Revisiting Exchange Rate Pass-Through to Consumer Price Inflation in Nigeria: A Cointegrated Vector Autoregressive Approach

This study revisits the extent of Exchange Rate Pass-Through (ERPT) in Nigeria based on a Cointegrated Autoregressive Model proposed by Johansen (1988, 1995). Using the annual data from 1960 to 2015, it is found that exchange rate has a positive and significant effect on consumer price inflation, captured by CPI both in the short- and long-run dynamics. The findings also show that import price index and trade openness index have positive and significant effects on consumer price inflation; although the effect of import price index is statistically flawed in the short-run. The implication of this study, therefore, is that exchange rate, import price index and trade openness index are the major determinants of consumer price inflation in the long-run but in the short-run the effect of import price index is blunted.