Oil Rents and Human Development Outcomes in Nigeria: Evidence from a Non-Linear Bounds Approach to Cointegration

Abstract

In this study, the asymmetric relationship between oil rents and human development in Nigeria was examined between 1981 and 2020. Specifically, the nonlinear autoregressive distributed lag (NARDL) model was employed to ascertain how the partial sums of positive and negative changes in oil and gas rents contributed to the human development index (HDI) with time-series data obtained from the United Nations Development Programme (UNDP) Human Development Report and World Development Indicators (WDI). In addition, unit root and bounds cointegration tests were employed to determine the stationary properties and long-run relationships among the variables. It was found from the unit root test that the variables were fractionally integrated. It is also evident from the bounds cointegration results that HDI has a long-run relationship with oil and gas rents. The findings revealed that oil rent has not yielded the intended and desired positive benefits in terms of improving human development given its insignificant positive contribution to HDI. On the other hand, HDI responded positively to positive changes in natural gas rents and this finding was statistically significant at a 5 per cent level. This implies that an increase in natural gas rents plays a significant role in improving human development. Given the findings, this paper recommends proper management and accountability of the oil rents to create better opportunities for human development. It is also recommended for government to mitigate gas flaring and create enabling environment for more investments in gas resources to provide a roadmap for more investments in human development.