THE INFLUENCE OF OIL PRICE FLUCTUATIONS AND MACROECONOMICS CONSEQUENCE ON DEFENSE EXPENDITURE IN AFRICAN OIL-RICH COUNTRIES

The purpose of this study is to examine the cointegration and causal directions between oil price fluctuations and macroeconomic consequences on military expenditure in countries that are rich in oil. The study incorporated heterogeneous panel estimations and data from 1980 to 2022. The empirical evidence shows that real oil prices have a significant and positive impact on military expenditure in the long run, and there is a causal relationship between real oil prices and military expenditure. The long run military expenditure in African oil-exporting countries is positively affected by real oil prices, according to empirical evidence. The SLM test revealed a U-shaped pattern for these oil-exporting countries, which suggests that their military expenditures are heavily influenced by GDP over time. Policymakers should prioritize utilizing oil revenues for healthcare, education, and infrastructure instead of excessively spending on defense industries. This study seeks to bridge the knowledge gap by studying the impact of oil prices on the military budgets of these nations.