PETROLEUM RESOURCE AND ECONOMIC WELFARE OF FIVE SELECTED LOWER-MIDDLE INCOME OF OIL PRODUCING COUNTRIES (i.e. NIGERIA, PAKISTAN, INDONESIA, EGYPT, INDIA).

Abstract

Purpose – Economic welfare is one of the macroeconomic goals every country seeks to achieve, be it developed, least-developed or developing one. Some countries with abundant natural resources still suffer from achieving this goal. Based on this reason, this study was carried out to empirically look into the relationship between petroleum resource as measured by oil rent, and official exchange rate, and economic welfare as measured by gross domestic product per capita of five-selected lower-middle-income of oil producing countries (i.e. Nigeria, Pakistan, Indonesia, Egypt and India), using annual time-series data sourced from World Bank for the periods 2010-2020.

Design/methodology/approach – This objective was achieved with the utilization of static panel data method coupled with other linear models such as; Pooled OLS, Fixed effects, and Random effects models.

Findings – The results of the findings of Pooled OLS revealed that petroleum resource as measured by oil rent and official exchange rate had significant bearings on economic welfare as measured by gross domestic product per capita by 103.3 per cent and 0.14 per cent respectively on the average. The result further displayed that fixed effects model was an appropriate model to explain the significant fixed effects oil rent and official exchange rate had on improving gross domestic product per capita, when choice was made between Pooled OLS and fixed effects model. More so, the result further demonstrated that random effects model was the best model to explain the random effects oil rent and official exchange rate had on contributing positively to the gross domestic product per capita, when choice was made between fixed effects and random effects models. Finally, Panel Diagnostic residual test results showed that the series were normally distributed, hence the presence of cross-section dependence was not found in the model.

Conclusion/Policy Implication – The study concluded that for these five-oil producing countries to achieve their economic welfare, they must adopt mixed effects model as portrayed by the findings of this study for policy inference. As this is geared towards enabling these countries to achieve policies that are aimed at pegging their exchange rate to the value of dollars, and increasing the value of crude oil production, so as to improve their economic welfares.