Distributive lag effects of inflation dynamics on petroleum pump price in Nigeria: implications for formalized informalities?

Using the consumer price index, producer price index, and food price index as independent variables, along with inflation indicators and petroleum pump price as a dependent variable, this study calculated the distributive lag effects of inflation dynamics on petroleum pump prices in Nigeria from 1986 to 2023. Data from the Central Bank of Nigeria were analysed using techniques such as Granger causality, ARDL bound test of cointegration. The analysis revealed that Petroleum pump prices are not significantly influenced by inflation dynamics in the short term, with a notable long-term impact as well. The Granger causality test indicates a unidirectional causal relationship between PPP and PPI. Therefore, to address issues related to informal trading, it is recommended that government interventions targeting the regulation of food and petroleum pump prices focus on managing the informal sector within the oil and gas industry.