Oil revenue and manufacturing sector growth in Africa’s oil-exporting countries

Abstract

The study examines the impact of oil revenue on the growth of the manufacturing sector in Africa’s oil-exporting countries. It focuses on six major net oil-exporters in Africa, namely: Nigeria, Algeria, Sudan, Gabon, Cameroon and Egypt. Both static and dynamic panel data techniques are used to explore the effects of oil on the manufacturing sector of the countries between 1970 and 2010. The findings of the study show that the six countries do not exhibit significant country-specific effects, and the existence of Dutch disease is confirmed. The negative relationship between oil and manufacturing sector growth, which might be regarded as a symptom of the presence of Dutch disease, is significant in the panel dynamic model while it is not in the static model. The study also reveals that there is a dearth of capital formation in the six countries’ manufacturing sectors. It is further shown that the more capital-intensive the manufacturing sector is, the less the negative effect of the oil sector’s dominance. It is recommended that these countries should restructure their oil sector in such a way that proceeds from oil are largely utilised for more investment in the manufacturing sector.

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