The Moderating Effect of Institutional Quality on the Relationship Between Oil Revenue and Economic Growth of Oil-Producing Countries in Africa

This study investigates the moderating effect of institutional quality on the relationship between oil revenue and economic growth in 22 African oil-producing countries over the period 2012–2023. Using a panel dataset and fixed effects regression analysis, the findings reveal a statistically significant negative main effect of oil revenue on economic growth (β = -0.0832, p < 0.05), consistent with the resource curse hypothesis in weak governance contexts. Institutional quality, measured via the Corruption Perceptions Index, exhibited a strong positive impact on growth (β = 0.0762, p < 0.05), while the interaction term between oil revenue and institutional quality was positive and significant (β = 0.0038, p < 0.5), confirming a synergistic moderation effect. Grounded in the principal-agent theory, the study adopted a positivist research philosophy and an explanatory design. It utilized secondary panel data sourced from the World Bank, International Monetary Fund, Transparency International, and national statistical agencies. Data analysis involved descriptive statistics, correlation analysis, and fixed-effects panel regression, including moderation analysis, using STATA version 14. The findings revealed that institutional quality positively moderated the effect of oil revenue on growth (R² = 0.5026). Strong positive correlations were observed between economic growth and oil revenue (r = 0.7671), and institutional quality (r = 0.5777), all significant at the 5% level. Additionally, oil revenue was positively correlated with institutional quality (r = 0.5594), also statistically significant. These results highlight the critical role of institutional strength in converting oil wealth into sustainable development. The study contributes in three key areas: theoretically, by deepening the understanding of resource-led growth in contexts of institutional fragility; empirically, by offering new panel data evidence on oil-growth dynamics in Africa; and methodologically, by enhancing macroeconomic analysis through moderated panel modeling. It recommends that African governments adopt transparent oil revenue management systems, align resource inflows with long-term public investment strategies, and reinforce fiscal oversight mechanisms. Limitations of the study include its reliance on secondary data and the omission of sub-national dynamics. Future research should incorporate spatial econometric techniques, sub-national datasets, and explore the implications of energy transition for oil-dependent economies.