Interconnections between governance shortcomings and resource curse in a resource-dependent economy

Fisayo Fagbemi and Richard Angelous Kotey

PSU Research Review, 2022, vol. 8, issue 2, 297-320

Abstract: Purpose - The paper assesses the role of natural resource rents in Nigeria's economy through the channel of institutional quality. Design/methodology/approach - The analysis is done with the use of autoregressive-distributed lag (ARDL) bounds testing approach to cointegration, vector error correction model (VECM), Granger causality test and cointegrating regression over the period 1996–2019. Findings - Findings support the notion that overreliance on natural resources could exacerbate the growing number of dysfunctional economic outcomes in the country. The study confirms that a mix of weak governance quality and natural resource rents could have a negligible effect on economic growth and possible retardation impact on the economy in the long run as well as in the short run. The evidence further reveals that there is unidirectional causality running from the interaction term to growth, suggesting that growth trajectory could be jointly determined by natural resource rents and the quality of institutions. Originality/value - The divergent arguments associated with the mechanisms of resource curse in each of the resource-rich countries offer ample support for the contention that economic outcomes in resource-abundant states may not be a product of resource windfallsper se, but rather the quality of governance or ownership structure. Hence, the ultimate aim of the analysis is to further understanding on the link between resource rents and growth in Nigeria via governance channel.

Keywords: Natural resource rents; Resource curse; Institutional quality; Economic growth; ARDL; Nigeria (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:eme:prrpps:prr-09-2021-0052

DOI: 10.1108/PRR-09-2021-0052

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