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Oil Price Shocks and Development Finance Flows in Nigeria

Simeon Oamen Obode and Benneth Kiyentei Gini

Abstract

This study developed three long-term regression models to assess the impact of oil price shocks on development finance flows in Nigeria from 2003M1 to 2023M12. It employed the ARDL model in combination with DCC-GARCH framework. The study explores both the long-run relationships and short-term volatility dynamics among oil price volatility and development finance flows, including official development assistance (ODA), foreign direct investment (FDI), and external borrowing. In addition to oil price shocks, the study also considered other macroeconomic variables, including exchange rate, monetary policy rate, inflation rate and GDP as explanatory variables. The results indicate that Nigeria's development finance flows are highly sensitive to oil price volatility.

Keywords

Oil Price ShocksDevelopment FinanceODAFDIExternal BorrowingNigeriaARDLDCC-GARCH

References

Ayungbo, D.O. (2023), Effects of global oil price on exchange rate, trade balance, and reserves in Nigeria: A frequency domain causality approach. Journal of risk and financial management, 12(1), 43. Orhewere B.and Ogbeide O.E. (2019). Oil price volatility and capital expenditure in Nigeria: An empirical investigation. Theoretical and Applied Economics, 26(1), 243-258. Pesaran and Yongcheol Shin and Richard J. Smith (2001). Bounds testing approaches to the analysis of level relationships, Journal of applied econometrics, John Wiley and Sons, Ltd., vol. 16(3), pages 289-326. Pfeffer J.and Salancik G. R. (1978). The external control of organizations: A resource dependence perspective. New York: Harper and Row. Priya, P. (2024). Does crude oil price volatility respond asymmetrically to financial shocks? Resources policy, Volume 92, 105029. Udoka, C. O. and Ogege S. (2012). Public debt and the crisis of development in Nigeria: Econometric investigation. Journal of Research in National Development, 10(3), 52-70. World Bank. (2020). Commodity markets outlook, April 2020. Washington, D.C.: World Bank.

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