Natural resource rents and financial inclusion nexus: Evidence from Africa

• Published in: Resources policy 2024-07, Vol.94, Article 105134
• Main Authors: Bosah, Philip Chukwunonso, Li, Shixiang, Ampofo, Gideon Kwaku Minua
• Format: Article
• Language: English
• Subjects: Africa; CCEMG; CS-ARDL; CS-DL; Financial inclusion; Natural resources
• ISSN: 0301-4207; 1873-7641
• DOI: 10.1016/j.resourpol.2024.105134

A significant gap in total natural resources wealth and financial inclusion studies on the African continent stems from their impact and variation. To address these deficiencies, this study investigates the effect of total natural resource rents on financial inclusion, employing data from 27 African economies from 2004 to 2019. This study uses the most recent panel estimators, causality test and variance decomposition analysis for accuracy and reliability. Findings reveal that total natural resources wealth and economic progress significantly reduces financial inclusion, while fossil and renewable energy promote financial inclusion. Moreover, financial globalization had an insignificant outcome on financial inclusion. The causality test revealed bi-directional causation between financial inclusion in renewable energy and financial inclusion in economic progress. Again uni-directional causation from financial inclusion to fossil energy and financial inclusion to natural resources wealth. At the same time, a neutral causal effect was found from financial inclusion to financial globalization. Regarding variations, financial inclusion had the highest effect on natural resource rents. Our findings grasp new insight into financial inclusion in Africa, and policymakers are advised to support natural resources rent by directing its impact into the economy's real sector. •Examined the impact of resources rent on financial inclusion in 27 African nations.•CS-DL, CCEMG, CS-ADRL, causality, and variance decomposition were adopted.•Resources rent and economic progress decreased financial inclusion.•Fossil and renewable energy amplified financial inclusion.•Resources rents should be directed toward Africa's real economy.