Analyzing the Effect of Oil Price Fluctuations on the Performance of Petroleum Marketing Companies in Nigeria: A Case Study of Total

Analyzing the Effect of Oil Price Fluctuations on the Performance of Petroleum Marketing Companies in Nigeria: A Case Study of Total

Ahmed Umar Farouk

The work analyzes Oil price effect fluctuations on performance of Petroleum products Marketing Companies in Nigeria. Trends of Oil price fluctuations and performance of Petroleum products Marketers are described here. The work further examines the effect of the fluctuation in Oil price on the performance of Petroleum products Marketers, and further checks the causal relationship between fluctuation of Oil price and the performance of Petroleum products Marketers in Nigeria between 1970 and 2018. Secondary data was employed for the analysis. The data was sourced from CBN Annual Report. Graphs were used to describe the trends of variables while the ARCH-GARCH analysis, granger causality test, and Vector Autoregressive analysis were employed in the analysis. Unit root test and the Co-integration test were also used to check for stationarity and long-run relationship, respectively. Jarque-Bera statistic for crude oil price (3.509752) with a probability of 0.172929 indicates normality, while that of Profit after tax is 6.370729 with probability value of 0.041363 indicates that there is no normal distribution. The stationarity test shows that all variables are I(1). Cointegration test showed the existence of one co-integrated equation at 5 per cent level of significance. The Error Correction Term (ECT) has a coefficient of -0.316976 with probability value 0.0184, which is significant at 5%. This indicates that in the short run, performance adjust to about 31% of the price fluctuation, while the remaining 69% is accounted for in the long-run. The F statistics of the ARCH LM test results also indicate that there is no ARCH effect. The F value of 2.02960 for causality from COP to LPAT and with probability value of 0.1564, shows that Oil price fluctuation does not granger-cause Performance of Petroleum products Marketers in Nigeria. Similarly, there is the absence of causal relationship from LPAT to COP, with F statistic and probability value of 0.95211 and 0.4020 respectively, thus there exist no causality between COP and LPAT.
The study recommends that Oil marketers should move from just describing or forecasting oil price volatility as high or low to understanding the dynamics of the oil market.

MBA. Petroleum Economics and Finance

Ghana Technology University Library

September, 2019

Riverson Oppong, (Phd)