Oil price volatility effect on infrastructure spending in Nigeria

Abstract

AbstractThis 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.