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Macroeconomic Policies and Smuggling: An Analysis of Illegal Oil Trade in Nigeria
Author:
Mr. Jian-Ye Wang
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Series:
IMF Working Papers
Volume/Issue:
Volume 1994: Issue 115
Language:
English
Publication Date:
01 Sep 1994
DOI:
https://doi.org/10.5089/9781451942880.001
ISBN:
9781451942880
ISSN:
1018-5941
Pages:
26
Keywords:
WP; CFA franc; price differential; oil price PN; U.S. dollar exchange rate; price differential in CFA franc term; CFA franc term; fiscal policy; exchange rate depreciation; foreign currency terms; world petroleum price; currency price; naira rate; differential in CFA francs; Oil prices; Energy subsidies; Anti-smuggling; Exchange rates; Oil; West Africa; oil price differential in CFA francs
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IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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Based on a simple model, the paper provides an explanation for illegal oil trade between Nigeria and its neighboring countries. The analysis focuses on the linkages between the level of smuggling and changes in the Government’s fiscal, monetary, and domestic pricing policies. It is shown that smuggling has implications for inflation and currency depreciation. A vicious circle emerges when financial policies are expansionary and policy makers attempt to hold the domestic sale price of oil constant. Macroeconomic indicators of Nigeria over the period 1986-1993 appear to support the predictions of the model. Policy implications of the analysis are also noted.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund
Volume 1994: Issue 115