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Oil Price and Public Expenditure Relationship in Nigeria: Does the Level of Corruption Matter?

Author

Listed:
  • Nurudeen Abu
  • Joseph David
  • Musa Abdullahi Sakanko
  • Ben-Obi Onyewuchi Amaechi

Abstract

We employ the non-linear autoregressive distributed lag (NARDL) approach to examine if the oil price and public expenditure relationship are dependent on the level of corruption using Nigeria’s quarterly data during the 1996-2019 period. The result of the NARDL-bounds test to co-integration demonstrates that there is a long-run relationship between the variables, and we found evidence of long-run asymmetry in this relationship. The estimation results indicate that both positive and negative shocks to oil price have a significant positive effect on public expenditure in the long run, and the impact of oil price on public expenditure depends on the level of corruption. In addition, the marginal effect of oil price on public expenditure varies at different levels of corruption. Other important factors that drive public expenditure in Nigeria, in the long run, include spending on internal security and debt service. Based on these outcomes, we proffer some policy recommendations.

Suggested Citation

  • 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.
    • Handle: RePEc:bas:econst:y:2022:i:3:p:59-80
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • E64 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Incomes Policy; Price Policy
    • H50 - Public Economics - - National Government Expenditures and Related Policies - - - General
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption

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