Discovery of Oil in African Countries: Blessing or Curse to the Indigenous Citizens?

ABSTRACT

For a nation to grow faster, it must direct its oil revenue on pro-poor investment. It must be noted also that, reforms in the health and educational sectors are cornerstones of a nation. This means that investment in health and education is so important that a country should dedicate its natural resource revenue towards these sectors. The emphasis on investment in health and education cannot be taken for granted.

As a result, this study empirically examines the influence of natural resource (oil) rent on pro-poor investment in Africa. The research used data from the World Bank’s World Development indicators and polity IV dataset for 17 African countries over the period 2000 to 2017. The study employed a simple pair-wise correlation estimation technic in the estimation. Taking the level of democracy and oil production level into consideration, the study found that oil rent influences pro-poor investment in one way or the other in Africa. The study also reveals that the democracy level plays a role in the oil rent-pro poor investment nexus, particularly investment in education. To be specific, increase in oil rent tend to increase educational investment in democratic years but detrimental to educational investment in autocratic years. We, thus, conclude that, for natural resource (oil) revenue to be effective in enhancing pro-poor investment, it requires a complementary democratic environment in Africa.

The study, therefore, points out the need for domestic policymakers of oil-producing African countries to concentrate on the exploration of oils resource in their respective countries alongside ensuring democratic environment.