The impact of oil on Nigeria's economy: the boom and the burst cycles.

Abstract

The global perception of Nigeria is that of a richly blessed oil producing nation but with a growing poverty index. The problem of low economic performance of Nigeria cannot be attributed solely to instability of earnings from the oil sector, but as a result of failure by government to utilize productively the financial windfall from the export of crude oil from the mid-1970s to develop other sectors of the economy. Nigeria is among the poorest countries in the world, with the poverty incidence estimated at 54 percent in 2006. The economy has been substantially unstable, a consequence of the heavy dependence on revenue, and the volatility in its prices. The oil boom of the 1970s led to the neglect of non oil tax revenues, expansion of the public sector and deterioration in financial discipline and accountability. In turn, oil dependence exposed Nigeria to oil price volatility which threw the country's public finance into disarray. Since 1986, Nigeria has undertaken reforms in various sectors of the economy. The reforms have moved the economy forward but the rate of growth is commensurate with the reforms and there is much room for improvement. This paper therefore seeks to appraise the state of the Nigerian economy, from the boom to burst periods and identify some major economic policy issues.