Nigeria, the eleventh largest producer and the eighth largest exporter of crude oil in the world, typically produces over 2.4 million barrels per day (b/d) of oil and natural gas liquids. However, according to the IMF, while the Nigerian economy has benefited $800 billion dollars in oil revenue since 1960, this has added basically nothing the Nigerian economy or the standard of living of the average Nigerian. In fact the World Bank estimates that since 1960 $100 billion of the $800 billion in oil revenues have gone missing.
For most economies that have natural endowments like oil or minerals, there is the risk of the economy experiencing the ‘resource curse’. This is when a natural resource begins to run out, or if there is a downturn in price, manufacturing industries that used to be competitive find it extremely difficult to return to an environment of profitability. According to Paul Collier, Nigeria has a resource curse of its own, the civil war trapin which 73% of the low income population have been affected by it, as well as a natural resource trap- where the so-called advantages of a commodity in monetary value did not eventuate – on average affecting only 30% of the low income population. It seems that in Nigeria there is a strong relationship between resource wealth and poor economic performance, poor governance and the prospect of civil conflicts. The comparative advantage of oil wealth in fact turns out to be a curse. governments and insurgent groups that determines the risk of conflict, not the ethnic or religious diversity. Others see oil as a “resource curse” due to the fact that it reduces the desire for democracy. You can read the full version of this article by going to the econoMAX website below: