VOLATILITY SPILLOVERS AMONG UNCERTAINTY SHOCKS, COMMODITY PRICES, AND INFLATION DYNAMICS IN NIGERIA

ABSTRACT
This study examines volatility spillover transmission and dynamic connectedness among uncertainty shocks, commodity prices, and inflation in Nigeria from 2000 to 2024. Four uncertainty indices — Geopolitical Risk (GPR), Climate Policy Uncertainty (CPU), Oil Price Uncertainty (OPU), and the US-China Trade Tension Index (UCTI) — are analysed alongside five agricultural commodity returns (palm oil, maize, rice, soybeans, wheat) and the Consumer Price Index (CPI). The study applies the Diebold-Yilmaz (DY) spillover index, a time-varying DY connectedness model, and the Baruník-Křehlík (BK) frequency decomposition. The total volatility connectedness index stands at 41.73%, indicating a substantial degree of cross-variable shock transmission. UCTI is the dominant net transmitter (net +44.88%), while rice records the highest outward spillover (TO = 84.42%). CPI absorbs the largest share of exogenous shocks (FROM = 59.54%), confirming Nigeria's inflation as a downstream variable driven by commodity market turbulence and trade-related uncertainty. These findings call for coordinated monetary policy, trade-shock buffers, and commodity price stabilisation programmes to reduce the pass-through of global uncertainty into domestic inflation.