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Oil price volatility effect on infrastructure spending in Nigeria
Author(s) -
Akinleye Simeon Oludiran
Publication year - 2017
Publication title -
opec energy review
Language(s) - English
Resource type - Journals
eISSN - 1753-0237
pISSN - 1753-0229
DOI - 10.1111/opec.12096
Subject(s) - oil price , cointegration , economics , volatility (finance) , variance decomposition of forecast errors , government spending , monetary economics , econometrics , shock (circulatory) , impulse response , macroeconomics , market economy , medicine , mathematical analysis , mathematics , welfare
Abstract This study examined the effect of oil price volatility on infrastructure spending in Nigeria, using time series data from 1960 to 2012. The data were analysed using cointegration, variance decomposition and impulse response functions to determine the effect of oil price volatility on infrastructure spending in Nigeria. The trend analysis shows that both oil price and government spending on infrastructure fluctuate together. The impulse response showed that the impact of crude oil price shock is substantial in the short run but remain stable and high in the long run which implies that the effect of crude oil price volatility could persist into the future. From these results, the empirical findings suggest that effort should be made by government to seek alternative means of financing infrastructure as oil price is unpredictable.