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Author(s): Eduma Enobong Essien, Joseph Dagogo, Biu Emmanuel Oyinebifun.

Volume/Issue: Volume 8, Issue 4 (2025)

Page No: 64-97

Journal: African Journal of Mathematics and Statistics Studies (AJMSS)

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Abstract:

This study, titled “Vector Autoregressive (VAR) Model Forecasting of Petroleum Products Price Rate in Some Nigerian States (Petrol, Diesel, and Kerosene)”, examines the trend, interdependence, and future prediction of petroleum product prices across two Nigerian states. The research evaluates the stationarity and descriptive statistics of the products’ price distributions. Petroleum remains Nigeria’s major revenue source, contributing over 90% annually. However, the 2012 national debate on petroleum pricing exposed inconsistencies in cost determination across agencies, enabling corruption within the subsidy framework. Analysis revealed that prices of petrol, diesel, and kerosene have continued to rise due to inefficiencies and distortions in the distribution chain. The yearly and monthly mean plots (2017–2024) indicate upward trends. Yearly mean plots for Petrol, Diesel, and Kerosene show quadratic trends with coefficients of determination (R²) of 97.2%, 96.1%, and 98.8%, respectively. Monthly mean plots for Petrol and Diesel also exhibit quadratic trends (R² = 90.8% and 92.8%), while Kerosene’s monthly mean shows a linear trend (R² = 86.8%). Correlation analyses and cross-correlation functions show strong positive relationships among the three petroleum products. The series for all products were non-stationary and became stationary after first differencing. In the estimated VAR(2) models, when Petrol Prices served as the dependent variable, only Kerosene Prices were significant at the 5% level; a 1% change in Kerosene Prices caused about a 7.7% change in Petrol Prices. Similarly, when Diesel Prices were the dependent variable, Kerosene Prices remained the only significant predictor, where a 1% change in Kerosene Prices caused a 39.3% change in Diesel Prices. Conversely, when Kerosene Prices were the dependent variable, both Petrol and Diesel Prices were significant, with 1% changes in Petrol and Diesel Prices causing 85.0% and 18.3% changes in Kerosene Prices, respectively. Forecast results indicate that Petrol Prices will experience a slight upward and stable variation, Diesel Prices will trend upward, and Kerosene Prices will fluctuate gradually from 2025 to 2027. Predicted prices range from ₦183.19–₦225.93 for Petrol, ₦191.35–₦1121.25 for Diesel, and ₦451.76–₦1866.88 for Kerosene.

Keywords:

Vector Autoregressive (VAR), Petroleum Products Price, Trend, Stationarity, Forecasting.

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