Authors:
Deebom Zorle Dum

Addresses:
Department of Mathematics and Statistics, Rivers State Universal Basic Education Board (RSUBEB), Port Harcourt, Rivers State, Nigeria. 

Abstract:

The study examines volatility and return dynamics of four global crude oil benchmarks – Crude Oil Average (COA), Brent (COB), Dubai (COD), and West Texas Intermediate (COWTI) – denominated in Nigerian naira per barrel from January 1982 to April 2023. Monthly price data comprising 1,984 observations were obtained from the Energy Information Administration website. Using EViews 10, the study employed primary diagnostics such as descriptive statistics, unit root tests, correlation analysis, and the Jarque-Bera test to assess normality. Log transformation and performance were applied to ensure stability and detect volatility. The results showed that all price series were right-skewed and leptokurtic, while the return series were negatively skewed and significantly leptokurtic, indicating fat tails and non-normality. The presence of ARCH effects required the application of a multivariate GARCH framework. A diagonal BEKK-GARCH model was applied to capture time-varying volatility and correlations between crude oil benchmark indices. The model confirmed volatility clustering, using specific positive variance-covariance matrices. This suggests that, using specific positive matrices, the risk implications between different crude oil benchmarks (Brent, WTI, Dubai, and Mediterranean) are quantified and predictable. This provides a solid basis for the design of sovereign wealth funds and Hedging strategies to protect the Nigerian economy from global fluctuations in crude oil prices.

Keywords: Crude Oil Average; Oil-Dependent Economies; Benchmark Indicators; Co-Movement and Volatility; Oil Market Stability; Macroeconomic Planning; Globally Traded Commodity.

Received on: 02/07/2024, Revised on: 21/09/2024, Accepted on: 19/11/2024, Published on: 09/03/2025

DOI: 10.69888/FTSSSL.2025.000409

FMDB Transactions on Sustainable Social Sciences Letters , 2025 Vol. 3 No. 1, Pages: 9-18

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