Introduction
Nigeria, one of the most populous countries in Africa achieved independence from Britain in 1960, a time when primary agricultural products like groundnuts, palm oil, cocoa beans. Cotton and rubber dominated the exports. Oil till the 1950s was nowhere in picture of the Nigerian macro-economy. However, the discovery of oil wells in the Niger delta region of Nigeria in great quantities changed the entire macro-economic scenario of Nigeria. Oil wells were discovered in 1956, but production did not start until 1958. Nigeria’s economy soon became heavily dependent on oil with a production level of 1.9 million barrels per day in 1958 to 2.35 million barrels per day in the early 2000s.
With the advent of this discovery, oil became one
However, it proved to be otherwise for a country like Nigeria. The emergence oil and the economy turning into a mono product economy in no time gave rise to what is commonly referred to as the Dutch-disease. A situation where the there is a sudden decrease in the manufacturing or the agricultural sector despite increase in the exploitation of natural resources. The economy of Nigeria is constantly exposed to oil price shocks and market vulnerability since oil contributes to over 90% of the total revenue. Eventually, fluctuations in the international market would lead to significant problems in planning of fiscal and monetary policies. Ironically Nigeria’s windfall gains from the discovery of oil did not translate into economic growth or development. It was observed by several economists that the emergence of oil as a dominant commodity for exports magnified the country’s problems. The impact of which resulted in almost a national
The rural sector was not immune from the government’s blend of mismanagement and corruption, which aggravated the problem of the decline in the agricultural sector. Thus, due to various reasons like stated above Nigeria, an oil dependent country has been highly vulnerable to fluctuations in oil price and as failed to move the economy on a path of sustained development.
Furthermore, oil abundance has generally not improved the circumstances but rather has led to negative externalities due to increased pollution of rivers and agricultural land. These factors have led to a desire by certain groups (such as MEND) to gain a greater share of the oil wealth which has resulted in civil and political conflict as well as vandalism of oil infrastructure, which has further increased environmental problems. Therefore, it is important for Nigeria to focus on its endowment of gas resources,