Oil Resource Wealth: Analysis of the Impacts on Economic Growth: The Case of Nigeria

The literatures on natural resource abundance has proved that resource rich countries tend to underperform in terms of economic growth; a paradox known as the ‘resource curse’. Much of the studies use econometric models to estimate the economic performance of a cluster of resource rich countries. Therefore, we build on earlier studies to consider the impacts of resource wealth on Nigeria’s economic growth as a case study. We examine the channels through which resource curse perpetuates, and latest researches that tests for effects in a cross-country setting. Our reflection of earlier claims and correlation tests shows that oil resource wealth impacts growth negatively. Using expenditure figures as measure of human capital accumulation, a downward trend in budgetary allocation is visible compared to administrative expenditure and debt stock. Secondly, increasing natural resource contemporaneously attracts more foreign direct investment than traded sectors, Thirdly, in trade barter terms, commodity exports signifies heavy dependence on primary commodities (agriculture and fuels) making the economy susceptible to price fluctuation. We document an unstable real exchange rate (appreciating and depreciating) when oil price/revenue adjusts. Lastly, we test for institutional analysis and document considerable effectiveness evidenced in recent growth performances.