Impact of Gas Monetisation on Price Stability in Nigeria
Year: 2024
Type: article
Abstract: The study investigated the intricate relationship between gas monetization and price stability in Nigeria, addressing the critical problem of how various components of gas monetization influence inflation rates. The main objective was to examine the dynamic interactions between gas monetization activities, such as the utilization of gas in various sectors, and their impact on the economic indicator of inflation, thereby reflecting price stability. Employing an Auto-Regressive Distributive Lag (ARDL) approach within an ex post facto research design, the study conducted unit root tests to ascertain the stationarity of the data, followed by cointegration analysis to establish the presence of long-term equilibrium relationships. The ARDL bounds testing and subsequent error correction modelling were used to scrutinize both short-term and long-term interactions between the variables. Findings revealed that while gas utilization as fuel, household gas demand, gas-to-power indices, gas to exports, and gas-based industrial demand did not significantly influence inflation in the long term, there was a notable exception. The reduction in gas flaring volume was found to have a significant and negative impact on inflation, indicating that decreasing gas flaring can contribute to long-term price stability in Nigeria. Based on these findings, specific recommendations were made. It was advised to foster the domestic use of natural gas to reduce dependence on erratic international fuel prices and to implement incentives for households to switch to natural gas, potentially moderating inflation indirectly over time. The study also recommended enhancing the efficiency of the power sector to ensure that the benefits of gas-powered electricity generation are passed on to consumers through stable and reduced costs. To fortify economic resilience against global market shifts, it was suggested to develop domestic gas processing industries that add value to raw gas exports. Most importantly, the significant finding regarding gas flaring necessitates rigorous policies aimed at minimizing this practice, which could be pivotal in stabilizing prices and promoting environmental sustainability concurrently.
Language: English
Domain: Social Sciences
SDG: Climate action
Open Access status: diamond
OpenAlex ID: W4403515897