FUDMA Journal of Politics and International Affairs

(FUJOPIA)

The Paradox of Plenty:

Natural Resource Revenues and the Resource Curse in Nigeria
1
Andrew Aondohemba Chenge PhD & 2David Onu Salifu PhD

Abstract
Natural resources, notably those in the extractive industry, have shown to enhance
prosperity and economic growth in many countries. Despite the positive experience
associated with natural resource revenues and economic development in developed
countries, the experience in resource-rich developing countries has shown the
opposite conclusion. Natural resource revenues for most developing countries have
shown to be more of a curse than a blessing. This paper examines the nexus
between natural resource revenues and the resource curse in Nigeria. The Dutch
disease theory was adopted as the theoretical underpinning for the paper. A mixed
methods research design which combines quantitative and qualitative data was used
in the paper. Data collection was done using documentary sources, while data
analysis involved the use of descriptive statistics and content analysis. The study
revealed that oil revenue yields have been the dominant revenue earner for
government. It established that huge revenues from the oil and gas sector have
generated negative developmental outcomes such as increased poverty, wealth
disparity, conflicts, environmental degradation and decline of the agricultural and
manufacturing sectors. The paper also showed that over-reliance on oil revenues,
weak tax system and institutions of government, corruption and docile civil society
were major factors impelling the resource curse in Nigeria. The paper recommends
the need for economic diversification, improved public financial management and
strengthening of government institutions and civil society, as strategies of
addressing the resource-curse in Nigeria.
Keywords: Natural resources, Natural resource revenues, Extractive industry, Resource curse,
Development, Dutch disease

Introduction any country embarking upon a period of rapid

Placed in a historical context, the original
conception in the 1950s and 1960s was that the
discovery of natural resources (notably oil and
gas, including solid minerals) would enhance
prosperity and economic growth in many
developing countries (Omeje, 2016). In the
1950s, for instance, Ginsburg (cited in Anayati,
2012) and Rosser (2006) argued that the
possession of a sizable and diversified natural
resource endowment is a major advantage to
1&2 Department of Public Administration,
Federal University Wukari, Taraba State.
Lead Author: drewchenge@gmail.com
economic growth.
In the 1960s, Rostow (cited in Rosser, 2006)
went further, arguing that natural resource
endowments would enable developing
countries to make the transition from
underdevelopment to industrial ‘take-off’, just
as they had done for countries such as
Australia, the United States and Britain. In the
1970s and 1980s, neoliberal economists such as
Andrew Aondohemba Chenge PhD & David Onu Salifu PhD
Balassa (1980), Krueger (1980) and Drake
(1972) put forward similar arguments,
maintaining that natural resources could
facilitate a country’s industrial development by
providing domestic markets and investible
funds (cited in Anayati, 2012; Chenge, 2018;
Marnia, 2013; Onuoha, 2008; Rosser, 2006).
Despite the positive experience associated with
natural resource revenues and economic
development in North America and Western
Europe, the experience in resource-rich
developing countries has shown the opposite
conclusion (Di-John, 2011; Stevens, 2015).
Natural resource revenues for most developing
countries have shown to be more of a curse
than a blessing. For many countries rich in oil,
gas and minerals, development remains an
elusive goal. The rich get richer, the poor stay
poor, inequality rises, economies stagnate,
corruption flourishes and conflict deepens
(Olcer, 2009).
Cases of the resource curse in developing
countries were put under the spotlight in the
late 1990s when the incidence of conflict
minerals, particularly blood diamonds (as
experienced in Sierra Leone, Congo and
Liberia), and that of resource-rent looting (as
experienced for example in Angola, Sudan and
Venezuela) were disclosed (Barry, 2013;
Halbrunn, 2014; Omeje, 2016; Ovida, 2014;
Rajan, 2011; Tusalem & Morrison, 2014;
Wiens, Poast & Clark, 2014; Zulu & Wilson,
2012). Similarly, nations like Mexico,
Argentina, Iran, Libya, India, Costa Rica, Haiti,
Armenia, Burma, Azerbaijan, Georgia, and
Jamaica provide abject examples of the
phenomenon, as the exploitation of natural
resource endowments in these countries appear
to have propelled them into various states of
poverty, instability and chaos (economic and
otherwise) (Strauss, 2000).
Nigeria is often presented as a test case for the
resource-curse. Indeed, over 50 years of
substantial oil production have not resulted in
A Journal Publication of the Department of Political Science, Federal University Dutsin-Ma, Katsina- Nigeria
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FUJOPIA ISSN: 2682-5406
sustainable socioeconomic development in the
country. The poverty rate is extremely high,
with 50 percent of the population living on less
than US$1 per day; in fact, the poverty rate
exceeds that of the period before the first oil
boom in the 1970s, which was 35 percent
(Mahler, 2010). In this study, the present
economic trends in Nigeria would be subjected
to a methodical test in order to explain why the
resource curse hypothesis still holds in the
country.
Objectives of the Study
The study aims to examine the nexus between
natural resource revenues and the resource
curse in Nigeria. Specifically, the study aims to:
1. Examine natural resource revenue yields
from the extractive industries sector in
Nigeria from 2007 to 2017.
2. Assess the developmental outcomes
generated by natural resource revenues in
Nigeria.
3. Identify the factors impelling the resource
curse against concerted efforts for resource
led development in Nigeria.
Conceptual Review
Natural Resource Revenues
Natural resource revenues are revenues
generated by governments from the extractive
industries (EI) sector. These revenues include
rents, royalties and taxes. Rents are the surplus
value gained after all costs, both money and
opportunity costs, are subtracted from
revenues arising from the sale of EI resources.
Royalties are generally given to the state as a
percentage of the sale of EI resources. Tax
revenues are typically profit taxes, but can also
include corporate income taxes, sector specific
‘special’ taxes or export taxes (Boadway &
Keen, 2013).
Resource Curse
Resource curse refers to the failure of resource-
rich developing countries to benefit fully from
their natural resource wealth, and for
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Andrew Aondohemba Chenge PhD & David Onu Salifu PhD
governments in these countries to respond
effectively to public welfare needs. While it is
expected that better development outcomes
would be experienced after countries discover
natural resources, resource-rich developing
countries tend to have lower rates of economic
stability and economic growth, and higher rates
of rent seeking, conflict and authoritarianism,
compared to non-resource-rich countries.
Resource curse theorists therefore claim the
existence of an inverse relationship between
high revenue from abundant-resource
developing countries and economic growth
(Di-John, 2010; 2011; Sachs & Warner, 1995;
2001; Stevens, 2015).
Natural Resources and their Negative
Legacy
The economies of resource-rich developed
countries are highly dependent on well-
functioning management of extractive
resources in turning opportunities into
advantages to benefit the population as a whole
and aim at achieving sustainable development.
For resource-rich developing economies
however, various challenges impose obstacles,
which hinder realization and, indeed,
optimization of these revenues (Archine, 2013).
The natural-resource curse claims an inverse
relationship between high revenue from
abundant-resource countries and economic
growth. Sachs and Warner (1995; 2001) first
examined the correlation between natural
resources and economic growth, and since then
a vast amount of literature analyzed the
existence of and possible mechanisms through
which an abundance of natural resources can
negatively impact economic growth (Demissie,
2014).
The effects of natural resource wealth have
been found to affect a country’s economy
through a wide range of patterns. Notably, it
appears that such wealth is lowering economic
growth (Gylfason, Herbertsson & Zoega, 1999;
Leite & Weidmann 1999; and Sachs & Warner
A Journal Publication of the Department of Political Science, Federal University Dutsin-Ma, Katsina- Nigeria
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FUJOPIA ISSN: 2682-5406
2001), exacerbating the risk for conflict and
civil war (Collier & Hoeffler, 2005; Ross 2003)
and non-democratic tendencies (Ross 2001a;
Tsui 2005), giving rise to heightened social
divisions and weakened institutional capacity
(Ahmad & Singh 2003; Isham, Woolcock,
Pritchett & Busby, 2005), poverty (Ross,
2001b), inequality (Engerman & Sokoloff,
2002), corruption (Leite & Weidmann 1999;
Vicente, 2006), negative savings rates (World
Bank, 2006) and low levels of research and
development (Havro & Santiso, 2011; Maloney
& Rodriguez-Clare 2005).
Accounts of the resource curse are available for
many countries. Oil exporters (Iran, Venezuela,
Libya, Iraq, Kuwait, Quatar) experienced
negative growth during the last few decades.
The Organization of Petroleum Exporting
Countries (OPEC) as a whole saw a decline in
Gross National Product (GNP) per capita
while other countries with comparable GNP
per capita enjoyed growth (Van der Ploeg,
2011). The deindustrialization and
disappointing growth experience of South
Africa following the boom in gold prices can
be explained by the appreciation of the real
exchange rate in the 1970’s followed by gradual
depreciations together with increased barriers
to technological adoption (Chenge, 2018;
Stokke, 2007; Van der Ploeg, 2011).
Natural resources in Sub-Saharan African
(SSA) countries have waned good governance.
A study by Meon and Sekkat (2005) on the
relationship of the quality of institutions and
corruption finds that corruption is most
harmful to growth where governance is weak.
An Open Society Institute of Southern Africa
(2009) study on resource-rich SSA countries
such as the Democratic Republic of Congo,
Malawi, Tanzania, and Zambia found that
mineral-rich countries in Africa are not
benefiting enough from mining firms, due to
poor governance.
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Andrew Aondohemba Chenge PhD & David Onu Salifu PhD
Natural resources are also known to have
fueled conflicts and political instabilities. The
disruption of the “air bridge” from 1994
onwards shifted the production of coca paste
from Peru and Bolivia to Colombia and led to
a huge boom in the demand for Colombian
coca leaf. However, the colossal revenues
generated by coca did not produce widespread
economic spill-over effects, as the
opportunities that accelerated coca production
provided, subsequently fueled violence and
civilian conflict especially outside the major
cities. Natural resources for which there is
substantial black market, such as, coca, opium
and diamonds, appear especially likely to be
exploited by parties to a civil conflict (Angrist
& Kugler, 2005; Chenge, 2018; Li Billon, 2001;
Lujala & Rustad, 2011; 2012; Rubio, 2014).
The debate on natural resources as a motive
for conflicts and violence has been dominated
by the juxtaposition of greed and grievance
(Berdal & Malone 2000; Collier & Hoeffler,
2001). The grievance hypothesis claims that
segments of the population or regions might
feel deprived of the benefits of resource-related
income (while possibly carrying the ecological
burden of production) and therefore take up
arms. Typically, grievance is associated with
secessionist upsurges; When central
governments (tend to) monopolize resource
income, the resource producing regions might
develop feelings of deprivation and grievances
that, in turn, trigger violent secessionist
movements such as in the oil-rich regions of
Cabinda in Angola and in the Niger Delta or in
copper rich Katanga in the 1960s (Basedau,
2005).
However, perhaps the most common present-
day spurs to violence over resources are
quarrels over their prize as booty. Their
profitability stimulates, in the words of one
World Bank report (Collier & Hoeffler, 2001),
the ‘greed’ of both internal and external
players. Though greed and grievance might
sometimes be hard to differentiate, ‘greed’ is
A Journal Publication of the Department of Political Science, Federal University Dutsin-Ma, Katsina- Nigeria
Volume 3 Number 2
FUJOPIA ISSN: 2682-5406
not so much connected to perceived inequality
but rather to narrow ambitions by individuals.
In the resource-rich and ethnically
heterogeneous Democratic Republic of Congo
(DRC), various rebel groups have not been
seeking secession, but rather power over the
capital Kinshasa in order to access resource-
related benefits. In Angola, Sierra Leone,
Liberia and Congo-Brazzaville as well, the
specific economic interests of the main players
have always been amongst the primary issues
(Basedau, 2005).
Negative Growth Impact in a Natural
Resource Dependent State: A Focus on
Nigeria
Nigeria is identified as one of the most
dramatic examples of the resource curse
(Bevan, Collier & Gunning, 1999; Sala-i-Martin
& Subramanian, 2003; Van de Ploeg, 2011). Oil
revenues per capita in Nigeria increased from
US$33 in 1965 to US$325 in 2000, but income
per capita has stagnated at around US$1100 in
Purchasing Power Parity (PPP) terms since its
independence in 1960 putting Nigeria among
the 15 poorest countries in the world. Between
1970 and 2000 the part of the population that
has to survive on less than US$1 per day shot
up from 26 to almost 70 percent. In 1970 the
top 2 percent had the same share of income as
the bottom 17 percent, but in 2000 the same
share as the bottom 55 percent (Sala-i-Martin
& Subramanian, 2003).
Clearly, huge oil exports have not benefited the
average Nigerian. Although Nigeria has
experienced rapid growth of physical capital at
6.7 percent per year since independence, it has
suffered a declining Total Factor Productivity
(TFP) of 1.2 percent per year. Capacity
utilization in manufacturing hovers around a
third. Two thirds of capacity, often owned by
the government, thus goes to waste. Successive
military dictatorships have plundered oil wealth
and Nigeria is known for its anecdotes about
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transfers of large amounts of undisclosed Also, the social indicators have illustrated no
wealth (Sala-i-Martin & Subramanian, 2003). specific tendency towards improvement such
that in 2010, Nigeria was ranked 142 out of
Nigeria is among the 20 countries in the world
169 countries by the United Nations Human
with the widest gap between rich and poor.
Development Index (Ushie, Adeniyi &
The Gini index measures the extent to which
Akongwale, 2013). Nigerians have been
the distribution of income (or in some cases
wallowing in abject poverty with inadequate
consumption expenditure) among individuals
infrastructural and social amenities, poor
or households within an economy deviates
standard of living, high mortality rates, low
from a perfectly equal distribution. A Gini
incomes, low literacy rates and other forms of
index of zero represents perfect equality while
poor human development index. It thus goes
an index of 100 points to a perfect inequality.
without saying that Nigeria has evidently
Nigeria had one of the highest Gini indexes in
grappled with the resource curse problem also
the world in 2006 - for Nigeria, it was 50.6.
called the paradox of plenty (Gonzalez, 2016;
This compared poorly with other countries
Okeke & Aniche, 2013; Olayiwola & Titilola,
such as India (37.8), Jamaica (37.9), Mauritania
2016; Onyekwu, 2007; Ushie et al., 2013).
(37.3) and Rwanda (28.9) (Onyeukwu, 2007).
Arguably, the violent conflict in the Niger
It is quite amazing that the stupendous
Delta is a result of accumulated grievances
resources gained from oil have not been
related to the resource curse. The resource
reflected in the rate and level of development
curse in the Niger Delta is constituted by
in Nigeria. Rather, is has become a major
factors relating to the Nigerian state, the
source of concern that such resources might,
production side and oil-financed armed
when we look at the economic indices, be
conflict. The Nigerian state shows clear signs
classified as having been wasted. Cumulative
of what Karl (1997) identified as ‘petro-states’
earnings from the export of oil between 1965
that have a centralizing tendency that
and 2000 have been put at US$350 billion, at
simultaneously weakens their authority. In
1965 prices – with fewer payments being made
Nigeria, this is experienced as a paradox of
to the oil companies. Given the fact that over
centralized federalism. With the military rule
the last six years the price of oil on the
after 1966, the management of the Nigerian oil
international market has been consistently
sector became more and more concentrated in
rising, we can safely say that Nigeria has earned
the federal government. The oil being
more than the triple the 2000 figure
produced in an ethnic minority area that has
(Onyeukwu, 2007).
marginal influence on the national level,
Oil wealth has fundamentally altered politics combined with a lack of transparency in the
and governance in Nigeria. It is hard to governance of the oil sector, people in the
maintain that the standard Dutch disease story Niger Delta feel excluded from the process of
of worsening competitiveness of the non-oil decision-making and deprived of their
export sector fully explains its miserable livelihoods (Muller, 2010).
economic performance. Instead, exchange rate
On the production side, host communities in
policy seemed to be driven by rent and fiscal
the Niger Delta have faced manifold problems
imperatives and relative price movements were
resulting from oil exploitation, including
almost a by-product of the resource boom
environmental destruction, land ownership
(Sala-i-Martin & Subramanian, 2003; Van de
disputes, loss of livelihoods and inadequate
Ploeg, 2011)
compensation, due to a lack of oversight by the
state over the multinational oil companies’
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Andrew Aondohemba Chenge PhD & David Onu Salifu PhD
operations (Ezirim, 2011; Muller, 2010;
Osaghae, 2015).
Theoretical Framework
The Dutch disease theory is adopted for this
paper. The Dutch disease theory was first
developed by Corden and Neary (1982). The
term originated from the 1977 experience in
the Netherlands concerning the decline of the
Dutch manufacturing sector after the discovery
of natural gas sources. Other scholars that have
contributed to the growth of the theory are
Sachs and Warner (1995), Gylfason (2001),
Papyrakis and Gerlagh, (2004), Iimi (2007) and
Frankel (2010) (cited in Badeeb, Lean & Clark,
2016).
The Dutch disease refers to a reduction in a
country’s ability to export from non-resource
sectors as a result of an appreciation in the
exchange rate due to substantial earnings from
the export of natural resources. In other words,
the Dutch disease is the phenomenon where
the non-resource sector weakens and the
country experiences inflation as a result of the
resource flux to the thriving natural-resource
sector (Demissie, 2014; Di-John, 2010).
The assumptions of the Dutch disease theory
can be described as follows: In an economy in
full employment equilibrium, a permanent
increase in the inflow of external funds results
in a change in relative prices in favour of non-
traded goods (services and construction) and
against non-oil traded goods (manufacturing
and agriculture), leading to the crowding out of
non-oil tradeables by non-tradeables. That is,
an appreciation of the exchange rate leads to a
decline in the competitiveness, and hence
production and employment, of the traded-
goods sector (Di-John, 2010).
In applying the theory, the study maintains that
the features of the Dutch disease have been
viewed in Nigeria since the 1980s, when the
A Journal Publication of the Department of Political Science, Federal University Dutsin-Ma, Katsina- Nigeria
Volume 3 Number 2
FUJOPIA ISSN: 2682-5406
real exchange rate appreciated and the relative
profitability of domestically produced goods
and resources fell. The historical development
of Nigeria has revealed that despite abundant
natural resource endowment including
numerous favourable agricultural and industrial
opportunities, Nigeria has tended to neglect
the agricultural and other non-oil sectors while
placing an overwhelming reliance on the export
of crude oil. In the years that Nigerian oil
revenue dwindled (1987-1990), manufacturing
boomed. However, the oil windfalls since the
of 1990’s put a halt to this progress and with
consistent growth in oil revenues over the
years, Nigeria’s manufacturing sector also
called the real sector has been in doldrums.
Methodology
The paper adopts a mixed methods research
design. Thus, both quantitative and qualitative
data were collected and analyzed in the paper.
Data was derived from annual reports and
statistical bulletins agencies like of the Central
Bank of Nigeria (CBN) and National Bureau of
Statistics (NBS), as well as other published
materials such as books, journal articles and
internet documents. Data analysis was done
using descriptive statistics and content analysis.
Discussions and Findings
Extractive Industry and Natural Resource
Revenue Yields in Nigeria (2007 – 2017)
Revenue yields in the extractive industry can be
divided into oil and non oil revenues. Oil
revenue refers to the income earned from both
sales and taxation of oil and gas products (thus,
it consists of, crude oil and gas sales, Petroleum
Profit Tax (PPT), royalties and other related oil
financial flows). Figure 1 below shows the
contribution of oil and non oil revenue to the
Federation Account from 2007 to 2017.
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Andrew Aondohemba Chenge PhD & David Onu Salifu PhD FUJOPIA ISSN: 2682-5406

Figure 1: Contribution of oil and non oil revenue to the Federation Account (2007 – 2017)

Source: CBN Annual Reports 2007-2017

From figure 1, it can be seen that the only exception to this trend is the 2016 fiscal
contributions of oil revenue to the Federation year when non oil revenue recorded N2.9
Account exceeded the contributions of non oil billion against oil revenue which recorded N2.6
revenue to the Federation Account through billion.
most of the period under consideration. The
Figure 2: Contribution of oil revenue to total government revenue (2007 – 2017)

Source: CBN Annual Reports 2007-2017

The contribution of oil revenue to total
government revenue (shown in figure 2) also
reveals that oil revenue earnings dominate the
revenue pool in Nigeria. From 2007 to 2017,
oil revenue contributions as a percentage of
total government revenue was in most cases
above 50%. The only exception to this trend
was for the fiscal year 2016 when oil revenue
recorded 48% of total government revenue.
From the above analysis, it can be maintained
that oil revenue has been a major source of
government revenue accounting for an average
of about 70% of total government revenue.
A Journal Publication of the Department of Political Science, Federal University Dutsin-Ma, Katsina- Nigeria
Volume 3 Number 2
Nigeria can thus be described as a monolithic
economy. A monolithic economy refers to an
economic system that is essentially based on
the existence of only one major economic
product; depended upon for the economic
sustenance of that economy. The implication is
that the economic life and existence of that
economy revolves around the existence,
relevance and currency of that product. That
economy remains a potentially buoyant one
only if such product thrives in the international
market. The reverse is the case if the product
deteriorates or experiences a fall in demand in
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the international market. This scenario has
been the situation for the oil and gas sector in
the Nigerian economy.
Developmental Outcomes Generated by
Natural Resource Revenues in Nigeria
It has been established in the section above
that the oil and gas sector is the dominant
revenue earner for Nigeria. In spite of the huge
earnings that accrue from oil and gas sector,
Nigeria has not been able to maximally utilize
Figure 3: NPI in Nigeria (2007 – 2017)
such earning to attain the desired level of
development. Abundance of resource revenues
has not improved the living conditions of
majority of Nigerians as the National Poverty
Index (NPI) has shown that the poverty rate in
Nigeria has continued to increase over the
years. Similarly, the Gini index that defines the
inequality level shows that income inequality
has also been on the increase over the years.
Figure 3 below shows the NPI in Nigeria from
2007 to 2017.

Source: CBN Statistical Bulletins 2007-2017/ World Bank Poverty Report 2007-2017
Figure 3 reveals that the NPI has always been lower than the previous year), data shows that
above 50% all through the years under study. the NPI had consistently increased implying
Apart from the year 2009 when the NPI was that more Nigerians were getting poorer over
53.6% (0.1% lower than the previous year) and the years.
the year 2015 when the NPI was 55.8% (0.1%
Figure 4: Gini Index in Nigeria (2007 – 2017)

Source: CBN Statistical Bulletins 2007-2017/ World Bank Poverty Report 2007-2017
Related to the NPI is the Gini index which is increased from 2007 to 2017. The Gini index
an indicator of inequality in a country. Figure 4 was 41.89% in 2007, 44.5% in 2012 and 48.1%
shows that the Gini index consistently in 2017. The increasing Gini index implies a

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widening gap in inequality which also indicates The emergence of oil bunkering (theft) is
a declining standard of living among Nigerians. another important factor fuelling violence in
the region. Oil bunkering represents the
Another fall out of abundant oil revenues in
financial mechanism through which militants
Nigeria is the issue of prevalent oil related
fund their attacks and recruit new members
conflicts in the Niger Delta Region. Conflicts
(Watts, 2007). Militias involved in bunkering
in the Niger Delta pre-date the discovery of oil.
often justify their actions on the grounds that
Minority groups in the region have been
they are freedom fighters and are taking what is
agitating ever since colonial days against
rightfully theirs (Ikelegbe 2005). However, it is
domination and marginalization by the majority
likely that many militia groups are involved in
ethnic groups (Arowogsegbe 2009; Asgill,
bunkering for economic rather than altruistic
2012; Ibaba 2011). The marginalization faced
reasons (Asgill, 2012; Ikelegbe, 2005). The
by the Ijaw and other minority groups, resulted
trend of oil related conflicts has been on the
in voicing their concerns of ethnic
rise since 2010 as shown in Fig 5 below.
marginalization to the Willink Commission in
1957 (Asgill, 2012; Watts, 2004).
Figure 5: Oil Related Conflicts in the Niger Delta Region (2010 – 2016)

Source: World Bank/ NBS, 2018

Oil related conflicts in the Niger Delta have led
to a lot of fatalities. The Armed Conflict
Location and Event Data Project (ACLED)
database, Global Terrorism Database (GTD)
and World Bank/ NBS records reveal the
fatalities recorded in conflicts in the Niger
Delta region from 2010 to 2016. Although
statistics shown by these agencies indicate
variations in data reported, a common feature
in the data is that the upward trend of fatalities
over time remains strong (Figure 6)

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Figure 6: Distribution of Fatalities in Oil Related Conflicts in the Niger Delta Region
(2010 – 2016)

Source: GTB, ACLED & World Bank/ NBS 2018

Oil exploration and extraction in the Niger
Delta region is also said to have resulted to
incidents of oil spillage which cause severe
environmental degradation. This has led to the
inability of indigenes of the area to continue
with their traditional livelihoods. In the Niger
Delta of Nigeria, over 50 years of onshore and
offshore oil drilling has had devastating
consequences (Keblusek, 2010). People have to
drink, cook with and wash with polluted water;
they eat fish contaminated with oil and other
Figure 7: Oil spillage Data in the Niger Delta Region (2013 – 2017)
toxins; gas flares put pollutants in the air,
causing breathing and skin problems and
creating acid rain which destroys farmland.
Millions of people are affected, especially the
poorest individuals and those who rely on
fishing and agriculture – and almost everyone
in the Niger Delta once relied on these means
of livelihood. Figure 7 reveals the incidents of
oil spillage in the Niger Delta region from 2013
to 2017 as well as the possible causes of such
oil spills.

Source: SPDC, 2018

High rents from extractive sector resources
have also led to the declined performance of
other sectors in the Nigeria economy like the
agricultural and manufacturing sectors. In
1960, about 63.5% of all economic activity in
Nigeria was dominated by crop production,
animal husbandry, forestry and fishing, while
manufacturing was only a fraction of economic
activity, at 5%. In 1960, the oil and gas
industry, which is presently seen the driver of
Nigeria’s revenue was just a tiny fraction
(0.3%) of the economy.

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Andrew Aondohemba Chenge PhD & David Onu Salifu PhD
Figure 8: GDP Composition (1960)
Source: BudgIT, 2017
Throughout the 60s, the relevance of the
manufacturing sector ensured it began to
dictate the pace and drive government's
policies. However, by 1970, the oil and gas
sector gained prominence over the
manufacturing sector in terms of economic
relevance and value of output; annual
production touched 395.8mn barrels,
automatically propelling the oil and gas
industry to becoming the mainstay of the
economy. Less than a decade later, agriculture
proved the next casualty, losing traction to
crude. In 1985, the oil and gas sector’s
contribution to GDP was 25.5%, while the
agricultural sector amounted to 22% of GDP
(BudgIT, 2017).
In recent times, the oil and gas industry has
become the most strategic sector to national
development and growth in Nigeria. Oil and
gas constitute about 90% of Nigeria’s foreign
exchange earnings and 83% of its GDP. At the
global level, Nigeria is revealed as the 10th
largest producer of crude and the 6th largest
exporter among OPEC members (BudgIT,
2017; Nwoba & Abah, 2017). With these
developments, the agricultural and
manufacturing sectors became relegated to the
background position.
A Journal Publication of the Department of Political Science, Federal University Dutsin-Ma, Katsina- Nigeria
Volume 3 Number 2
FUJOPIA ISSN: 2682-5406
Factors Impelling the Resource Curse in
Nigeria
Sachs and Warner (1995) found in their
influential study that countries with great
natural wealth tend to grow more slowly than
resource-poor countries. Various other authors
have identified the particular channels through
which natural resources could lead to lower
growth rates. The resource curse also called the
‘paradox of plenty’ has been prevalent in
Nigeria since the oil boom of the 1970s due to
the factors examined below:
The effects of the resource curse in the
Nigerian state occur for reason that the
government earns considerable revenues from
resource extraction. The rents from the
extractive industry could have important
implications for the quality of institutions and
governance (Busse & Groning, 2011). Rents
reduce the need for the government to tax the
population, which in turn hinders the
development of a representative political
system (taxation effect). Low-taxed citizens
may then demand less accountability from
government, in turn lowering the pressure to
improve institutional quality.
Also, revenues easily extracted from the
resource sector allow the government to
mitigate dissent among the population, for
example, by spending on patronage (spending
effect) (Busse & Groning, 2011). This is likely
July 2020 22
Andrew Aondohemba Chenge PhD & David Onu Salifu PhD
to dampen latent pressure for good
governance. An increase in patronage could
foster rent seeking activities and corruption
among the population.
Corruption has been established as a major
obstacle for resource-rich countries in
economic growth and development. Patronage
and rent-seeking are ways corruption in
resource-rich countries spreads. Rent-seeking is
defined as “efforts, both legal and illegal, to
acquire access to or control over opportunities
for earning rents” (Karl 2007, 661 cited in
Demissie, 2014). Resource rents coupled with
corruption affect valuable decision making
abilities of those in power and result in low
quality services with less benefit to the general
public. At the same time, resource revenue
encourages patronage as government officials
finance their supporters to cling to their power.
Auty (2001a) suggests that the struggle for
large resource rents will increase the
concentration of economic and political power
in few elites.
Apart from the causes associated with the
rentier state structure, two other main causal
mechanisms between natural resources and the
resource curse can be identified in the Nigerian
system. There is a repression effect related to
natural resource wealth (Busse & Groning,
2011; Clark 1997; Gause, 1995). With abundant
natural resources, the government could
generate the financial resources needed to
suppress demands from the existing weak civil
society for changes in the political system or
improved functioning of the government in
general. With higher spending on internal
security, resource-rich governments impede
aspirations among the population for better
institutions and government services.
In a similar way, resource-dependent
governments may delay the modernization of
the economic structure of the economy, since a
large manufacturing sector would create
alternative sources of economic and political
A Journal Publication of the Department of Political Science, Federal University Dutsin-Ma, Katsina- Nigeria
Volume 3 Number 2
FUJOPIA ISSN: 2682-5406
power (Auty, 2001b; Ross, 2001c). If the
industrial sector is rather small, labour
organizations would not as likely be established
or would be smaller and, thus, less effective in
demanding political reforms. Governments
with ample revenues from fuel and minerals
also may spend less on improvements in
education (Busse & Groning, 2011; Demissie,
2014; Isham et al., 2005). Lower education
levels may then decrease the demand for
political reforms as citizens are less able to
formulate their demands effectively.
Summary of Findings
1. Oil revenue yields have been the dominant
revenue earner for the government from
2007 to 2017.
2. The huge revenues from the oil and gas
sector have generated negative
developmental outcomes such as increased
poverty, rise in wealth disparity, oil related
conflicts, environmental degradation and
decline of the agricultural and
manufacturing sectors.
3. The factors impelling the resource curse in
Nigeria are identified to include: over
reliance on extractive resource revenues,
weak tax system and institutions of
government, corruption and docile civil
society.
Conclusion
African economies dependent upon
exploration of natural resources are typical
specimens of the resource curse. Nigeria is
considered a poster child for African countries
experiencing the resource curse phenomenon.
In spite of negative connotations associated
with the resource curse in Nigeria, the success
experience of Botswana shows that Nigeria can
actually break out of the curse and realign on
the path of resource led development. This,
however, means that natural resource revenues
must be managed in tune with principles of
good governance and social accountability so
July 2020 23
Andrew Aondohemba Chenge PhD & David Onu Salifu PhD
that they can be transformed into productive
public assets and sustainable development.
Recommendations
This paper proffers the following
recommendations as strategies needed to
address the negative implications of natural
resource revenues which have resulted to the
resource curse in Nigeria:
1. Nigeria needs to move away from over-
reliance on one product which has created
the monolithic economy status for the
country. It is highly desirable for a more
diversified economy where revenue can be
generated from a wide range of sources
(primary sector – extractives; secondary
sector – manufacturing, tertiary sector –
service; and quaternary sector – information
technology, education and financial planning
sectors) to drive the needed socio economic
development.
2. Improved public financial management in
Nigeria will enable the huge revenues
generated from the oil and gas sector to be
used for the development of other sectors.
Various sectors of the economy are
supposed to be complementary to each
other. Improved public financial
management for the extractive industries
sector will require improved transparency
and accountability for revenues that accrue
from oil and gas.
3. The Nigeria Extractive Industries
Transparency Initiative (NEITI) which is
the Nigerian sub set of the global EITI
should be more pro active in addressing
problems associated with resource revenue
transparency and accountability which have
generated the resource curse in Nigeria.
NEITI has to redirect its overbearing
emphasis from publication of audit reports
to strengthening of government institutions
and civil society.
A Journal Publication of the Department of Political Science, Federal University Dutsin-Ma, Katsina- Nigeria
Volume 3 Number 2
FUJOPIA ISSN: 2682-5406
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