INTERNATIONAL JOURNAL OF RESEARCH AND INNOVATION IN SOCIAL SCIENCE (IJRISS)

ISSN No. 2454-6186 | DOI: 10.47772/IJRISS | Volume IX Issue X October 2025

Oil Price, Monetary Policy and Macroeconomic Varaibles in Africa.

Prof Sanya Ogunsakin, Dr Abubakar Tafa Hassanat

Department of Economics, Faculty of the Social Sciences, Ekiti State University, Ado Ekiti.

Federal College of Education, Okene, Kogi State.

DOI: https://dx.doi.org/10.47772/IJRISS.2025.91100195

Received: 12 October 2025; Accepted: 18 October 2025; Published: 05 December 2025

ABSTRACT

Oil price fluctuations significantly affect African economies, influencing growth, inflation, exchange rates, and

investment, with effects differing between net oil exporters and importers due to structural and institutional

variations. This study examines the relationship among oil price, monetary policy, and macroeconomic variables

in African countries from 1990Q1 to 2023Q4, using data from the World Energy Information, IMF, and World

Bank, analyzed via descriptive statistics, Panel ARDL, EGARCH, Panel SVAR, and Granger causality tests.

Results show that oil prices are volatile and exert asymmetric effects on monetary and macroeconomic variables.

In net oil exporters, positive shocks trigger significant positive responses, while negative shocks are weaker; the

opposite pattern is observed in net oil importers. Long-run co-movement exists among oil price, monetary policy,

and macroeconomic variables, with unidirectional causality from oil price to these variables and bi-directional

causality with output growth and investment. The study concludes that oil price fluctuations exert significant,

asymmetric, and persistent effects on monetary policy and macroeconomic variables, with impacts differing

between net oil exporters and importers, highlighting the importance of incorporating oil price dynamics in

economic planning and policy formulation. The study recommends monitoring global oil prices in policy

formulation and pursuing economic diversification to reduce vulnerability to oil price shocks.

Keywords: Oil price volatility, Monetary policy, Macroeconomic variables, Net oil exporters, Net oil importers,

Africa, Panel ARDL, EGARCH, Granger causality, Structural VAR

INTRODUCTION

Oil price dynamics, monetary policy behaviour, and macroeconomic performance remain important issues in

macroeconomic research, particularly for resource-dependent and structurally fragile African economies. Global

oil markets are highly volatile, shaped by geopolitical conflicts, supply-demand changes, technological shifts in

energy production, and policy decisions by major producers (Balcilar et al., 2020; Rafiq & Bloch, 2016). For

African countries, especially those reliant on crude oil exports such as Nigeria, Angola, Algeria, and Gabon, oil

price movements directly influence fiscal revenues, external reserves, exchange-rate stability, and overall

macroeconomic conditions. High oil prices often strengthen fiscal performance and reserves, while declines

typically worsen budget deficits, cause currency depreciation, increase inflationary pressures, and weaken

economic growth (Mensi et al., 2023).

Oil-importing African economies experience a different yet equally significant vulnerability. Rising global oil

prices increase import costs, widen current account deficits, elevate production and transportation expenses, and

contribute to rising domestic prices (Adu et al., 2019). Declines in oil prices may provide temporary relief but

do not eliminate structural weaknesses. Because most African economies rely heavily on petroleum products for

energy and transportation, oil price volatility remains a major macroeconomic risk across the continent. Weak

institutional frameworks, shallow financial systems, limited diversification, and foreign exchange constraints

amplify these vulnerabilities, making African economies highly sensitive to external shocks (Balcilar et al.,

2020).

Monetary policy in Africa operates within this complex and constrained environment. Many African central

banks must navigate weak monetary transmission mechanisms, fiscal dominance, limited operational

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INTERNATIONAL JOURNAL OF RESEARCH AND INNOVATION IN SOCIAL SCIENCE (IJRISS)

ISSN No. 2454-6186 | DOI: 10.47772/IJRISS | Volume IX Issue X October 2025

independence, and exchange-rate pressures (Adu et al., 2019). Oil price fluctuations complicate policy

implementation by affecting inflation expectations, liquidity conditions, foreign exchange demand, and interest

rate stability. For oil-exporting nations, falling oil revenues often pressure central banks to support government

financing or defend the domestic currency, actions that may compromise policy credibility. Even in economies

with ongoing reforms such as movement toward inflation-targeting and exchange-rate flexibility oil price shocks

continue to pose significant challenges (Mensi et al., 2023).

Recent global disruptions have heightened the urgency of understanding these dynamics. The COVID-19

pandemic triggered an unprecedented collapse in oil demand, leading to volatile prices and severe

macroeconomic consequences across Africa. Subsequently, geopolitical tensions, especially the Russia–Ukraine

conflict, drove global energy prices upward and created renewed uncertainty. These shocks underscore that

African economies remain significantly exposed to external commodity price movements, making effective and

responsive monetary policy frameworks essential (Rafiq & Bloch, 2016).

Despite extensive literature on oil price shocks and macroeconomic performance, important knowledge gaps

persist. First, many studies treat African economies as a homogenous group, overlooking structural differences

such as economic diversification, fiscal strength, monetary policy regimes, institutional quality, and exchange-

rate arrangements (Balcilar et al., 2020). This generalization limits the applicability of findings for policy

formulation.

Second, although oil price shocks clearly influence inflation, exchange rates, interest rates, and output across

Africa, the specific monetary policy responses to these shocks are not well understood. Research has focused

more on advanced and emerging economies, where central banks operate with stronger independence and deeper

financial markets. African central banks face distinct constraints that shape policy responses, yet these

institutional realities are often not sufficiently incorporated into empirical analysis (Adu et al., 2019).

Third, findings in the existing literature remain inconsistent, with studies reporting varying effects of oil price

shocks on macroeconomic variables. These divergences stem from differences in methodologies, study periods,

data frequency, and failure to account for nonlinearities or asymmetries. Moreover, many earlier studies do not

reflect recent global disruptions or modern monetary policy reforms occurring across Africa, resulting in gaps

between past empirical evidence and present macroeconomic realities (Mensi et al., 2023).

Finally, most research examines oil price dynamics, monetary policy behaviour, and macroeconomic

performance separately. There is a lack of integrated frameworks that simultaneously assess how oil price

volatility influences monetary policy decisions and, in turn, shapes macroeconomic outcomes. Given the

complexity of these relationships, a holistic analytical approach is required to produce more accurate insights

and policy-relevant findings (Rafiq & Bloch, 2016).

Although oil price volatility plays a crucial role in shaping macroeconomic outcomes across Africa, substantial

gaps remain in understanding how these shocks interact with monetary policy behaviour under diverse structural

and institutional conditions. Addressing these gaps is essential for improving the resilience of African

economies, enhancing policy effectiveness, and designing robust stabilization mechanisms capable of mitigating

the adverse effects of global oil market volatility (Balcilar et al., 2020; Adu et al., 2019; Mensi et al., 2023; Rafiq

& Bloch, 2016).

This study contributes to the literature by providing an integrated analysis of oil price dynamics, monetary policy

behaviour, and macroeconomic performance in African economies, accounting for structural differences,

institutional constraints, and recent global shocks. Methodologically, it employs advanced panel econometric

techniques that capture asymmetries and nonlinearities in the interactions between oil prices, policy responses,

and macroeconomic outcomes, addressing gaps in previous empirical work.

Following this introduction, Section Two reviews the relevant literature on oil price shocks, monetary policy,

and macroeconomic performance in Africa. Section Three outlines the methodology, including data sources,

model specification, and estimation techniques. Section Four presents and discusses the empirical results, while

Section Five concludes the paper with policy implications and recommendations.

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INTERNATIONAL JOURNAL OF RESEARCH AND INNOVATION IN SOCIAL SCIENCE (IJRISS)

ISSN No. 2454-6186 | DOI: 10.47772/IJRISS | Volume IX Issue X October 2025

CONCEPTUAL LITERATURE

Conceptual literature on oil prices, monetary policy, and macroeconomic variables highlights the complex

interactions that shape economic outcomes, particularly in African economies. Oil prices, benchmarked against

indicators such as Brent, WTI, and OPEC baskets, are influenced by global supply-demand conditions,

geopolitical tensions, and speculative activities (Hamilton, 2009; Kilian & Murphy, 2014). For oil-exporting

countries like Nigeria, Angola, and Libya, fluctuations in oil prices directly affect fiscal revenues, foreign

reserves, and economic growth, often creating resource curse and Dutch disease effects (Adeniran, Oladipo, &

Adeoye, 2021; Corden & Neary, 1982). In contrast, oil-importing nations such as Kenya, Ghana, and South

Africa face higher import bills, inflationary pressures, and constrained growth when oil prices surge (Mwase &

Kumah, 2015).

Oil price shocks, defined as unanticipated deviations from expected prices, and oil price volatility, reflected in

erratic or sharp price movements, significantly influence economic behavior (Baumeister & Kilian, 2016a; Chuu,

2012; Hooker, 1996). Supply-side factors include crude availability and uncertainty about future production,

while demand-side shocks arise from changes in economic activity or precautionary demand for energy (Fattouh,

2007; Hamilton, 2009a; Kilian, 2008, 2009a). Volatility affects household consumption, savings, and business

costs, creating challenges for macroeconomic stability (Carroll, 1990; Romer, 1990; Banito, 2004; Johnson,

2006).

Monetary policy, the set of central bank actions regulating money supply, interest rates, and credit, aims to

ensure price stability, sustainable growth, and exchange rate stability (Mishkin, 2019). In Africa, policy

effectiveness is constrained by shallow financial markets, weak central bank independence, and fiscal

dominance, while oil price shocks create conflicting policy objectives (Adu & Marbuah, 2019; Mishra, Montiel,

& Spilimbergo, 2014). Policies may be expansionary, stimulating growth through increased liquidity, or

contractionary, controlling inflation via tighter money supply (Mathai, 2009; Niculae, 2013). Policy frameworks

such as inflation targeting, interest rate targeting, and exchange rate targeting guide the transmission of monetary

actions to the economy (CBN, 2011; Todaro & Smith, 2004). Monetary policy dynamics describe how

adjustments in instruments propagate through output, prices, and financial conditions (Romer & Romer, 2004;

Tomasz & Aaron, 2009; Olivier, 2012).

Macroeconomic variables, including GDP, inflation, exchange rates, and unemployment, signal the overall

health of the economy and inform policy decisions (Catalan, 2023; US CBN, 2017; World Bank, 2023). These

variables are sensitive to oil price shocks and monetary policy interventions. Economic uncertainty from

unpredictable events or incomplete information affects consumption, investment, and savings, emphasizing the

need for credible, stable, and well-coordinated fiscal and monetary policies (Carroll, 1990; Banito, 2004; Romer,

1990).

In conclusion, conceptual literature underscores the intertwined nature of oil price movements, monetary policy,

and macroeconomic variables, showing that oil shocks amplify the challenges of economic management,

particularly in resource-dependent African economies. Effective policy responses require coherent frameworks,

credibility, and careful consideration of the asymmetric effects of shocks on growth, inflation, and exchange

rates.

Theoretical Literature

The theoretical literature on oil prices, macroeconomic performance, and monetary policy provides an integrated

framework for understanding their complex interactions, especially in resource-dependent economies. The

Mundell-Fleming framework, extending the IS-LM model to open economies, highlights the interaction between

fiscal and monetary policies under different exchange rate regimes (Mundell, 1963; Fleming, 1962; Obstfeld &

Rogoff, 1995). In oil-importing countries, oil price increases raise import costs, worsen the balance of payments,

and induce currency depreciation. Fixed exchange rate regimes constrain monetary policy through reserve

interventions, whereas flexible regimes allow direct responses to inflationary pressures, albeit with exchange

rate volatility. Monetary policy effectiveness depends on transmission channels such as interest rates, credit,

exchange rates, and inflation expectations (Mishkin, 2019), yet in many African economies, weak financial

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INTERNATIONAL JOURNAL OF RESEARCH AND INNOVATION IN SOCIAL SCIENCE (IJRISS)

ISSN No. 2454-6186 | DOI: 10.47772/IJRISS | Volume IX Issue X October 2025

systems limit credit and interest channels, leaving exchange rate and inflation expectations channels as dominant

mechanisms (Adu & Marbuah, 2019).

Oil shocks exhibit asymmetric effects on macroeconomic outcomes: exporters gain from positive shocks but

suffer from negative ones, while importers experience the opposite (Kilian & Vigfusson, 2011). Empirical

studies confirm that oil price increases elevate inflation and reduce growth in importing African countries, while

exporters enjoy temporary fiscal gains but face long-term volatility (Berument & Ceylan, 2017; Adeniran et al.,

2021; Mensah et al., 2019; Mwase & Kumah, 2015; Balcilar et al., 2020). Theoretical explanations for oil price

fluctuations include the speculative behaviour hypothesis, which attributes price changes to market expectations

and speculative activity (Kaufmann & Ullman, 2009; Singleton, 2010); the global business cycle-induced

demand shift hypothesis, linking oil prices to global economic growth and demand from emerging economies

(Baumeister & Kilian, 2016; Baumeister & Peersman, 2009); the global production-induced supply shift

hypothesis, emphasizing exogenous and endogenous disruptions to oil production (Economou, 2016; Kilian,

2009a); and the unexpected inventory demand shift hypothesis, highlighting the role of stocks disequilibrium

and storage behavior in short-term price dynamics (Kilian, 2008a; Drollas, 2012; Alquist & Kilian, 2010).

Additional perspectives include the macro-economic environment hypothesis, which links oil price changes to

monetary and fiscal conditions in major economies, particularly the US (Akram, 2009; Krichene, 2008), and the

OPEC cartel hypothesis, underscoring the market power of major oil producers, especially Saudi Arabia, in

stabilizing oil prices (Kilian, 2015; Baumeister & Kilian, 2016).

The impact of oil prices on growth is addressed by the linear symmetric relationship theory, which posits that

oil price volatility reduces output growth, particularly in net oil-importing countries (Hooker, 2002; Laser, 1987),

and the Renaissance Growth Theory, which distinguishes between price changes and volatility, asserting that

volatility has immediate negative effects while price changes exert delayed impacts (Lee, 1998). Resource booms

may also induce Dutch Disease, whereby rapid growth in resource sectors adversely affects non-resource

tradable sectors through real exchange rate appreciation and labor reallocation (Gregory, 1976; Corden & Neary,

1982). The spending effect raises demand for non-tradables, while the resource movement effect draws labor

into booming sectors, reducing output elsewhere. The monetary effect further amplifies inflationary pressures

when export booms generate unsterilized increases in money supply (Edwards, 1985).

Monetary policy theories complement these perspectives by explaining the relationship between money supply,

prices, and economic activity. The classical quantity theory of money, including Fisher’s cash transaction

approach and the Cambridge cash-balance approach, links changes in money supply proportionally to price

levels under assumptions of constant income, velocity, and full employment (Fisher, 1926; Vaish, 2002; Ahuja,

2009). While useful, these approaches are criticized for ignoring cyclical fluctuations, relative prices, and

speculative demand. Friedman’s modern quantity theory integrates money as a determinant of both price levels

and economic activity, asserting that short-run changes in money supply drive output and employment

fluctuations, whereas long-run output is determined by real factors such as capital, technology, and labor

(Friedman, 1950s; Ahuja, 2009). Keynesian monetary theory further refines these views, showing that money

supply affects aggregate demand and interest rates, with inflation arising only after full employment,

emphasizing the short-run impact of monetary policy on output and employment before price adjustments occur

(Keynes, 1936; Ahuja, 2009).

In conclusion, these theoretical frameworks collectively illustrate the intricate relationships between oil price

volatility, macroeconomic performance, and monetary policy, emphasizing the need for context-specific policy

interventions in African economies. They highlight the asymmetric effects of oil shocks, the role of global

economic and production factors, and the critical influence of monetary policy in moderating inflation and

stabilizing output, providing a foundation for empirical analysis and policy recommendations tailored to

resource-dependent nations.

Empirical Literature

Empirical studies indicate that oil price fluctuations and monetary policy significantly influence macroeconomic

performance, though results are often mixed. In developed economies, oil price shocks generally reduce output,

affect employment, and trigger asymmetric monetary responses (Sadorsky, 1999; Hooker, 1996; Cunado &

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Gracia, 2003; Miller & Ratti, 2009), while some studies report limited positive effects on investment and

employment (Matthew & Godneless, 2020; Veronica & Joy, 2020). In developing countries, particularly in

Africa, oil price volatility strongly affects growth, inflation, exchange rates, and investment, with oil-exporting

nations benefiting from price increases and importers suffering depreciations (Aliyu, 2009; Akpan, 2009;

Babatunde, 2015; Olaleye, Johnson & Muheeden, 2020). Monetary policy shocks also influence output and

inflation, often with short- and long-term effects (Udah, 2009; Hassan, 2009; Adofu & Salami, 2017). However,

empirical findings remain inconclusive: some studies find no significant relationship between oil prices and

macroeconomic variables, while others report positive connections. Few studies simultaneously examine oil

price and macroeconomic variables, and even fewer separate oil price shocks from volatility. This study

addresses these gaps by measuring shocks with structural VAR, volatility with E-GARCH, and decomposing oil

price changes into positive and negative components to assess their distinct effects on macroeconomic outcomes.

METHODOLOGY

This study examines the relationship among oil prices, macroeconomic variables, and monetary policy variables

in selected African countries between 1990q1 and 2023q4. The methodology integrates theoretical foundations,

model specifications, variables, estimation techniques, and data sources.

Theoretical Framework

The study is grounded in Investment under Uncertainty (Dixit & Pindyck, 1994) and Real Business Cycle Theory

(Kydland & Prescott, 1982). Investment under uncertainty explains that firms and households delay irreversible

investments under economic uncertainty, affecting consumption, productivity, employment, and GDP growth

(Aloui et al., 2016; Kilian, 2014; Bernanke, 1983; Guidi, 2010). Real Business Cycle Theory attributes economic

fluctuations to real shocks, including oil price changes, technology shocks, and policy shifts, which alter labor

and capital productivity and affect output (Brown & Yucel, 2002; Su et al., 2021; González & Nabiyev, 2009;

George, 1994).

Model Specification

The study specifies models for each objective:

Oil price → monetary policy variables:

i.

X_it=αY_it−1+βX_it+γZ_it+ϕi+ε_itX_it= αY_{it-1}+ βX_it+ γZ_it+ φ i + ε_itXit=αY_it−1+βX_it+γZ_it+ϕi+ε_it

Oil price → macroeconomic variables:

ii.

ΔY_t=α0+βΔY_t−1+γΔX_t−J−λ1Y_t−1+λ2X_t−1+ε_tΔY_t= α0 + βΔY_{t-1}+γΔX_{t-J}- λ1Y_{t-1}+ λ2 X_{t-1}+ ε_tΔY_t=α0

+βΔY_t−1+γΔX_t−J−λ1Y_t−1+λ2X_t−1+ε_t

iii.

iv.

Oil price volatility: Modeled using E-GARCH.

Asymmetric shocks: Modeled with Panel Structural VAR (P-SVAR) assuming oil price is exogenous

contemporaneously.

v.

Causal links: Estimated through Panel Granger Causality among oil price, monetary policy, and

macroeconomic variables.

Variables

Key variables include:

i.

Macroeconomic: RGDP, REER, GFCF, CPI, RIR, unemployment.

Monetary policy: MPR, broad money supply, PLR.

ii.

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iii.

Oil price: World oil price per barrel (USD).

Data are sourced from IMF, OPEC, World Bank, central banks, and energy databases.

Estimation Techniques

i.

ii.

Panel NARDL: Short- and long-run effects.

Panel Structural VAR: Asymmetric effects.

iii.

iv.

v.

Panel Granger Causality: Direction of relationships.

Panel Unit Root, Cointegration, IRF, FEVD: Stationarity, long-run relationships, shock transmission.

Cross-sectional dependence: Handled via bootstrapping (Westerlund, 2007; Ishibashi, 2012).

Data span 1990 Q1 – 2023 Q4, using quarterly frequency. Exogenous factor: world oil price; endogenous factors:

macroeconomic and monetary policy variables.

RESULTS AND DISCUSSIONS

The study begins with descriptive statistics to assess the normality and variability of the data. Skewness indicates

deviation from symmetry (0 = normal; positive = right-skewed; negative = left-skewed), while kurtosis measures

peakedness (3 = normal; >3 leptokurtic; <3 platykurtic). The Jarque-Bera test confirms normality for all

variables, as probability values exceed 0.05. In both net oil-exporting and importing African countries, the mean

monetary policy rate (MPR) is the highest among selected variables, while GDP has the lowest mean. Maximum

log values are highest for MPR in exporters and unemployment in importers, whereas GDP records the lowest

minimum log value in importers, and the real effective exchange rate (REER) is lowest in exporters. Gross fixed

capital formation (GFCF) exhibits the highest variability in exporters, followed by the prime lending rate (PLR);

in importers, the real interest rate (RIR) shows the highest standard deviation. Most variables are leptokurtic,

while GDP, CPI, GFCF, money supply (MS), and world oil price (WOP) display near-normal skewness,

providing a robust foundation for further analysis.

Panel unit root tests indicate mixed integration orders. RGDP, GFCF, and inflation (CPI) are stationary at level,

I(0), while MS, MPR, unemployment, RIR, and PLR are stationary at first difference, I(1), in both net oil-

exporting and importing countries. Tests applied include Levin-Lin-Chu (LLC), Im-Pesaran-Shin (IPS), Fisher-

ADF, Fisher-PP, and Zivot-Andrews (ZA). Co-integration analysis using the ARDL bounds test confirms a long-

run relationship among oil price, monetary policy, and macroeconomic variables, as the F-statistic (7.137)

exceeds the 5% upper critical bound (3.52). This long-run equilibrium can be adjusted in the short run using an

Error Correction Mechanism (ECM).

Lag selection based on the Akaike Information Criterion (AIC) determined optimal lags of 8 for African oil-

exporting countries and 11 for oil-importing countries. Panel ARDL analysis examining the effect of oil price

on monetary policy variables shows that in net oil exporters, oil price changes positively and significantly affect

MPR in both the short and long run, with an ECT of 15.3% indicating stable long-run adjustment. In net oil

importers, oil price negatively affects MPR in the long run but positively in the short run, with long-run

equilibrium statistically insignificant. Oil price effects on MS are generally insignificant in the long run but

positive and significant in the short run, particularly in exporters. PLR responds positively to oil price increases

in both country groups, with varied significance for negative price changes. These results highlight

heterogeneous transmission of oil price shocks on monetary policy across African economies.

Regarding macroeconomic variables, oil price shocks significantly affect economic outcomes differently for

exporters and importers. In exporters, a 1% oil price increase raises real output growth by 6.1% (2.6% short run),

appreciates the REER by 8.3% (16.3% short run), lowers RIR by 21.3% (2.3% short run), increases inflation by

15.3%, boosts GFCF by 10.6%, and reduces unemployment. In importers, a 1% price increase reduces output

by 3.4% (2.6% short run), depreciates the REER by 13.14% (17.6% short run), lowers RIR by 11.3% (1.6%

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short run), increases inflation by 8.5%, reduces GFCF, and raises unemployment. Error correction terms indicate

movement toward long-run equilibrium, significant only in exporters (17.08% adjustment). Short-run effects

largely mirror long-run trends at smaller magnitudes.

Finally, asymmetric effects of oil price shocks on monetary policy and macroeconomic variables were examined

using a Structural Vector Autoregressive (SVAR) model. Impulse Response Functions (IRF) reveal that positive

oil shocks increase output growth and GFCF in exporters but reduce them in importers over time, while negative

shocks lower output in exporters but favor growth in importers. Inflation rises following positive shocks in

exporters but is largely unaffected in importers. REER in exporters shows delayed appreciation to positive

shocks and depreciation to negative shocks, whereas importers’ exchange rates react sluggishly and negatively

to adverse shocks. Forecast Error Variance Decomposition (FEVD) shows oil price shocks contribute most to

REER volatility, accounting for 5% in the first quarter and peaking at 26% by the twenty-fifth quarter, with

money supply, GDP growth, domestic interest rates, CPI, and fiscal deficits contributing variably over time.

Overall, the findings demonstrate that oil price fluctuations exert significant and divergent effects on monetary

policy and macroeconomic variables across African net oil-exporting and importing countries, with long-run

equilibrium confirmed and heterogeneous short-run dynamics captured effectively by ARDL and SVAR models.

To assess the effect of oil price volatility, GARCH models were employed. After confirming stationarity, ARCH

and GARCH tests were conducted. The ARCH test (Table 4.17) rejected the null hypothesis of no ARCH effect

at the 1% level, confirming the presence of volatility clustering in world oil prices. The AR(1)-GARCH(1,1)

results for selected African countries indicate significant ARCH and GARCH coefficients in most countries,

suggesting persistent volatility.

The conditional variance equation from the E-GARCH(1,1) model shows that world oil price volatility is

asymmetric, with positive shocks exerting a larger impact than negative shocks, particularly benefiting net oil-

exporting countries. The persistence of volatility indicates that oil price shocks tend to continue over time,

consistent with fluctuations observed in international markets since mid-2014.

Diagnostic tests for heteroskedasticity (Table 4.18) confirmed the robustness of the E-GARCH results, with no

evidence of remaining ARCH effects. Overall, the findings indicate that oil price volatility is significant,

persistent, and asymmetric, with important implications for both monetary policy and macroeconomic stability

in African countries.

To examine causal relationships, panel Granger causality tests were conducted for net oil-exporting and net oil-

importing African countries. In net oil exporters, results show that oil price Granger-causes most macroeconomic

(GDP, GFCF, CPI, unemployment, REER) and monetary policy variables (MPR, money supply, real interest

rate), while GDP and GFCF also Granger-cause oil price, indicating bidirectional causality with these two

variables. For other variables, causality runs unidirectionally from oil price, consistent with findings by Obadi

and Korcek (2018), Olayungbo (2019), and Al-Hajj et al. (2017).

In net oil importers, oil price similarly predicts GDP, GFCF, and other macroeconomic and monetary variables,

though the effects are generally weaker, with fewer bidirectional links. Overall, the results indicate that oil price

is a significant driver of both macroeconomic and monetary policy dynamics in African countries, with stronger

causal influence in exporters than importers.

DISCUSSION OF FINDINGS

The study reveals that oil price fluctuations significantly influence macroeconomic (GDP, inflation, exchange

rate, interest rate, unemployment, gross fixed capital formation) and monetary policy variables (monetary policy

rate, money supply, prime lending rate) in African countries, with effects differing between net oil exporters and

importers. Positive oil price changes significantly affect variables in exporters but have limited impact in

importers, while volatility negatively and significantly affects importers. Asymmetric oil price shocks show

divergent effects: negative shocks harm exporters, whereas positive shocks benefit importers. Causality tests

indicate unidirectional links from oil price to GDP, inflation, investment, and monetary policy rate, and

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bidirectional links with exchange rate and interest rate. Impulse response and variance decomposition suggest

that oil price decreases partially transmit to macroeconomic and monetary variables. Overall, the findings

confirm that oil price shocks and volatility materially affect economic and monetary outcomes, consistent with

prior studies (Ghosh et al., 2009; Olomola, 2022; Charitian et al., 2019; Akpan, 2009).

SUMMARY AND CONCLUSION

This study investigated the relationship among oil price, monetary policy, and macroeconomic variables in

African net oil exporting and importing countries from 1990Q1 to 2023Q4, using descriptive statistics, panel

ARDL, and Panel SVAR and found that variables were non-normally distributed with oil prices skewed left,

long-run co-movement exists among oil price, monetary policy, and macroeconomic variables, oil price

significantly affects most monetary and macroeconomic variables, and its volatility plays a critical role in

shaping economic outcomes, making these economies vulnerable to shocks (Ghosh et al., 2009, 2017; Balcilar

et al., 2020). Panel causality tests showed that oil price generally drives changes in monetary and macroeconomic

variables, with bidirectional effects observed for GDP and gross fixed capital formation, and positive oil price

shocks increased GDP in net oil exporters but reduced it in net oil importers, while negative shocks had converse

effects, with other variables including interest rates, inflation, exchange rates, unemployment, and investment

responding differently depending on country type. The study concludes that oil price changes significantly and

asymmetrically affect macroeconomic and monetary variables, that oil price volatility is a key determinant of

economic performance and policy outcomes, and recommends that exporters diversify their economies,

importers adopt renewable energy, policymakers monitor oil price trends, alternative energy be intensified, and

policies be dynamically consistent and credible. The study contributes by providing a comparative analysis of

oil price effects on monetary and macroeconomic variables across African exporters and importers, highlighting

asymmetric relationships, and employing linear and nonlinear modeling to capture complex dynamics, while

future research could use higher-frequency data and integrate political, social, and institutional factors using

mixed methods for richer policy insights.

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APPENDIX

Consolidated Tables of Descriptive and Empirical Results

Table A1: Descriptive Statistics of Variables

Variables

Net Oil

Exporters

Importers

Mean

Median Std.Dev Skewness Mean

Median Std.Dev Skewness

WOP

WOP+

WOP-

RGDP

CPI

4.1341

4.4621

-2.84

4.934

-0.4311 2.3461

3.112

1.433

1.2113

3.441

1.621

0.143

1.431

3.678

2.441

1.634

4.113

1.462

-3.411

2.162

0.062

1.432

1.423

0.731

7.9311 -0.1141 3.431

-2.362 1.9311 -0.165

1.4562 1.462

-3.621 -2.461

-3.421 4.033

21.91

-35.11 -3.431

5.631

92.116

0.631

71.341 44.345 2.0913

REER

GFCF

0.5342 0.291

0.0631

0.431

2.456

-0.621

1.621

-3.441

-

1.344

-3.4621

0.1452

PLR

MPR

MOS

UEP

RIR

0.1441

2.3411

1.621

1.631

0.621

0.6341 1.456

2.6311

0.621

1.623

0.431

0.621

1.462

1.433

2.456

3.411

0.621

1.431

-1.433

-1.461

1.721

0.034

0.631

2.456

-4.562 2.3411 2.672

0.462

2.144

1.462

2.611

2.341

0.456

-3.112 1.411

0.314 2.413

1.4621 4.146

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Table A2: Panel Unit Root Test

Variable Exporters (ADF Exporters (1st Importers (ADF Importers (1st

Level/Intercept)

Difference)

Level/Intercept)

Difference)

WOP

WOP+

WOP-

RGDP

CPI

-2.63

-0.411

-1.52

-0.311

-2.65

-0.436

-1.633

-0.433

-6.431

-1.621

-0.632

-0.331

-2.431

-0.362

-2.331

-1.463

-1.54

-0.325

-0.522

-0.322

-5.320

-0.510

-0.521

-0.221

-1.320

-0.251

-1.221

-0.352

-0.44

-0.33

0.33

0.22

0.94

0.83

REER

GFCF

PLR

-0.94

-0.83

0.942

0.831

-0.621

-0.312

0.131

-0.510

-0.211

0.120

MPR

MS

RIR

-0.131

0.113

-0.120

0.112

UEP

Table A3: Lag Length Selection Criteria

Lag Exporters AIC Exporters SC Importers AIC Importers SC

0

26.5344

5.9552

4.2721

3.2954

2.6553

26.6174

6.4534

5.1855

4.6240

4.3991*

19.0549

-1.2360

-2.9678

-3.9738

-4.5581

19.1380

-0.7378

-2.0544

-2.6452

-2.8143*

1

2

3

4*

Optimal lag marked with asterisk ().*

Table A4: Panel ARDL Results – Selected Macroeconomic Variables

Variable

Region Long-Run Coeff (p-value) Short-Run Coeff (p-value)

Monetary Policy Rate

Exporters 0.1456 (0.0468)

Importers -0.6382 (0.0671)

Exporters 0.5332 (0.1282)

0.1535 (0.0674)

0.0468 (0.0632)

0.3734 (0.1349)

Money Supply

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Importers -0.5368 (0.0467)

Exporters 0.6142 (0.3335)

Importers 0.6637 (0.0074)

Exporters 0.0646 (0.0462)

Importers -0.0674 (0.0342)

0.0049 (0.6382)

-0.3968 (0.2974)

-0.0938 (0.0065)

0.1304 (0.0345)

-0.1778 (0.4321)

0.0736 (0.0538)

-0.1625 (0.0438)

-0.2369 (0.0734)

-0.6289 (0.0341)

-0.4628 (0.0001)

-0.4178 (0.0000)

0.1064 (0.0678)

-0.6241 (0.0484)

0.2168 (0.0735)

-0.2218 (0.0462)

Prime Lending Rate

Real Output Growth

Real Effective Exchange Rate Exporters 0.0344 (0.0563)

Importers 0.0864 (0.0246)

Real Interest Rate

Inflation Rate

GFCF

Exporters -0.2135 (0.0342)

Importers -0.6382 (0.0612)

Exporters -0.0693 (0.0431)

Importers 0.0859 (0.0582)

Exporters 0.2368 (0.0363)

Importers 0.1683 (0.0472)

Exporters 0.0616 (0.0638)

Importers -0.6346 (0.0424)

Unemployment Rate

Source: Author’s Computation, 2025.

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