RESOLVING NIGERIA'S DEPENDENCY ON OIL - THE DERIVATION MODEL

UDEH, Sergius Nwannebuike and ONWUKA, Ifeanyi Onuka and AGBAEZE, E.K (2015) RESOLVING NIGERIA'S DEPENDENCY ON OIL - THE DERIVATION MODEL. Journal of African Studies and Development, 7 (1). pp. 1-14. ISSN 2141-2189

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Abstract

Since the discovery of oil in commercial quantity in Nigeria in 1956 and the oil boom of 1970s, oil has dominated the economy of the country. Oil accounts for more than 90 percent of the country’s exports, 25 percent of the Gross Domestic Product (GDP), and 80 percent of government total revenues. As a result, the economy of the country has been substantially unstable, a consequence of the heavy dependence on oil revenue, and the volatility in prices. The oil boom of the 1970s led to the neglect of agriculture and other non-oil tax revenue sectors, expansion of the public sector, and deterioration in financial discipline and accountability. In turn, oil-dependence exposed Nigeria to the vagaries associated with oil price volatility which threw the country’s public finance into disarray. Moreover, since oil revenue dominates Nigeria’s Federation Account, the sharing of oil rents govern intergovernmental fiscal relations in the country with an on-going tension between agitations by oil producing states for greater share of resources and demands for redistribution from other regions, particularly relatively less endowed ones. In this paper, the authors argue for a rethink in the current revenue sharing formula in Nigeria in favor of derivation. This will reduce ongoing tensions in the distribution of proceeds from oil between the federal government and states on one hand and between the federal government and oil producing states in Nigeria on the other hand. The authors argued for a rollback to the era when states/regions were accorded 50% retention of any proceeds accruing from their areas. This will make every state/region in Nigeria to look inwards and explore other resources that abound in their areas and will also help to diversify the economy of Nigeria away from oil. Key words: Oil dependency, economic diversification, derivation formula, economic development.

Item Type:	Article
Subjects:	H Social Sciences > H Social Sciences (General) L Education > L Education (General)
Divisions:	Faculty of Management and Social Sciences
Depositing User:	GOUNI ICT
Date Deposited:	24 May 2018 14:39
Last Modified:	07 Aug 2018 10:23
URI:	http://eprints.gouni.edu.ng/id/eprint/181

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