On the Dynamics of the Oil Resource Curse in Nigeria: Theory and Implications

Abstract

The paper provides conceptual insights and in-depth analysis of the dynamics of the oil resource curse on the political economy of Nigeria. Using a combination of the resource curse and structural transformation theories, we highlight the perverse connections between oil dependence and weak institutional framework as well as low human development and its concomitant effect on conflict and political instability in Nigeria. We employ cross-sectional data across selected countries in Sub-Saharan Africa and within Nigeria at various intervals under different groupings between the periods 2005 to 2016 to benchmark Nigeria’s performance in terms of development indicators such as gross fixed capital formation; quality of governance and institutional capacity; level of inclusive human development; infrastructure performance and spread of the tax base. The study found that Nigeria compares abysmally in terms of the development indicators analyzed and therefore lag behind many countries in the region. We conclude in line with extant literature that to some extent, the low development performance of Nigeria is symptomatic of the oil curse and common to many other mineral exporting countries in many developing regions of the world. The policy implications of this paper imply an urgent need for structural transformation of the economy from low productive subsistence agriculture, non-tradable services and low net employment mining to sectors with both high productivity and employment such as industrial agriculture and manufacturing in order to stimulate the creation of better and productive jobs for the bulging population. The study also recommends an urgent need for institutional reforms that will strengthen the governance and administrative capacity of the country in order to foster a paradigm shift from a rentier economy to a more inclusive and sustainable economy.