Can Extractive and Financial Sector Development Help Build Sustainable Infrastructure in Africa?

We examine the relationship between natural resource rents, bank credit, and infrastructure quality in Sub-Saharan Africa. We consider total natural resources rents and specific rents from extractive industries—oil, gas, and mineral resources—in our analysis. We employ instrumental variables, fixed effects, and dynamic panel data estimations in our analysis. Our results, in general, suggest a weak positive association between natural resource rents and infrastructure quality. Conditioning on institutional quality and financial development leads to different observations. When we consider natural resource dependence as a natural capital proportion of total wealth, we find that institutional quality has a negative coefficient on the interaction of institutions and natural resources rent in developing enablers of trade such as roads and other trade-related infrastructure to spur economic activity and prosperity.