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Oil Price Volatility and Fiscal Behaviour if Government in Nigeria

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  • Omo Aregbeyen
  • Ismail Olaleke Fasanya

Abstract

This paper examined the fiscal response of government to oil price volatility in Nigeria during the period 1970-2013. This is because no study has analysed the peculiar fiscal behaviour of the government given the unpredictable nature of oil prices. Yet, government fiscal activities had significantly determined and shaped the growth path of the economy. The multivariate vector Auto regression model was explored for the empirical analysis. Our findings showed that real oil prices had driven government expenditure dynamics and a long run relationship between real oil prices and government spending, non-oil growth, inflation and discount rate differential exist; and no asymmetric effect of oil price shocks on the government spending. However, these results are robust to different non-linear transformation of the real oil prices and inclusion of additional variables. Since oil price is highly volatile, it is advised that the government diversify the sources of foreign exchange inflows.

Suggested Citation

  • Omo Aregbeyen & Ismail Olaleke Fasanya, 2017. "Oil Price Volatility and Fiscal Behaviour if Government in Nigeria," Asian Journal of Economic Modelling, Asian Economic and Social Society, vol. 5(2), pages 118-134.
    • Handle: RePEc:asi:ajemod:v:5:y:2017:i:2:p:118-134:id:892
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    Citations

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    Cited by:

    1. Nurudeen Abu & Joseph David & Musa Abdullahi Sakanko & Ben-Obi Onyewuchi Amaechi, 2022. "Oil Price and Public Expenditure Relationship in Nigeria: Does the Level of Corruption Matter?," Economic Studies journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 3, pages 59-80.
    2. Samson Adeniyi Aladejare, 2022. "Are public spending determinants significant in per capita budget spending decisions in Nigeria?," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 27(1), pages 192-206, January.
    3. Abubakar, Attahir Babaji & Muhammad, Mansur & Mensah, Samuel, 2023. "Response of fiscal efforts to oil price dynamics," Resources Policy, Elsevier, vol. 81(C).
    4. Wajdi Hamza Dawod Alredany, 2018. "A Regression Analysis of Determinants Affecting Crude Oil Price," International Journal of Energy Economics and Policy, Econjournals, vol. 8(4), pages 110-119.
    5. Samson Adeniyi Aladejare, 2019. "Testing the Robustness of Public Spending Determinants on Public Spending Decisions in Nigeria," International Economic Journal, Taylor & Francis Journals, vol. 33(1), pages 65-87, January.
    6. Iliyasu, Ibrahim & Gambo, Suleman Lawal, 2021. "Does Debt Servicing Crowd-Out Federal Government Expenditures in Nigeria?," African Journal of Economic Review, African Journal of Economic Review, vol. 10(1), December.

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