PETROL (PMS) PUMP PRICE FLUCTUATION AND CONSUMERS’ BEHAVIOUR IN NIGERIA (1970- 2016): A VECTOR ERROR CORRECTION APPROACH
Keywords:
Petrol pump price, Consumers’ behaviour, Fluctuation, Impulse Response FunctionsAbstract
In Nigeria, most light and heavy-duty automobiles are powered by the premium motor spirit (PMS) aka petrol, and its pump price fluctuation is expected to affect consumer behaviour. This study investigated the connection between petrol pump price fluctuations and consumers’ behaviour in Nigeria from 1970 to 2016 using the framework that applies multivariate Vector Error Correction. There was the presence of both long and short-run associations amid the pump price of petrol and consumers’ behaviour. Petrol pump price negatively affects behaviour and other variables of macro-economic policy such as importation of food, foreign private investment, exchange rate and government funds allocation for agriculture in both the long and short run. There was a negative and significant effect of petrol pump price shock on these macro-economic variables while the variation in the forecast error for petrol price on consumer behaviour shock had a declining and fluctuating value from period one to four (0.96%), averaging in period five with 1.36% of the variation of petrol pump price and continue fluctuating to the ten years. This indicated the negative impact unstable petrol pump price had on consumers' behaviour hence their purchasing power. The petrol pump charge influence on the macro-economic policies in the economy created room for local producers and foreign private investments to thrive. The local producers seized the opportunities to export their produce while the foreign private investors invested in the local producers to make a profit. As such, the government need to create a better conducive environment for the local agricultural producers and foreign private investors to export and invest accordingly.
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