Further investigation of the total natural resource rents and economic growth nexus in resource-abundant sub-Saharan African countries

• Published in: Mineral economics : raw materials report 2023, Vol.36 (1), p.97-121
• Main Authors: Ampofo, Gideon Minua Kwaku, Laari, Prosper Basommi, Ware, Emmanuel Opoku, Shaw, Williams
• Format: Article
• Language: English
• Subjects: Asymmetry; Causality; Debt management; Deficit financing; Economic analysis; Economic development; Economic growth; Economics; Economics and Finance; Engineering Economics; Environmental Economics; Industrial Organization; Innovation/Technology Management; Loans; Logistics; Marketing; Mineral Resources; Natural resources; Organization; Original Paper; Public debt; Sustainable development
• ISSN: 2191-2203; 2191-2211
• DOI: 10.1007/s13563-022-00316-4

This paper analyses the effect of natural resource wealth on sustainable economic development in the top 8 resource-abundant sub-Saharan African countries according to the World Bank Wealth of Nations 2018 over the period 1981–2017. The study incorporates public debt as an explanatory variable in our analysis, which is an extension of previous natural resource-growth estimations, to throw more light on how natural resource abundance and debt overhang simultaneously affect economic growth in resource-abundant sub-Saharan African (SSA) countries. The NARDL bounds testing approach and asymmetric Granger causality tests are employed. Long-run asymmetric effect results show that an increase in natural resource rents significantly increases economic growth in Equatorial Guinea. However, an increase in natural resource rents in the Congo republic negatively affects economic growth, validating the resource curse hypothesis. No significant effect was found in other countries studied. In terms of asymmetric causality results, no bidirectional causality between natural resource rents and economic growth was noted. We, however, identified a weak unidirectional asymmetric causality relationship running from economic growth to resource rents in the Congo Republic and natural resource rents to economic growth in South Africa. The study, therefore, suggests the implementation of efficient public debt management policies and an improvement in the quality of institutions for effective management of public loans and resource revenues to stimulate economic development in these resource-rich countries.