Macroeconomic Policies and Smuggling: An Analysis of Illegal Oil Trade in Nigeria
September 1, 1994
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Summary
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.
Subject: Anti-smuggling, Commodities, Energy subsidies, Exchange rates, Expenditure, Foreign exchange, Oil, Oil prices, Prices, Revenue administration
Keywords: Anti-smuggling, CFA franc, CFA franc term, currency price, differential in CFA francs, Energy subsidies, exchange rate depreciation, Exchange rates, fiscal policy, foreign currency terms, naira rate, Oil, oil price differential in CFA francs, oil price PN, Oil prices, price differential, price differential in CFA franc term, U.S. dollar exchange rate, West Africa, world petroleum price, WP
Pages:
26
Volume:
1994
DOI:
Issue:
115
Series:
Working Paper No. 1994/115
Stock No:
WPIEA1151994
ISBN:
9781451942880
ISSN:
1018-5941
