10395

FACTA UNIVERSITATIS
Series: Economics and Organization Vol. 19, No 1, 2022, pp. 39 - 52

https://doi.org/10.22190/FUEO220105004B

Original Scientific Paper

COVID-19 PANDEMIC AND NIGERIA’S INTERNATIONAL

LIQUIDITY: IMPACT ANALYSIS1

UDC 616.98:578.834]:339.721(669)

Abdurrauf Babalola

Al-Hikmah University, Department of Economics, Ilorin, Nigeria

ORCID iD: Abdurrauf Babalola https://orcid.org/0000-0001-8389-6639

Abstract. Covid-19 pandemic woes have caught across almost every international

activity in the world today, which makes many economies to be in a cross-road whether

the COVID-19 pandemic is the cause of these woes or not. In this regard, this study

investigated the effect of the COVID-19 pandemic on international liquidity in Nigeria.

COVID-19 pandemic was proxied by COVID-19 new cases and new deaths of the

pandemic in Nigeria and a dummy which represented the period of the pandemic, and as

such, stood in as the explanatory variables in the study, while international liquidity was

put as the dependent variable. Daily data sets were sourced from National Centre for

Disease Control in Nigeria and the Central Bank of Nigeria statistical bulletin between

February and October 2020, employing Auto-Regressive Distributed Lag (ARDL)

technique. Findings of the study revealed that, in the short run, the COVID-19 pandemic

period had a significant impact on Nigeria's international liquidity. However, the

COVID-19 new cases and new deaths could not have any significant impact on the

international liquidity. Moreover, none of the COVID-19 pandemic variables could have any

long-run impact on the international liquidity in Nigeria. The study, therefore, suggests that

Nigerians should know that the depletion of its foreign reserve is not due to policy deficiency

but to the COVID-19 pandemic. Also, the government should try to improve quality exports

that will be demanded by foreign countries irrespective of any pandemic.

Keywords: COVID-19 Pandemic, Dummy variable, International liquidity, Time series

JEL Classification: F38, F42, I11, I15, I18

Received January 05, 2022 / Revised March 01, 2022 / Accepted March 08, 2022

Corresponding author: Abdurrauf Babalola
Department of Economics, Al-Hikmah University, Adewole Estate, Adeta Road, 240281 Ilorin, Kwara State,
Nigeria | E-mail: abdclement@yahoo.com

https://orcid.org/0000-0001-8389-6639
mailto:abdclement@yahoo.com

40 A. BABALOLA

1. INTRODUCTION

The woes that have befallen the world as a result of the Corona Virus are an

unanticipated and unprojected challenge, and this health challenge has spread to almost all

sectors of the world economy. With the declaration of the World Health Organisation

(WHO) on March 11th, 2020, that COVID-19 has become a global pandemic, the issue has

shaken the world economy as a whole.

To curb the spread of this pandemic, most governments have put in place policies to reduce

or regulate the spread. Apart from the use of sanitary materials, which to some extent, has

encouraged a quantum level of productive capacity in the pandemic-demanded goods such as

face-masks, hand sanitizers, COVID-19 test kits among others, it has, however, drastically

paralyzed the demand for a major international product, crude oil, due to the total lockdown

experienced in most nations of the world, in which Nigeria is not left out.

The advanced economies were hit by the effect of the pandemic which resulted in the

total and partial closure of many sectors that fed their external reserves with the appreciable

quantity of foreign currencies. Even though they remain the main producers and providers

of these COVID-19 test kits, which brought lots of foreign patronages and hence were

expected to boost their economy to some extent, they still cry out as the pandemic bit hard

on their economy. The question now is that what will be the fate of the developing

economies like Nigeria, in which this challenge has depleted her major source of foreign

reserve? Moreover, the developing country has not developed to the extent of exporting

COVID-19 test materials to the international market.

Nigeria's economy at the start of the pandemic has been very fragile as it depends solely

on the demand and price of oil in the international market and the nation's budget is based.

Oil is the main source of improvement in its international liquidity popularly known as

external reserve. The price of Brent crude oil was $26 per barrel at the beginning of April

2020, whereas, the budget is based on $57 a barrel, showing a negative gap of $31. This has

an adverse consequence on the reserve (Onyekwena & Ekeruche, 2020).

Quoting from a report by the International Monetary Fund (IMF), "Nigeria has been

severely hit by the spread of COVID-19 and the associated sharp decline in oil prices.

Government policy is responding to both these developments. A range of measures has been

implemented to contain the spread of the virus, including the closure of international airports,

public and private schools, universities, stores, and markets, and the suspension of public

gatherings. A "lockdown" was declared in Lagos, Abuja, and Ogun states. Work at home is

also encouraged in several states and government institutions while isolation centres are being

expanded in Lagos state. Testing capacity is increasing as National Center for Disease

Control (NCDC) now deploys digital platforms for people to get results sooner.

The President ordered the release of inmates in correctional facilities to decongest prisons.

On May 4th, phase 1 of the three-phase economic re-opening commenced following a full

lockdown that had been placed since March 30th. Phase 1 moved to phase 2 on June 2nd -

allowing most offices and schools to reopen. However, a comprehensive list of restrictions

remains in place, including a nighttime curfew, a ban on non-essential inter-state passenger

travel, the partial and controlled interstate movement of goods and services, and mandatory use

of face masks or coverings in public. On September 4th, Nigeria transitioned into phase 3. Night

curfew has been reduced to 12am – 4am. Groups of up to 50 people are allowed to attend parties

and gatherings. More opening hours were allowed for parks and gardens but clubs and bars

remained shut. Schools around the country reopened around October 12th, 2020" (IMF, 2020).

COVID-19 Pandemic and Nigeria’s International Liquidity: Impact Analysis 41

Based on the background of the COVID-19 pandemic in the world and Nigeria

specifically concerning the economic sector, the broad objective of this study is to

investigate the impact of the COVID-19 pandemic on Nigeria's international liquidity.

Specifically, the objectives are:

i. To examine the impact of COVID-19 cases on international liquidity in Nigeria.
ii. To determine the effect of the period of COVID-19 on Nigeria’s international

liquidity.

iii. To examine the impact of new deaths as a result of COVID-19 on Nigeria’s
international liquidity.

The rest of the study is organized in sections: Section two presents the relevant literature

underpin; Section three showcases the methodology; Section four presents the research

findings, and section five concludes and proffers recommendations.

2. REVIEW OF RELEVANT LITERATURE

Cevik and Mutlu (2022) examined the actions taken by different central banks to
support various businesses in their respective economies. Their findings indicated that
these banks made liquidity to be abundant by keeping a very low-interest rate. Also,
quantitative easing was applied during the period of the COVID-19 pandemic. A swap
agreement was also implemented to facilitate the access of economies to dollars and euros.
The resultant response was the flow of credit into the real economy which boosted the
employment rate, reduced the market volatility, and reduced the supply of dollars pressure.

Papyrakis (2022) also studied the impact, drivers and responses of COVID-19 on
international development. According to him, the pandemic has reshaped the debates and
processes in international development. The crisis has generated a quantum of challenges
for developing nations, many of which could not conveniently cope with the situation of
high demand for health care which calls for an immediate decision and made a prompt
relief to affected economic development outcomes such as climate change, water, education,
poverty and migration, among others.

Nikolova (2021) reviewed the role of foreign reserves in the COVID-19 pandemic
period in central banks of governments. Simple bar chart methods were employed to
compare pre-COVID with the present situation, sourcing data from the Bank for International
Settlements and the International Monetary Fund databases. The finding revealed that the
foreign exchange reserves are necessary for the central banks and governments, especially
in times of crisis and in pandemics, since the reserves are used as a source of last resort for
intervention and rescue of the domestic economy.

Marques et al. (2021) studied the foreign intervention and capital flow management
measures from a multilateral view. They realized that more caution is warranted in the use
of this policy when there are spillovers in a multilateral review from an individual country's
view. Also, multilateral cooperation could be more helpful when considering foreign
intervention which will also affect the international liquidity of a country.
Dong and Xia (2020) examined the impact of COVID-19 on the balance of payments and
foreign reserves in China. The emergence of the pandemic resulted in an expansion in the
nation’s balance of payment. Moreover, capital inflows and the international liquidity of
the country increased appreciably.

Adenomon and Maijamaa (2020) studied the impact of COVID-19 on the Nigerian stock

exchange from January to April 2020 employing quadratic and exponential autoregressive

42 A. BABALOLA

conditional heteroskedasticity. The findings indicated a loss in stock returns and high volatility

in stock returns during the COVID-19 period in Nigeria.
Jacob et al. (2020) presented in their study that the COVID-19 pandemic affected higher

institutions in Nigeria through the lockdown of schools, reduction of international
education, disruption of the academic calendar of higher institutions, cancellation of local
and international conferences, creation of teaching and learning gap, loss of human
resources in the educational institutions, and cut in the budget of higher education.

The submission of Ozili (2020) was that Nigeria had the highest number of COVID-19
cases in West Africa and the third highest cases in Africa between March and April 2020.
Fernandes (2020) studied the impact of the COVID-19 pandemic on industry and countries
and stated that in the case of this crisis, the economic impact of the crisis varied between
3.5% and 6% and that this impact would depend on the weight of tourism and dependence
of countries on foreign trade. Odhiambo et al. (2020) used a Discrete Markov chain analysis
to determine that COVID-19 affects all sectors of the Kenyan economy.

Ohia et al. (2020) foresaw that the consequence of COVID-19 would be severe in Africa
since the health systems in countries in Africa are quite fragile. They claimed that the
current national health systems of Nigeria could not be able to manage the growing number
of infected patients who require admission into intensive care units.

Other studies on empirical literature are the work of Olapegba et al. (2020); Chinazzi
et al., 2020; Haleem et al., 2020; Chen et al., 2020; Fornaro and Wolf, (2020) and most
recently van der Hoeven and Vos (2022) who examined the various methods carried out in
some developing countries using the international financial and fiscal system reforms.
They have all contributed to the literature as a whole but could not empirically investigate
the impact of COVID-19 on international liquidity, let alone on the Nigerian economy.
This is the contribution to knowledge that the paper intends.

3. METHODOLOGY

3.1. Model Specification

To achieve the set broad objective of this study, the impact of Covid-19 was

disaggregated into Covid-19 new cases, new deaths as a result of Covid-19, and the period

of Covid-19. This study adapted the model of Dineri and Cutcu (2020) which specified

that Covid-19 new cases, new death cases, and the period of the Covid-19 pandemic stood

as the explanatory variables while international liquidity was put as the dependent variable,

thus specified as:

𝐼𝑙 = 𝑓(𝐶𝑛𝑐 , 𝐶𝑛𝑑 , 𝐶𝑝) (1)

where,

Il is the international liquidity of the Nigerian economy, Cnc stands for Covid-19 new cases,

Cnd is Covid-19 new deaths and Cp is Covid-19 period of attaching.

In this regard, the econometric model becomes

𝐼𝑙 = 𝛼0 + 𝛼1𝐶𝑛𝑐 + 𝛼2𝐶𝑛𝑑 + 𝛼3𝐶𝑝 + 𝜀𝑡 (2)

Where 𝜀𝑡represents the disturbance error term at present time, which represents all other
factors that affect international liquidity outside the model. Since variables have different

measurements, it becomes imperative to take the log of international liquidity to make

equation 2 a semi-log model, thus,

COVID-19 Pandemic and Nigeria’s International Liquidity: Impact Analysis 43

𝑙𝐼𝑙 = 𝛼0 + 𝛼1𝐶𝑛𝑐 + 𝛼2𝐶𝑛𝑑 + 𝛼3𝐶𝑝 + 𝜀𝑡 (3)

Hence, equation 3 was employed in the analysis.
In measuring the effect of this pandemic, three variables were used. They are the daily data

of the total number of Covid-19 new cases (Cnc) and Covid-19 new deaths (Cnd) which were
gotten from the National Centre for Disease Control (NCDC). A dummy variable (Cp) was put
up for the period of this attack. As usual, the period of the Covid-19 attaches represented 1 while
a period of no pandemic represented 0. These were the main variables that represented the
pandemic period.

The external reserve measured in United States dollars was employed to cater for
international liquidity and it was sourced from the Central Bank of Nigeria (2020) online
database assessed in November 2020.

3.2. Estimation Procedure

After taking the natural log of the dependent variable, Il, a trend analysis was taken,
and then the descriptive and correlation statistics. A pre-estimation technique using unit-
roots of Augmented Dicky Fuller, Phillip Peron and KPSS was employed which informed
the study of the autoregressive Distributive Lag (ARDL) model. Finally, a post-estimation
test was carried out.

4. RESEARCH FINDINGS

4.1. Trend Analysis

The graph of the trend of international liquidity and Covid-19 cases in Nigeria is shown
in Figure 1 below; the Y-axis shows the number of cases while the X-axis shows the month
and year. From the graph, the first Covid-19 case was recorded in March while the first
death was recorded in April. The highest daily case number was recorded in July before
we start experiencing a fall in the number of daily reported cases.

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Fig. 1 Trend of International Liquidity and Covid-19 cases in Nigeria
Source: Author’s extraction from E-view 9

44 A. BABALOLA

4.2. Result of Descriptive Statistics

Table 1 showcases the descriptive statistics of the dataset with 247 observations. The table
shows that International liquidity (Lil) was logged in other to reduce its volatility while Covid-
19 cases (Cnc), have the highest mean followed by International liquidity (Lil), Covid-19 deaths
(𝐶𝑛𝑑), and Covid-19 period (𝐶𝑝) respectively. Skewness is the measure of the asymmetry of the

data around its mean, Cnc and 𝐶𝑛𝑑 are positively skewed while Lil and 𝐶𝑝 are negatively skewed.
The standard deviation shows the rate of the volatility of the dataset, the high figures of Covid-
19 cases (Cnc), is as a result of the fact that the logarithm is not taken while Lil has a low figure
because its log was taken.

The Kurtosis shows that only Cnc is less than 3 i.e. Platykurtic distribution meaning the
distribution is flat relative to normal. The implication of this is that it has a lower likelihood
of extreme events compared to a normal distribution (Greene, 2002). While the other three
variables are peaked i.e. Leptokurtic distribution because they are more than 3. The Jarque-
Bera shows the normality distribution of data. The small Jacque-Bera probability as shown
in the table means rejection of the null hypothesis.

Table 1 Descriptive Statistics

Lil CNC CND CP

Mean 24.29632 254.4696 4.631579 0.874494
Median 24.30400 196.0000 3.000000 1.000000
Maximum 24.32331 790.0000 31.00000 1.000000
Minimum 24.23481 0.000000 0.000000 0.000000
Std. Dev. 0.025422 211.4025 5.290532 0.331965
Skewness -1.523617 0.602856 1.458866 -2.260810
Kurtosis 4.405047 2.237743 5.403502 6.111260
Jarque-Bera 115.8820 20.94126 147.0677 310.0363
Probability 0.000000 0.000028 0.000000 0.000000
Sum 6001.190 62854.00 1144.000 216.0000
Sum Sq. Dev. 0.158987 10993992 6885.474 27.10931
Observations 247 247 247 247

Source: Authors extract gotten from E-view 9

4.3. Result of Pairwise Correlation Matrix

Table 2 shows the correlation matrix and the probability of the relationship between the
variables. 𝐶𝑛𝑐, 𝐶𝑛𝑑 and 𝐶𝑝 all show a positive relationship with Lil and they are all significant

at a 1% level of significance.

Table 2 Correlation Matrix

Correlation
Probability LIL CNC CND CP

LIL 1.000
-----

CNC 0.4462
0.000

1.000
-----

CND 0.3260
0.000

0.5926
0.000

1.000
-----

CP 0.1496
0.018

0.4494
0.000

0.3277
0.000 1.000 -----

Source: Author’s extraction from E-view 9

COVID-19 Pandemic and Nigeria’s International Liquidity: Impact Analysis 45

Being more particular about the explanatory variables, their coefficients (0.59, 0.45 and

0.33) are far from the 0.8 benchmarks of high correlation (Asteriou & Hall, 2011; Gujarati &

Porter, 2009). This indicates that the model is not having any issue with multicollinearity.

Table 2(b) Variance Inflation Factor (VIF)

Coefficient Uncentered Centred

Variable Variance VIF VIF

C 1.38E-05 6.763498 NA

CC 8.21E-11 4.237576 1.802569

CD 1.18E-07 2.750085 1.588567

CP 2.11E-05 8.832204 1.305929

Source: Author’s extraction from E-views 9

Table 2(b) further explains the status of the explanatory variables to ascertain the presence

of multicollinearity. From the table, the centred VIF values for the three explanatory variables

show that there is an absence of multicollinearity in the variables as the values are less than

the usual threshold of 10 (Asteriou & Hall, 2011; Greene, 2002).

4.4. Result of Unit root tests

The Augmented Dickey-Fuller (ADF), Phillip Peron (PP) and Kwiatkowski-Phillips-

Schmidt-Shin (KPSS) are the three unit-root tests used in the study (Phillips & Perron, 1988)

(Gujarati & Porter, 2009). The ADF and KPSS tests show that LIL and Cnc, are stationary at

1st difference while the others are stationary at level. The PP test, however, shows a little

difference that all the variables are stationary at level except LIL which is stationary at 1st

difference.

Table 3(a) ADF

Variables At level Probability At 1st

difference

Probability Remark

LIL -2.155552 0.2234 -15.58850 0.0000*** 1(1)

CNC -1.816755 0.3718 -17.64468 0.0000*** 1(1)

CND -3.274341 0.0172 - - 1(0)

CP -2.924887 0.0440 - - 1(0)

Source: Author’s extraction from E-view 9

Table 3(b) PP

Variables At level Probability At 1st

difference

Probability Remark

LIL -2.211812 0.2027 -15.58850 0.0000*** 1(1)

CNC -2.702500 0.0750 1(0)

CND -10.41699 0.0000*** 1(0)

CP -2.998643 0.0364 1(0)

Source: Author’s extraction from E-view 9

46 A. BABALOLA

Since two of the tests have supported the stationarity of the variables at level and 1st

difference, we conclude that the order of integration is mixed and this is the justification

for employing the ARDL analysis (Alogoskoufis & Smith, 1991; Asteriou & Hall, 2011)

Table 3(c) KPSS

Variables At level Probability (5%)

Critical Value

1st difference

Probability Remark

LIL 0.7165 0.4630 0.4465 0.4630 1(1)

CNC 0.5957 0.4630 0.2003 0.4630 1(1)

CND 0.0729 0.4630 - - 1(0)

CP 0.2273 0.4630 - - 1(0)

Source: Authors extraction from E-view 9

4.5. Result of Model Selection Criteria

Figure 2 shows the result of the model selection criteria using the Akaike information

criteria top 20 of the model. It is clear from the figure that ARDL (1,0,0,1) is the best model

and was chosen because it has the lowest AIC of 41.2998.

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Akaike Information Criteria (top 20 models)

Fig. 2 Graph of selected model criteria
Source: Author’s extraction from E-view 9

4.6. Result of ARDL Coefficients

In Table 4, the result of impact analysis in the short run using the ARDL model is

showcased. The coefficient of 𝐶𝑛𝑐 (4666.010) and 𝐶𝑛𝑑 (4020291.) show that Covid-19 cases
and Covid -19 deaths have a positive impact on international liquidity. The impacts are

COVID-19 Pandemic and Nigeria’s International Liquidity: Impact Analysis 47

insignificant at 1%, 5%, or 10% levels. Although international liquidity (Lil) shows a

positive and significant relationship with itself in the previous period. The coefficient of

𝐶𝑝 (-5.27E+08) shows that the Covid-19 period has a negative impact on international

liquidity and its impact is significant at a 1% level of significance. It is also shown that the

𝐶𝑝coefficient in the previous period positively impacted international liquidity and its

impact is significant at a 1% level of significance.

The R2 shows that about 93% of the variation in international liquidity is explained by

the explanatory variables. This means that 7% of the variation responsible for international

liquidity is outside the model. The R2 adjusted shows about 93% variations which are very

close to the R2 indicating that there is no redundant variable in the model.

The F-statistics (683.1887) and Prob. (F-statistic) (0.000000) show that the goodness

of fit is significant at a 1% level of significance. The Durbin-Watson stat (2.000879) is

approximately 2 which shows the goodness of fit.

Table 4 ARDL Coefficient

Variable Coefficient Std. Error t-Statistic Prob.*

LIL(-1) 0.950031 0.018552 51.21009 0.0000
CNC 4666.010 97639.94 0.047788 0.9619
CND 4020291. 3468199. 1.159187 0.2475
CP -5.27E+08 1.36E+08 -3.869932 0.0001
CP(-1) 5.92E+08 1.35E+08 4.389676 0.0000
C 1.71E+09 6.56E+08 2.601883 0.0098

R-squared 0.934353
Adjusted R-squared 0.932986
F-statistic 683.1887
Prob(F-statistic) 0.000000
Durbin-Watson stat 2.000879

Source: Authors extract gotten from E-view 9

4.7. Result of ARDL Bound Test

Table 5 showcases the bound test which is required to ascertain if the explanatory

variables (COVID-19: Cnc, Cnd, and Cp) can affect the dependent variable (international

liquidity) in the long run. From the table, the F-statistic value (2.383703) is lower than the

I0 bound, so the null hypothesis of no co-integration could not be rejected.

Table 5 ARDL Bound test

Test Statistic Value K

F-statistic 2.383703 3

Critical Value Bounds
Significance I0 Bound I1 Bound

10% 2.72 3.77
5% 3.23 4.35
2.5% 3.69 4.89
1% 4.29 5.61

Source: Authors extract gotten from E-view 9

This is an indication that the model does not have any long-run relationship. Hence, we

only estimated the short-run model which is the ARDL coefficients as presented and

interpreted in Table 4.

48 A. BABALOLA

4.8. Result of Diagnostic Tests

Table 6 presents the result of residual diagnostic tests of serial correlation using the

Brusch-Godfrey LM test, the heteroskedasticity using the ARCH test, and Linearity using

the Ramsey RESET test.

Table 6 Diagnostic test

Tests Statistics Probability values

Breusch-Godfrey Serial Correlation LM Test 0.0077 0.9923

Heteroskedasticity Test: ARCH 0.0091 0.9240

Linearity Test- Ramsey RESET Test 0.1181 0.7312

Source: Authors extract gotten from E-view 9

Their respective probability results are all more than 5% meaning that we accept the

null hypotheses that, there are no issues of serial correlation, heteroskedasticity, and

specification error.

-60

-40

-20

50 75 100 125 150 175 200 225

CUSUM 5% Significance

Fig. 3 Graph of Recursive Estimate test- CUSUM
Source: Authors extract gotten from E-view 9

Figure 3 showcases the stability test result using the Cumulative Sum test. From the

result, the blue line is within the red lines, and so, we accept the null hypothesis (which is

desirable) that the coefficients of the regression are changing systematically and therefore,

stable.

COVID-19 Pandemic and Nigeria’s International Liquidity: Impact Analysis 49

-0.2

0.0

0.2

0.4

0.6

0.8

1.0

1.2

50 75 100 125 150 175 200 225

CUSUM of Squares 5% Significance
Fig. 4 Graph of Recursive Estimate test- CUSUM Square

Source: Authors extract gotten from E-view 9

Figure 4 presents the stability test result using the Cumulative Sum of Square test. From

the result, the blue line is crossing the red line, and so, we reject the null hypothesis (which

is not desirable) that the coefficients of the regression are not changing suddenly and

therefore, based on this test, are not stable.

Going by the words of Turner (2010), "if the break is in the intercept of the regression

equation then the CUSUM test has higher power. However, if the structural change involves

a slope coefficient or the variance of the error term, then the CUSUMSQ test has higher

power. This may help to explain why the two tests often produce contradictory findings", our

regression (ARDL) has an intercept and so the CUSUM is higher and better preferred to

CUSUM Squares, thus, we conclude that the coefficients of the regression are stable.

4.9. Discussion of Results and Implications of Findings

This empirical article employed ARDL techniques which were based on the information

given by the ADF and PP unit root tests to investigate the impact of the COVID-19 pandemic

on international liquidity in Nigeria.

The first objective was to examine the impact of COVID-19 new cases on international

liquidity in Nigeria. Though there was an average positive correlation between the new

cases and international liquidity, the result of the ARDL cointegration test revealed that, in

the short run, COVID-19 new cases did not have a significant impact on international

liquidity in Nigeria. There was no long-run relationship as revealed by the bound test result.

Hence, the null hypothesis of no significance could not be rejected. Other factors like oil

prices would have been responsible for the effect aside from new cases during this period.

The second specific objective was to evaluate the effect of new deaths as a result of

COVID-19 on international liquidity in Nigeria. Also, the results of ARDL analysis

indicated that new deaths as a result of the COVID-19 pandemic did not have a significant

effect on Nigeria's international liquidity within the period under consideration. Thus, the

null hypothesis could not be rejected in this regard. This finding is in contrast with the

50 A. BABALOLA

findings of Dineri and Cutcu (2020), and Odhiambo, Weke, and Ngare (2020), though

Fernande's (2020) finding could still be referred to, that, the impact of the COVID-19

pandemic on industry and economies would depend on the weight of tourism and dependence

of countries on foreign trade.

The third objective was to examine the impact of the period of the COVID-19 pandemic

on international liquidity in Nigeria. Findings of the study discovered that, in both the short

run and long run, the period of the COVID-19 pandemic has a very significant impact on

international liquidity. This result is in line with our a priori expectation and not different

from the study of Dineri and Cutcu (2020) on the exchange rate in the Turkish economy,

though they did not use the period as one of their predictors. Hence, we reject the null

hypothesis and accept that period of the COVID-19 pandemic has a significant impact on

Nigeria's international liquidity.

Moreover, from the results, the predictors in the model were able to explain about 93% of

the variation in international liquidity in Nigeria within this period of interest. This applies to

real Nigeria's situation since there are still many major contributors to international liquidity

like the export of crude oil and other goods that generally have a direct positive impact. Import

of goods like used cars, mostly COVID-19 test kits and health care facilities deplete negatively

and worsen the international liquidity status of the country. In essence, the high rate of import

stretches the Naira exchange rate, in which, for the country to remain within the ambit of the

desired exchange rate, the external reserve will have to suffer, mainly due to the COVID-19

pandemic which energized other variables in the negative. Expectedly, as the pandemic rounds

off, the international liquidity will keep increasing and moving back to its original point.

6. CONCLUSION AND RECOMMENDATIONS

This study investigated the impact of the COVID-19 pandemic on international liquidity in

Nigeria. COVID-19 pandemic was proxied by COVID-19 new cases and new death of the

pandemic in Nigeria and a dummy that represented the period of the pandemic, and as such,

stood as the explanatory variable while international liquidity was put as the dependent variable

in the study. Daily data sets were sourced between February and October 2020, employing

Auto-Regressive Distributed Lag (ARDL) technique. The findings of the study revealed that

there was an average correlation between the variables of the pandemic and international

liquidity. In the short run, the COVID-19 pandemic period had a significant impact on Nigeria's

international liquidity. However, the COVID-19 new cases and new deaths could not have any

significant impact on the international liquidity. Moreover, none of the COVID-19 pandemic

variables could have any long-run impact on the international liquidity in Nigeria. Diagnostic

tests revealed that there were no issues of serial correlation, heteroskedasticity, or specification

error. Also, the result divulged that the coefficients of the regression were stable.

It is upon the findings of this study that the following recommendations are made:

▪ Nigerians should know that the depletion of their foreign reserve is not due to policy
deficiency but due to the COVID-19 pandemic.

▪ Also, the government should try to improve quality exports that will be demanded
by foreign countries irrespective of the pandemic.

COVID-19 Pandemic and Nigeria’s International Liquidity: Impact Analysis 51

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52 A. BABALOLA

PANDEMIJA COVID-19 I MEĐUNARODNA LIKVIDNOST

NIGERIJE: ANALIZA UTICAJA

Problemi povezani sa pandemijom Kovida 19 su zahvatili skoro svaku međunarodnu aktivnost u

svetu danas, što mnoge ekonomije tera da se zapitaju da li je uzrok tih problema sama pandemija ili

ne. U tom smislu, ovaj rad istražuje uticaj pandemije Kovid 19 na međunarodnu likvidnost u Nigeriji.

Pandemija Kovid 19 se merila brojem novih slučajeva i novih smrti i veštačkom varijablom koja je

predstavljala period trajanja pandemije, i kao takva stajala kao objašnjavajuća varijabla u studiji,

dok je međunarodna likvidnost bila zavisna varijabla. Dnevni skup podataka dobijen je od statističkih

biltena Nacionalnog centra za kontrolu bolesti i Centralne banke Nigerije od februara do oktobra

2020, uz korišćenje ADRL tehnike. Rezultati studije ukazuju da je, kratkoročno, period Kovid-19

pandemije imao značajnog uticaja na međunarodnu likvidnost Nigerije. Međutim, novi slučajevi

Kovida 19 i nove smrti nisu imale značajnog uticaja na međunarodnu likvidnost. Štaviše, nijedna od

varijabli pandemije Kovida 19 nije mogla da ima značajnijeg uticaja na međunarodnu likvidnost

Nigerije. Studija, dakle, ukacije da Nigerijci treba da znaju da smanjenje njihovih deviznih rezervi

nije nastalo usled loše politike nego pandemije Kovida 19. Takođe, vlada bi trebalo da pokuša da

poveća izvoz kvalitetnih proizvoda koje će strane zemlje zahtevati bez obzira na pandemije.

Ključne reči: Pandemija Kovid-19, veštačka varijabla, međunarodna likvidnost, vremenska serija