Magoosh GRE

The Resource Curse and Democracy in Nigeria

| April 2, 2015

A. How has oil affected democracy in Nigeria?
Nigeria’s nascent democracy has been relatively stable since the onset of the country’s Fourth Republic in 1999. Although there have been several trying moments in the form of political upheavals, inter-ethnic hostility, and social unrest at several critical moments, the country’s democracy has managed to survive and consolidate. However, issues pertaining to disregard for rule of law, undemocratic practices and weak institutional mechanisms have largely characterized the country’s democracy since 199i – despite ineffectual attempts to build strong institutions and consolidate constitutionalism. In view of the foregoing, it is worthwhile to examine the direct or indirect consequences of the oil resource on Nigeria’s democracy – including how the country’s oil wealth affects the democratic character of government, building of institutions, and adherence to the democratic imperative of rule of law.

It is nonetheless appropriate to begin by exploring some conceptual perspectives on the sort of relationship that exists between the oil resource and democracy. Indeed, the compatibility of oil wealth and democracy has long been a contentious subject in the academic literature (e.g. Ross, 2001; Jensen and Wantchekon 2004; Berrigan, 2004; Dunning, 2008). Although it has been suggested that governments have the tendency to become more democratic with the rise of incomes (see for instance Londregan and Poole, 1996; Ross, 2004), a school of thought holds the view that the exception to this rule arises in situations where such incomes emanate from a country’s oil resources of – in which case the ordinarily democratizing effect of high income would shrink as a consequence of the supposedly ‘antidemocratic properties’ of the oil resource. Supporters of this view contend that this phenomenon is especially evident in Middle Eastern and Sub-Saharan African countries that are ‘cursed’ with the oil resource – where democracy is either altogether absent, or is in untypical application with inordinately autocratic political leadership. The view is therefore that ‘oil and democracy don’t mix’, except in countries such as Norway, Canada and other established democracies that had already entrenched democratic governance several years before they commenced oil exploration (Berrigan, 2004).

Accordingly, Ross (2009) has suggested two possible ways by which democracy may be adversely affected or “hindered” by oil; he proposes that oil could effectively weaken democratic structures, and that it could also strengthen authoritarian governments. Indeed, he claims that oil promotes authoritarian leadership by fostering repression in states where there is preponderant oil resources as people in positions of power use all means within their disposal to reduce any internal or external obstacles to their overseeing the rent-seeking state dynamic as well as access to oil wealth. From another perspective, it is also suggested that the oil resource weakens democracy by bringing about “poor institutional quality” which not only slows the pace of democratic consolidation and strengthening of the rule of law, but also affects economic performance (Sala-i-Martin and Subramanian, 2003, p.13).

In the case of Nigeria, there are several possible ways of investigating the effect of oil on democracy in the country. One way is to assess the failure of several attempts at democratic transition in the country’s history (for instance the aborted transitions of 1979 and 1993); some scholars suggest that the presence of oil wealth may explain such failures (e.g. Ross, 2009). On the other hand, the effect of oil on the extant democracy of the country has also been called into question. For example, country’s oil wealth is deemed as defining the power relationships between government officials and ordinary citizens; and the relatively easy access of government officials to the revenues generated from the oil resource inevitably skews the balance of power between them and ordinary citizens in favour of the former (see Sala-i-Martin and Subramanian, 2003, p.16). The idea behind this notion is that the power of public officials over ordinary citizens is so extensive that possibilities of them being answerable to the populace and being held accountable for their actions by the citizenry (in line with sound democratic principles) are severely limited; a fact that is facilitated by the almost unfettered access of public officials to immense oil wealth – to the exclusion and detriment of the largely deprived masses.

In another context, the effect of the resource curse on Nigeria’s democracy may be evaluated from the perspective of institutional failure and weak observance and enforcement of constitutionalism and the rule of law. Indeed the phenomenon of weak and compromised institutions has been cited in the academic literature as a rather common feature of countries such as Nigeria that possess the oil resource (see for instance Mehlum et al, 2006). The complicated socio-political conditions that characterize the struggle for access to oil wealth in Nigeria largely affect the efficacy of government institutions; the need to secure one’s position relative to the oil wealth has often overridden the imperative of allowing the law take its course. During the present Fourth Republic of Nigeria’s democracy for instance, it has been alleged that the scramble for a share of the oil wealth led to series of intricate collusions between militant gangs, security forces, and public officials to sabotage the oil production facilities, engage in oil bunkering, and cover up for unethical practices in the oil industry (see for example, BBC, 2009). Assuming that it is true that security agencies, law courts and other institutions of state that are ordinarily expected to defend the rule of law in Nigeria are implicated in the scramble for a share of the oil wealth, then to a certain extent it can be suggested that the oil resource exerts a corrupting influence on the country’s democratic governance.

B. How has Oil Affected Political Competition in Nigeria?
It may be argued that political competition in Nigeria is founded on the battle for control of or access to the country’s oil resources; in order words, the zeal to control the vast oil wealth may be considered a greater motivation for political competition than the aim of providing purposeful leadership for the citizens (Olarinmoye, 2008). In order to fully comprehend the effect of oil on political competition in Nigeria, it is important to take the political structure, federal character and multi-ethnic configuration of the country into consideration. The difficult ethnic balance that characterise Nigerian political relations is hinged on the struggle between the various ethnic groups and geopolitical zones for representation at the highest levels of political office (Amuwo, 1998). To a large extent, this struggle is further exacerbated by the high stakes inherent in the oil wealth of the country – that is essentially controlled by those at the highest levels of government. Therefore, the struggle for power by major ethnic groups in the country may be interpreted as a struggle for control of the country’s oil resources (VOA, 2006).

It is assumed that, at least in theory, politicians occupying particularly important offices that allow them easier access to oil revenues are better placed to avail their own ethnic groups or geopolitical zones greater benefits – pertaining to redistribution of oil-resource rents and higher patronage. This notion explains why political competition in Nigeria often has ethnic or regional dimensions; particular ethnic groups who believe that they do not get the political positions they deserve may feel cheated or ‘marginalized’ partly due to the belief that they may be deprived of their due share of the nation’s oil wealth – particularly through political patronage and oil rents redistribution (Olarinmoye, 2008).

On another level, the rent-seeking character of political competition is underscored by the tendency for realignments after political contests, in which the defeated parties, anxious about not being isolated from the ‘rentier space’ – in which proceeds from the oil resource are shared and distributed – often seek to gain the favour of the winners. This results in rather weak opposition and frequent decampment of politicians from opposition parties to the ruling parties at the federal and state levels – all in the bid to remain as close to the ‘rentier space’ as possible (Omeje, 2007).

Another way by which oil has affected political competition in Nigeria is that it has increased the level of desperation among politicians in the quest for power. This desperation manifests in the relatively frequent incidences of violence and other untoward practices that characterise political contests. Apart from reported cases of political assassinations and rampant use of thugs to harass and intimidate opponents (e.g. Igbafe and Offiong, 2007), there have also been suggestions that some politicians incite militant violence in the oil-producing Niger Delta region in order to sabotage the current political leadership and create conditions that may favour their own rise to power (see for instance Langer and Ukiwo, 2009). It is possible to argue that such levels of desperation are not necessarily indicative of the politicians’ passion for service to the people per se, but is rather a reflection of the inordinate desire to access the oil wealth and be in positions in which they can oversee the distribution of patronage to their cronies and associates. It would therefore seem that if Nigeria did not possess the oil resource and the attendant huge annual oil revenues, political office would have been less attractive than it currently is – and perhaps then such high levels of desperation for public office may not be necessary.

C. How has Oil contributed to the Military Regimes?
To some extent it may be arguable that Nigeria’s oil wealth was a significant contributory factor to the rather lengthy spells of military rule the country has witnessed since Independence in 1960. One point to note is that, in principle, military regimes often purport to be patrimonial in orientation; which means that the military leaders generally believe that it is their responsibility to administer the state and manage, allocate and dispense its resources in the manner that they deem fit in line their personal convictions in the interest of the public. More specifically however, patrimonialism as a distinct feature of many military regimes may be regarded as involving a political system in which the ruling class (in this case military officers) appropriate the power and resources of state essentially for their personal benefits and for their supporters (see Theobald, 1982).

In order to adequately evaluate the impact of the oil resource on military regimes in Nigeria, it may be necessary to first highlight some of the key elements that define the patrimonial character of military rule: (1) government is typically based on a single strongman supported by a close network of state officials (2) state officials typically do not recognize distinctions between public and private realms, (3) political offices are generally regarded as means of patronage by the ruling elite, (4) the political system is often defined by the existence of several patron-client networks (Ikpe, 2000, p.147-148). In view of these defining features of military regimes, the existence of huge oil resources in Nigeria and the consequent inflow of stupendous revenues from crude oil sales evidently provided considerable incentive for the successive military regimes in the country to seek to hold on to power. It is perhaps in this regard that it has been suggested that the oil resource fuelled the rampant corruption associated with past military regimes in the country – particularly those of Generals Ibrahim Babangida and Sani Abacha whose regimes were reputed to have plundered the oil revenues the country earned during their respective spells in power (see for instance Sala-i-Martin and Subramanian, 2003).

Indeed, it is also possible that control of the vast oil wealth of the country helped the military consolidate and prolong its dominance of Nigeria’s political and economic spheres due to its ability to dispense patronage to individuals and groups that assisted in winning support for the regimes. And so not only were the military leaders interested in appropriating the oil wealth for their personal use, they also found it effective as a means of consolidating their power by dispensing favours and resource allocations to interest groups that were considered important for entrenching the military’s hold on power. Essentially, it may be argued that oil contributed to the military regimes prolonged stay in two key ways: (1) It heightened the patrimonial zeal of the military to remain in power and oversee the management of the huge wealth generated by the oil resource, (2) the oil wealth help them strengthen their position and suppress opposition by dispensing patronage to large segments of society in order to win support and legitimize their hold on power.

4. The Resource Curse and Economic Development in Nigeria

A. How Has the Resource Curse Affected Public Services?
Public service delivery is perhaps one of the key areas in which the impact of the resource curse is most evident. In a sense it may be suggested that the huge oil wealth, underpinned by corruption and incompetence of government officials, contributes to a generally poor dispensation of public services.

There are several dimensions to the effect of the resource course on Nigeria’s public services. One key dimension is the persisting struggle between the three tiers of government (federal, state and local governments) over the formula for sharing of crude oil revenues. Considering the fact that Nigeria operates a federal structure of government, service public service delivery takes place at different levels of government, and therefore to a large extent the successful execution of public services depends on the nature of intergovernmental relations that exist between the federal, state and local governments (Freinkman, 2007). Accordingly, disputes over the sharing of resources among the three tiers of government may significantly affect the provision of public services at all levels – particularly at the state and local government levels. Such disputes are indeed fairly frequent; and the state governments have had cause to question the sharing pattern of the ‘excess crude’ revenues – i.e. surplus revenues beyond the preset budgetary benchmarks (see for instance Business Day, 2011).

Yet it is difficult to understand why public service delivery is poor in Nigeria – to the same extent that it is difficult to understand the resource curse or paradox of plenty.
Another important element to note is the tendency of oil producing regions in Nigeria to be plagued by insufficient and inefficient public services. Indeed it has been suggested that the federal structure of Nigeria effectively creates the conditions that facilitate a loss of specificity in public service delivery across all regions in the country – a fact that most adversely affects the oil-producing regions in the Niger Delta who do not receive a substantial share of the revenues from the oil produced in their area, due to extant redistributive arrangements implemented by the federal government (Ahmad and Singh, 2003). This is more so as the public services in the oil producing Niger Delta region may be subjected to considerable fluctuation due to vulnerability to swings in the international prices of oil. But then this effect does not only apply to the oil-producing region alone; the almost absolute reliance on oil revenues to fund projects and deliver public services invariably makes the entire country susceptible to international fluctuations and distortions in oil production as a result of unrest in the country’s Niger Delta.

The aggregate effect of such overreliance on oil revenues to run the government is therefore that there has been considerable inconsistency in public service delivery in the country. Examples of this can be seen in the haphazard or indeed failed implementation of a number of public services such as mass transit train systems, pipe-borne water and various welfare schemes across many states in the country. Although some argue that corruption and inefficiency are the primary causes of the failure of such public services (Thomson, 2003), others have also traced the problem to fluctuations in revenues due to uncertainties in world crude oil prices – which sometimes inhibits the ability of the federal, state or local governments to continue or maintain certain public projects and services. Evidently, this further buttresses the argument against overdependence on oil resources which often leads to indolence and lack of creativity on the part of government in devising stable and multifaceted means of generating revenues with which to implement public services (Karl, 2007).

It has also been noted that Nigeria’s oil wealth promotes profligacy and waste in public expenditure (see for instance Luqman and Lawal, 2011); such governmental profligacy and wastefulness generally follow two broad patterns: (1) more money is spent on the delivery of public services – relative to the value created – than should ordinarily be the case, and (2) Unnecessary or white elephant projects are embarked upon by the government to achieve superficial ends. In both cases, it is arguable that the primary factor that facilitates such wasteful spending on (ineffectual) public services is the availability of ‘easy’ money generated from crude oil sales.

B. How Has Oil Fuelled Corruption in Public Services?
One of the most evident manifestations of the resource cause, and a key consequence of oil wealth particularly in most developing countries, is rampant official corruption. The sheer size of revenues earned by rentier states such as Nigeria, and the weakness of institutions that should ordinarily ensure transparency and accountability in the management of government resources – along with a myriad of factors related to patronage and cronyism all conspire to entrench corruption in all levels of government. As has been earlier discussed, government’s profligate spending on public services generally takes the pattern of either overspending on the delivery of certain public services, or initiating bogus or unnecessary ‘white elephant’ projects which consume considerable amounts of money but do not deliver any real value to citizens. In either of these instances, it is often the case that corrupt intent is an underpinning factor at all stages of the projects – from ideation to implementation.

The idea that oil may have contributed to greater corruption in government and in the delivery of public services is not one that should be considered in isolation – otherwise it would seem to suggest that oil in itself has certain inherent properties that fuel corruption. Rather, it is reasonable to assume that oil facilitates greater corruption for the simple reason that it brings more (and easier) money into a political system such as Nigeria’s that has little institutional mechanisms to enforce prudence and accountability. Accordingly, corruption may be considered an integral part of the curse of oil and a fundamental consequence of the resource course that Nigeria’s oil represents (Thompson, 2007).

There are a different ways by which the link between Nigeria’s oil wealth and delivery of public services may be contextualized and evaluated. One, taxation does not represent the main source of income for government and indeed it has been suggested that the extent of tax payment in Nigeria is too low to facilitate any real demand for accountability in government by the citizens (Sala-i-Martin and Subramanian, 2003). This is in line with the belief that, in principle, it is much more difficult to misappropriate revenues that are generated from imposing taxes on the citizens since the tax burden on the latter invariably propels them to insist on accountability and judicious management of their taxes for the general good of the citizenry. Accordingly, since oil revenues have long been the primary source of funding for government projects, the extent to which citizen’s are motivated to make serious demands of their government at all levels is relatively limited – added to the low levels of literacy and political enlightenment on the part of many citizens. These elements create the conditions for government officials to engage in corruption with impunity; a situation that is exacerbated by the weak anti-corruption mechanisms and institutions.

Examples abound that demonstrate how public service delivery serves as an effective vehicle for corrupt practices by government officials and contractors in Nigeria. The country’s prolonged battle with power supply is a notable example of the failure of public service delivery in spite of several billion dollars that have been invested in the power sector by successive governments over the years. Indeed, about USD$16billion was reportedly spent on the power sector during the eight-year tenure of the immediate past administration of Olusegun Obasanjo between 1999-2007, and yet no progress was made in delivering steady power supply for the country – and it has been severally alleged that much of the funds were lost to corruption of public officials involved in disbursing and administering the funds (see for instance Usigbe, 2008). The prevailing perception amongst many Nigerians is that the state run power company – the Power Holding Company of Nigeria (PHCN) is one of the most corrupt public corporations in the country who benefit from so much investment but has failed to deliver acceptable services in terms of stable power supply. But then corruption in public service delivery is not associated with the PHCN alone, other government owned enterprises such as the Nigerian Telecommunications Limited (NITEL), the Nigerian Railway Corporation (NRC), the state run water works, the defunct Nigerian Airways and several other government-run public utility enterprises have largely failed to deliver the services for which they were established due to pervasive corruption and inefficiency which has made many of them moribund. Indeed, the effect of corruption on government’s capacity to effectively deliver public services is so debilitating that it has been estimated to cost Nigeria up to 40 percent of its annual revenues from oil exports (see Reuters, 2004).

The apparently adverse effect of Nigeria’s oil wealth on public services, particularly with regard to corruption, can also be explained from the ethnic or sectarian perspective. As was earlier mentioned, one of the implications of the resource curse on political competition has to do with the scramble by the country’s constituent ethnic groups for control over (or at least a share of) access to the oil revenues. Accordingly, when an individual from a particular ethnic group is elected or appointed to a given public office, there is tremendous pressure on him or her to ensure that in the limited time in which they occupy that position, they would provide financial and other direct benefits to members of their ethnic group as their own share of the proverbial ‘National Cake’ (i.e. oil wealth). Since the public official cannot possibly achieve this through lawful means, they often find it necessary to engage in corrupt practices by misappropriating resources meant for delivery of public services and public projects, and channelling some of the stolen funds towards assisting members of their home community or ethnic group.

Another dimension of this tribalism-driven corruption can be seen in the award of public services contracts by a government official to members of his or her community or ethnic group who are ordinarily unqualified or incapable of efficiently executing such contracts. The result is that, while funds may be released for such projects, they are seldom completed; even where they are indeed completed, they may fall short of the acceptable and desired quality standards, and worse still such poor quality projects are often executed at highly inflated costs. Accordingly, it is important to note the strong linkages between tribalism and official corruption in Nigeria, which invariably affects the quality and delivery of public services in the country.

The resource curse has also fuelled corruption in public services by intensifying the struggle for political relevance which in Nigeria is partly based on the depth of one’s financial resources. Considering that politics in the country is noted to be a particularly expensive enterprise, political office holders may resort to corruption and plundering of the resources meant for developmental projects and public services in order to stay competitive in the ‘money politics’ of the country – especially if they harbour the ambition of contesting for elective office sometime in the future (Adetula, 2008). In the process, public service delivery inevitably suffers. Indeed, the corruption that hinders meaningful public service delivery does not only occur at the top echelons of public office, but also through the rank and file of government workers in the various departments and public corporations who demand bribes to perform their duties, and cut corners in a number of ways. In all of this, the common causative factor appears to be symptomatic of the resource curse that has significantly diminished accountability and transparency at all levels of government in the country – thereby inhibiting effective delivery of public services.


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