Natural resources endowment: What more does West Africa need in order to grow?

Abstract

Notwithstanding a huge deposit of natural resources in West Africa, the region has consistently recorded unimpressive economic performances, thus prompting an important question: what other things, besides resources endowment, does the region need in order to grow? In an attempt to look into this, we examine the roles of FDI, globalisation, and economic-governance alongside that of natural resources endowment on the growth of the West African economy. Using the panel ARDL technique on the West African data covering 1996–2016, we confirm that the impact of natural resources endowment on economic growth is significant and positive. Also, FDI exerts a positive effect on economic growth, while the coefficient of globalisation is mixed. Finally, we find that government effectiveness stimulates the growth of the region; it, however, reduces the positive effect of natural resources endowment while regulatory quality enhances the positive effect of natural resources endowment on economic growth. Given these findings, the governments of West African countries are enjoined to further promote the economic institutions of the states – entrench public and civil services efficiency, promote the formulation and strict implementation of regulations and sound policies – in order to promote both domestic and foreign (private) investments. Also, the governments of the West African states should key-in to the globalisation agenda by enhancing the competitiveness of local markets in order to compete meritoriously with foreign firms.