HOW OPPORTUNISTIC AND PARTISAN POLITICAL BUSINESS CYCLES INTERACT IN NIGERIA’S OIL-RELIANT ECONOMY: EVIDENCE OF FISCAL POLICY MANIPULATION (1999-2023)
Umar Musa Kallah , Hussaina Sanusi and Nasir Aminu Ibrahim
Volume 14 Issue 1
Abstract
This study investigates the existence and dynamics of opportunistic and partisan political business cycles in Nigeria over the democratic Fourth Republic period (1999–2023). We investigate the impact of pre-election periods and regime changes (PDP versus APC) using annual time-series data and a hybrid Vector Autoregression (VAR) framework that incorporates growth of government expenditure, inflation, GDP growth and unemployment, while controlling for oil price volatility and its interactions. The findings of the improved VAR(2) model and the large number of robustness checks indicate that the classical opportunistic model of Nordhaus (1975) is not well supported. Pre-election dummies have positive, though generally not statistically significant, effects on growth of government spending, and have weak or counter-intuitive effects on inflation and real outcomes. We, on the other hand, have more evidence of partisan effects: the APC regime (post-2015) is associated with higher growth of government expenditure, but much lower growth of GDP than the PDP regime. Impulse response functions suggest that macroeconomic shocks are mostly temporary, lasting only 4–6 years. These patterns are consistent across alternative lag structures, estimators, sub-samples, and variable definitions. The results indicate that, in the oil-rich environment of Nigeria, political business cycles are more partisan than opportunistic, and are strongly shaped by commodity price fluctuations and institutional shortcomings. This study adds to the literature by offering new evidence on hybrid PBCs in a significant African resource economy and underscores the importance of improving fiscal institutions to reduce politically driven macroeconomic volatility. Keywords: Political Business Cycles, Opportunistic Cycles, Partisan Cycles, VAR Model, Oil Dependence, Fiscal Policy
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