significant impact on stock market performance in Nigeria. The results of the granger causality test also reveal a unidirectional causality from crude oil price to stock market performance with a piece of evidence from the current decline of global crude oil prices from December 2019 to April 2020. The study, therefore, suggests the need for the Nigerian capital market to continue to pursue with vigor the implementation of the capital market master plan in the hope that a more developed capital market should be able to absorb external shocks such as those arising from crude oil price fluctuations.