Determining If Oil Prices Significantly Affect Renewable Energy Investment in African Countries with Energy Security Concerns

As concerns regarding the adverse impacts of energy production and consumption on the environment grow, countries across the world are now charged with developing effective strategies that provide energy security and protect the environment. This means that efforts to generate significant investments and business opportunities to boost the growth of renewable energy need to increase rapidly. However, there are limited studies on what will facilitate the increase of renewable energy investment in Africa. The main factor considered in this study relates to the sensitivity to changes in oil prices, gross domestic product (GDP), interest rate and oil price volatility's impact on the renewable energy investment (REI) in countries with energy security concerns and if there is any significant influence from oil price shocks. With the help of an unrestricted vector retrogressive model and an annual panel data approach that covers the period 1990-2018, this paper examines the link between renewable energy investment and three macroeconomic variables: oil prices, GDP growth-adjusted interest rates and oil price volatility. The results indicate that REI exhibited immediate positive responses to oil shocks. However, renewable energy investment continued to fluctuate negatively in response to GDP. The results also show that the REI responded positively to interest rates in Africa and it exhibited immediate negative responses to oil price volatility but became positive after the second period.