COVID-19 Pandemic and Volatility Persistence of the Nigerian Crude Oil Price

Abstract

Impacts of COVID-19 pandemic on the global economy cannot be overemphasized, especially with Nigeria, which largely depends on crude oil as a major source of her revenue. Thus, investigating COVID-19’s impacts on the volatility persistence of Nigerian crude oil price forms the nucleus of this study. Our modelling framework was based on GARCH, EGARCH and GJR-GARCH with two asymmetric innovation distributions  Daily price data on the Nigerian crude oil sales (in dollars per barrel), ranging from 4th Jan., 2010 to 27th May, 2021, were obtained from the Central Bank of Nigeria (CBN). To capture the impact of the pandemic, the data were divided into two periods, before Covid-19 was proscribed as a pandemic by World Health Organisation (01/04/2010 to 10/03/2020) and during COVID-19 pandemic (11/03/2020 to 27/05/2021). Result shows that the leverage effect were positive and significant in both periods which indicates that positive shocks increases volatility more than negative news of the same sign. Also, EGARCH-SSTD and GJR-GARCH (1,1)-SSTD were the best fitted models for before and during pandemic respectively. Result shows that volatility persistence was higher during COVID-19 period (1.012639) than before the COVID-19 pandemic (0.988749) .There was also an increase and over persistence in the volatility of Nigerian crude oil price during COVID-19 than before COVID-19 period.