Nigeria’s Inflation in the Era of Liquefied Natural Gas Exports: Insights from 2000-2021 ARDL Cointegration Analysis

Abstract

This paper presents a comprehensive analysis of the impact of Liquefied Natural Gas (LNG) exports on inflation in Nigeria over the period 2000–2021. Utilizing the Autoregressive Distributed Lag (ARDL) bound co-integration approach, the study investigated both long-term and short-term relationships between LNG exports, natural gas prices, crude oil prices, and inflation in Nigeria. The Augmented Dickey-Fuller (ADF) unit root test indicated a mixed order of integration for the variables, suggesting the appropriateness of the ARDL cointegration method. The empirical results revealed the presence of a long-term relationship among these factors. In the long term, LNG exports, natural gas prices, and crude oil prices exhibited varying effects on inflation. While natural gas prices and crude oil prices had a statistically significant adverse impact on inflation at a 5% significance level, LNG exports did not show statistical significance. In the short term, LNG exports displayed both a negative and statistically insignificant influence, whereas crude oil prices had a positive and statistically significant effect. Natural gas prices, on the other hand, did not impact inflation significantly in the short term. The Granger causality tests revealed that there is no causal relationship between LNG exports and inflation in Nigeria. Although the influence of LNG exports on inflation lacks statistical significance, it is recommended that the government continue its commitment to the LNG sector, focusing on infrastructure and technology investments to enhance competitiveness and efficiency. Expanding into new markets and diversifying the LNG portfolio will ensure a steady revenue stream while prioritising economic diversification beyond the oil and gas sector