Asymmetric effect of oil price on government expenditure in Nigeria

Abstract

This study investigates the impact of oil price on government expenditure in Nigeria, using annual data for the period (1981-2019), the study used a Non-Linear Autoregressive Lag Distributed model (NARDL) to assess the positive and negative effects of the crude oil price on Nigeria’s government expenditure. In determining the effect of oil price on government expenditure, the study found that both the positive and negative changes in oil price have positive and significant effect on government expenditure, however the control variables, exchange rate, inflation and real gross domestic product have no significant effect on total government expenditure. The study also revealed an asymmetric relationship between crude oil price and government expenditure. Therefore, the study recommended that policy makers have to focus on deepening the oil and gas sector and
policy that will stabilize the macroeconomic structure of the Nigerian economy, by specifically focusing on another sources of government revenue (diversify and reduce dependency on oil proceeds) and ensure fiscal discipline in governance.