Modelling asymmetric and nonlinear features in the natural resource wealth-economic complexity nexus: empirical insights from Nigeria

Abstract

Abstract Contrary to previous research, this study makes a unique contribution to the global discussion by incorporating asymmetric structure and nonlinearity into the analysis of how changes in natural resource wealth affect economic complexity. To achieve this objective, the study uses a nonlinear autoregressive distributed lag (ARDL) and a fully modified ordinary least squares estimator, utilizing data from Nigeria spanning the period 1984–2021. Unlike earlier studies, this study establishes robust evidence of nonlinearity and asymmetry in the sensitivity of economic complexity to changes in natural resource rents in the short and long run. The cumulative increases (positive shock components) in natural resource wealth provide strong stimuli and incentives that promote economic complexity in the short run, while the cumulative decreases (negative shock components) deteriorate economic complexity upgrades. Meanwhile, long-run estimates indicate that both positive and negative shock components are catalysts that impede Nigeria’s manufacturing structures’ ability to improve technological innovation and knowledge-based productive capacity for producing sophisticated and globally competitive exports. These findings imply that the resource curse phenomenon holds true regarding economic complexity in Nigeria in the long run. In conclusion, this study finds that Nigeria’s natural resource endowments breed complacency, racketeering, shrewdness, corrupt practices, and opportunistic behaviour, which impair innovative initiatives that spur economic complexity. This study outlines the policy implications and insights from the findings.