Impact of Global Commodity Price Volatility on Nigeria’s Terms of Trade and External Balance

This study examines the impact of global commodity price volatility on Nigeria's terms of trade and external balance, with a specific focus on crude oil price shocks and their transmission to key macroeconomic indicators. Nigeria's heavy dependence on petroleum exports makes the country's external sector acutely sensitive to global commodity market dynamics. Fluctuations in crude oil prices directly affect export revenues, foreign exchange reserves, current account balances, and import capacity. The study adopts a secondary data and documentary research design, using annual time series data sourced from the Central Bank of Nigeria Statistical Bulletin, the World Bank, and UNCTAD for the period 2014 to 2023, a period characterised by significant oil price volatility including the 2014-2016 crash, the COVID-19 price collapse of 2020, and the 2022 price spike. Descriptive trend analysis and basic regression analysis are used as analytical tools. The theoretical framework draws on the prebisch-singer hypothesis on commodity terms of trade and the Dutch disease literature. The study traces how terms of trade deterioration during low oil price periods leads to import compression, currency depreciation, and external debt accumulation, while price booms create fiscal windfalls that are often poorly managed. Findings are expected to confirm the procyclical pattern of Nigeria's external balance and the limited buffers available to absorb price shocks. Recommendations include strengthening the Sovereign Wealth Fund, accelerating export diversification, and implementing counter-cyclical fiscal policies. Keywords: commodity price volatility, terms of trade, external balance, Nigeria, oil dependence