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Fiscal policy and current account in an oil-rich economy: the case of Nigeria

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  • Olusegun Akanbi

Abstract

This study empirically investigates the link between fiscal policy and the current account in Nigeria. Given the enormous influence of the oil revenue on Nigeria’s economy, the study separates the effects of oil on the fiscal balance and the current account balance. In line with existing literature, the causal link between the fiscal balance and current account takes into consideration the contemporaneous effects on the current account balance brought about by exchange-rate fluctuations, the growth in GDP, and the growth in money supply. The models are estimated using time-series data from 1970 to 2012, using the Johansen estimation techniques. The results from the estimation results reveal the existence of a positive and stable relationship between government budget surplus and the current account balance in the overall economy. In the non-oil segment, on the other hand, there is evidence of a twin-deficit, a fact which has been blurred by proceeds from the oil revenue. The unequivocal conclusion is that the country remains over-reliant on the revenue generated by oil; also, the proceeds from oil have not yet trickled down to the rest of the economy. Copyright Springer-Verlag Berlin Heidelberg 2015

Suggested Citation

  • Olusegun Akanbi, 2015. "Fiscal policy and current account in an oil-rich economy: the case of Nigeria," Empirical Economics, Springer, vol. 48(4), pages 1563-1585, June.
    • Handle: RePEc:spr:empeco:v:48:y:2015:i:4:p:1563-1585
    DOI: 10.1007/s00181-014-0838-2
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    Cited by:

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    3. Michael Pedersen, 2019. "The impact of commodity price shocks in a copper-rich economy: the case of Chile," Empirical Economics, Springer, vol. 57(4), pages 1291-1318, October.

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    More about this item

    Keywords

    Fiscal policy; Current account; Non-oil segment ; Nigeria; E62; F32; F41; H50; H60; N17;
    All these keywords.

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • H50 - Public Economics - - National Government Expenditures and Related Policies - - - General
    • H60 - Public Economics - - National Budget, Deficit, and Debt - - - General
    • N17 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Africa; Oceania

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