Determinants of International Reserves Among Organisation of Petroleum Exporting Countries (OPEC)

Oladejo Tokunbo  Bada; Kehinde Adekunle Adetiloye; Felicia Omowunmi Olokoyo; Grace Ukporhe

doi:10.18778/1508-2008.25.24

Authors

Oladejo Tokunbo Bada Covenant University, Department of Finance, Ota, Nigeria https://orcid.org/0000-0001-7823-3785
Kehinde Adekunle Adetiloye Ph.D., Associate Professor, Covenant University, Department of Finance, Ota, Nigeria https://orcid.org/0000-0002-7171-0793
Felicia Omowunmi Olokoyo Ph.D., Associate Professor, Covenant University, Department of Finance, Ota, Nigeria https://orcid.org/0000-0003-0176-0194
Grace Ukporhe Covenant University, Department of Finance, Ota, Nigeria https://orcid.org/0000-0001-5245-8986

DOI:

https://doi.org/10.18778/1508-2008.25.24

Keywords:

international reserves, Organisation of Petroleum Exporting Countries, crude oil prices, exchange rates, international trade

Abstract

Member countries of the Organisation of Petroleum Exporting Countries (OPEC) are always in the news regarding the prices and supply of crude oil to the international market. One of the economic reasons for this is liquidity and the desire to accumulate international reserves by the respective countries. This paper examined the determinants of international reserves among the cartel against the backdrop of the motives for keeping reserves. With data from 2005 to 2018, the adopted variables that were tested with the system of generalised methods of moments (Sy‑GMM) are inflation, exchange rates, oil prices, crude oil dependence, economic crises and others. The results and outputs show that inflation was negatively impactful externally and internally, while FDI inflows recorded negative significance. Economic crises and economic openness were positively significant, while oil prices and exchange rates were not significant determinants of international reserves accumulation. The paper recommends the maximisation of opportunities available by members during economic crises to accumulate reserves that will enable them to diversify from dependence on crude oil exports to include other products and a higher level of openness to open the economy up for competition to make the economies stronger.

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