The role of political stability on crude oil production in Cameroon: Evidence from the ARDL and NARDL models

Abstract

The development of a country's energy resources is strongly influenced by its institutional environment. This study analyses the symmetric and asymmetric effects, as well as the causal relationships between political stability and crude oil production in Cameroon, taking into account government efficiency, foreign direct investment (FDI) and GDP per capita over the period 1996–2022. To do this, we used the Toda Yamamoto causality test, as well as linear autoregressive models (ARDL) and non-linear autoregressive models (NARDL). The results show that the short-term negative impacts on crude oil production are due to foreign direct investment (FDI), GDP per capita and political stability. However, in the long term, political stability, FDI and government efficiency have a positive effect on crude oil production. An abruptly favourable shift in political stability leads to a reduction in crude oil production in the short term, while there is no significant impact in the long term. In terms of causality, we identified a unidirectional relationship from political stability to crude oil production and government effectiveness, as well as a bidirectional relationship between GDP per capita and political stability. These results suggest that political stability contributes to reversing Cameroon's oil curse through government efficiency, FDI and economic growth. It is therefore imperative for the Cameroonian government to strengthen political stability as an essential pillar of economic prosperity. This study stands out from previous work by integrating three complementary analytical approaches: ARDL, NARDL and the causality test, to analyse the complex relationship between crude oil production and political stability. In addition to this innovative combination of methods, it also represents the first initiative to explore this dynamic in sub-Saharan Africa, with a particular focus on Cameroon.