The effects of Speculative oil trading on Inequality and the role of Governance: A comparative study of five African countries

Abstract

This thesis examines how the financialization of oil, specifically speculative trading in oil futures, affects inequality in five African countries heavily reliant on oil: Gabon, Nigeria, Angola, The Republic of Congo and South Africa. The main research question asks whether increased speculative trading contributes to inequality and to what extent governance quality mitigates this effect. To explore this, panel data from 1999 to 2023 was analyzed using POLS, GMM, first differences and fixed effects models, with the Human Development Index as a proxy for inequality. The main finding of this research is that speculative trade alone does not consistently increase inequality. Furthermore governance quality appears to amplify the negative effects of financialization, which is inverted from the expected mitigation effect seen in Resource curse and Dutch Disease theories. The results suggest that governance reforms, while necessary, may be insufficient if countries exhibit underlying control of the elite or underlying governance inadequacies remain unaddressed. For policymakers, this highlights the importance of combining regulatory oversight in financial markets, with a transparent and adequate governance structure in the economy of resource rich developing countries.