Time Series Analysis of Nigerian Monthly Crude Oil Price

Abstract

This study is used to discuss and analysed the fluctuations and volatility in Nigeria monthly crude oil price since crude oil is a major determinant that drives Nigerian economic growth and development. The time series model used to model Nigerianmonthly crude oil price is Autoregressive Integrated Moving Average (ARIMA) model. The stationarity of the series was attained at the first difference based on the Augmented Dickey-Fuller (ADF) test. The ACF and PACF were used to identify four models andafter estimation with the ordinary least estimation method, ARIMA(5,1,2) model was selectedas the optimal model based on the values of the Information Criteria. The model is viewed as satisfactory for forecasting Nigerian monthly crude oil price since the ACF and PACF of the residuals do notform any irregular pattern. The forecasted value of Nigerian monthly crude oil price indicated a steadyrise and maybe in-between 71.78 – 200.84 dollar per barrelin the next 10 years. The forecast evaluation metrics values indicated that the forecasted values are relatively accurate. Conclusively, this price rise may take the Nigerian government out of unchartered waters and the worst recession in 40 years. This as well will give the Nigerian government the chance to revive the economy only if they diversify the economy, create job opportunities, combat insurgency, and put in place zero-tolerance measures against corruption and mismanagement of public funds.