Impact of Oil Rent on Economic Well-Being in a Frontier Developing Country: Role of Institutional Quality and Access to Finance

Knowledge gap . Despite the established link between oil rent and economic growth, the moderating effect of institutional quality and access to finance on the relationship between oil rent and economic well-being remains unexplored. Research objectives . This study examines the effect of oil rent on economic well-being in Nigeria — a country that is both a net oil exporter and net importer of petroleum products. We also examine how the relationship is influenced by the quality of governance institutions and access to finance during the 1996 to 2021 period. Results. We find that oil rent improves economic well-being in Nigeria through higher gross domestic product (GDP) per capita growth, economic growth and low unemployment. Institutional quality enhances the contribution of oil rent to economic well-being by decreasing the level of unemployment in Nigeria. Access to finance through bank branch expansion did not translate oil rent into positive economic well-being. There is a uni-directional granger causality between oil rent and GDP per capita growth, GDP growth rate and unemployment rate. Implications . The findings call on policymakers to increase oil rent due to its significant role in improving economic well-being. They should strengthen governance institutions by introducing laws and policies that protect public interests and combat corruption in the petroleum sector to increase oil rent and its positive trickle-down effect on people. Policymakers also need to identify other appropriate mechanisms for broadening access to finance for members of the public who need financing to access the infrastructure and products that were built using oil wealth, such as schools and hospitals. Contribution. The study makes a valuable contribution to the literature on resource dependence by examining the relatively underexplored case of a country that simultaneously exports crude oil and imports refined petroleum products. This perspective extends beyond the conventional focus on net oil-exporting economies and provides a fresh contribution to the resource curse debate.