Investigating the Effects of Coronavirus Pandemic on Selected Nigerian Macroeconomic Indicators: An Application of VECM

Abstract

This research empirically assessed the impacts of CoV-19 on Nigeria's foreign reserves (FR), exchange rate (EXR), and crude oil price (COP) using 593 daily datasets from January 2, 2020 to May 11, 2022. The number of confirmed CoV-19 cases was sourced from World Health Organization, the EXR, FR, and the COP were obtained from Central Bank of Nigeria (CBN). Johansen cointegration test was used and Vector Error Correction Model (VECM) adopted in the research. The variance decomposition result reveals that the CoV-19 exhibits a strong endogeneity in both the short and long run but weakly predicts the economic variables. The estimates of the variables speed of adjustments shows that CoV-19, COP, EXR and FR are significant at lag one. The error correction term, shows an adjustment rate of -0.0658 for the target variable CoV-19. The Granger/Wald causality test shows that there is no short run causality from CoV-19 to COP, EXR, and FR. The long run causal relationship indicates CoV-19, COP, EXR, and FR have long run relationship among the variables. Long run casual outcome indicates that crude oil price and foreign reserve are negative and significant at 5% level due to infected CoV-19 cases. While 5% increase in infected cases of CoV-19 pandemic will lead to 0.001897 increase in exchange rate in the future.