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Nonlinear Public Debt and Resource Rent Nexus in Highly Indebted Resource-Rich Sub-Saharan Economies: Evidence from Nigeria

This paper contributes empirical insights on nonlinear public debt and resource rent nexus in the Nigerian economy which in several ways typifies highly indebted resource-rich sub-Saharan nations in terms of rich natural resource endowments, excessive reliance on resource rent revenue that is susceptible to global price volatility, public debt unsustainability risks, a cyclical trade balance and weak governance challenges, thereby differing remarkably from advanced and emerging economies. Predicated on Ricardian equivalence theory, the findings of both nonlinear ARDL cointegration and asymmetric dynamic multipliers estimates include (i) significant short-run and long-run asymmetric nexuses, (ii) negative shocks of resource rent impact more on public debt than positive shocks and (iii) the pre-shock equilibria are never attained subsequently; these results explain the persistent public debt pile up in the region. Implications for policy are discussed.