The Effect of Oil Dependency on Nigeria’s Economic Growth

Abstract Nigeria is the largest oil exporting country in Africa and has a rapidly growing economy. The country follows a resource based growth strategy driven by the production and exporting of oil. With the volatility of global oil prices and of-ten volatile growth of Nigeria’s economy, this research is designed to examine the effect of Nigeria’s oil dependency on economic growth. This research at-tempts to answer the question of if the volatility of global oil prices is directly linked with the volatility of economic growth in Nigeria and uses GDP as the key variable for economic growth. An exploratory data analysis is employed using secondary data to examine the relationship between oil and GDP and the effect it has had on Nigeria’s growth since 1961.
The research found that there is a significant and positive relationship between oil dependency and economic growth in Nigeria. In the short-run, Nigeria was able to have increasing, yet volatile growth because of the high global oil pric-es, but in the long-run, the inconsistency of oil prices and lack of diversifica-tion of the productive base has had a negative effect on Nigeria’s economic growth. Thus, the research suggests that global oil prices are the cause of Nige-ria’s volatile growth rate. A combination of strict fiscal policy focused on the actual implementation of development and diversification and industrialization might be effective to protect the country’s economic from further global shocks and lead to increased and consistent economic growth.
ContentsAcknowledgements : iiiChapter 1: Introduction1.0 : Background : 11.1 :  Problem Statement and Justification1.2 :  Research Question and Objective1.3 : Hypothesis : 31.4 :  Methodology and Limitations in carrying out the research1.5 : Organization : 4
Chapter 2: Literature Review2.0 : Overview : 62.1 :  Literature Review2.1.1 Mainstream economists view on resource-based growth2.1.2 New Institutional Economics2.1.3 Structural Economists view
Chapter 3: Overview of Nigeria’s Economy3.0 : Introduction : 153.1 :  Structure of Nigerian Economy3.2.1 National Development Plans3.2.2 Agriculture policies3.2.3 Policies towards Industrialization
Chapter 4: Analysis and Findings4.0 : Introduction : 254.1 :  Nigeria’s dependence on oil4.2 :  Corruption & Growth4.3 :  Diversification and Growth4.4 :  Resource dependence in Indonesia & United Arab Emirates4.4.1 United Arab Emirates4.4.2 Indonesia
Chapter 5: Conclusion and Policy Implications
List of TablesTable  1:Exports  of  fuel,  manufactured  and  agriculture  as  percentage  of merchandise exports (1996-2011)
List of FiguresFigure 1: Nigeria GDP Growth and Oil Price Shocks (1961-2011)Figure 2: Oil RentsFigure 3: Fiscal Trends: Nigeria 2003-2011Figure 4: Federal-Collect Revenue from 2003 to 2011Figure 5:Allocation of Federal Government Expenditures (2006-2011)Figure 6: GDP and Oil priceFigure 7: Rate of change in oil production and GDP 1998-2012Figure 8: Relationship between oil price and value of oil exportsFigure 9:1990-2012 value of oil exports and gdpFigure 10:Corruption Perception Index (CPI) and Annual percentage growth rate of GDP of Nigeria from 1996 to 2012Figure 11: Exports of fuel, manufactured and agriculture as percentage of merchandise exports (1996-2011)Figure 12: Average Annual GDP Growth: Indonesia, Nigeria and United Arab Emirates 1976-2011Figure 13: UAE GDP vs. Global Oil Price (1976-2011)Figure 14: United Arab Emirates Economic Structure (1976-2011)Figure 15: Indonesian GDP and Global Oil Prices (1976-2011)Figure 16: Structural Change in Indonesia’s Economy (1976-2011)
List of AcronymsFAO : Food and Agriculture OrganizationISS : Institute of Social StudiesUNDP : United Nations Development ProgramWB : World BankGDP : Gross Domestic ProductIMF : International Monetary FundNNPC : Nigerian National Petroleum CorporationOPEC : Organization of Petroleum Exporting CountriesNEEDS : National   Economic   Empowerment   and   DevelopmentStrategyEDA : Exploratory Data AnalysisFSDH : First Securities Discount HouseNPC : National Planning CommissionCBN : Central Bank of NigeriaIFPRI : International Food Policy Research InstituteOFN : Operation Feed the NationNAFPP : National Accelerated Food Production ProgramUNIDO : United Nations International Development OrganizationEPZ : Export Processing ZonesTI : Transparency InternationalUAE : United Arab EmiratesFTZ : Free Trade ZoneHO : Heckscher Ohlin