The existence of asymmetry in exchange rate pass-through to consumer prices in Nigeria

The present study investigated the existence of asymmetry in exchange rate pass-through to consumer prices in Nigeria by collecting monthly data over the period of 2001 to 2015 from various sources. Owing to the absence of a long-run relationship, results showed that, over the short term, consumer prices in Nigeria have adaptive expectations; the case of imported inflation was also found; partial/incomplete exchange rate pass-through was found over the short term and the pass-through estimates became larger when the asymmetric effect of exchange rate changes was considered; differences in the responsiveness of consumer prices to exchange rate appreciation and depreciation were also registered. However, industrial production index had no significant role in the determination of consumer prices in Nigeria. The prevalence of imported inflation in the Nigerian economy reflects the larger proportion of imported goods in the consumption baskets of Nigerians. To this end, it is suggested that governments at all levels should give adequate and timely incentives to local producers so that their products could become affordable. Nigerians are also encouraged to patronize “Made-in-Nigeria” products so as to make government policy initiatives effective.

Key words: Exchange rate pass-through, consumer prices, Non-linear ARDL.