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The Relationship Between Natural Resource Rent and Economic Growth in Nigeria

Author

Listed:
  • Chala Amante Abate
  • Dagim Tadesse Bekele
  • Belisty Bekalu Ayenew
  • Adisu Abebaw Degu

Abstract

Purpose: The current study explored the nature of the relationship between natural resources and economic growth in Nigeria, drawing on linear and nonlinear versions of the ARDL model over the period covering 1972–2019. Design/Methodology/Approach: In this study, real GDP per capita was used as a proxy variable for economic growth, and it was sourced from the World Bank's database of world development indicators. As a measure of natural resources, the study used total natural resource rent expressed as a percent of GDP. Oil is represented by oil rent as a percent of GDP. The data on these variables was collected from world development indicators of the World Bank. Findings: The models consistently show that natural resources, economic growth, trade openness, and financial development are co-integrated. Findings of the current study indicate that natural resource is growth neutral in the long run and that there is no evidence of resource curse hypothesis. The study results also reveal that the relationship between natural resources and economic growth is asymmetric, such that a negative shock to natural resources retards economic growth in the short run. In addition, the study result reveals that natural resource and economic growth reinforce each other as bidirectional causality between the variables was detected. On the other hand, minor and major shocks to natural resources fuel economic growth. Practical Implications: The study recommends that the government of Nigeria design effective strategies to avoid a negative shock to natural resources and follow economic policies that enable the country to generate large revenues from natural resource exports. Originality/Value:

Suggested Citation

  • Chala Amante Abate & Dagim Tadesse Bekele & Belisty Bekalu Ayenew & Adisu Abebaw Degu, 2023. "The Relationship Between Natural Resource Rent and Economic Growth in Nigeria," International Journal of Finance, Insurance and Risk Management, International Journal of Finance, Insurance and Risk Management, vol. 13(4), pages 3-25.
    • Handle: RePEc:ers:ijfirm:v:13:y:2023:i:4:p:3-25
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    More about this item

    Keywords

    ARDL; economic growth; Nigeria; oil rent; total natural resource rent.;
    All these keywords.

    JEL classification:

    • Q00 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General - - - General
    • Q33 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Resource Booms (Dutch Disease)
    • Q38 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Government Policy (includes OPEC Policy)
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

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