Foreign Policy Brief #209 | Damian DeSola | July 11, 2025
Those who have a casual understanding of history or geopolitics may react agreeably to the concept: the greater abundance of natural resources a country has the more well-off the people of that country will be. Unfortunately, for Nigerians, the opposite is their reality. The abundance of oil in Nigeria, along with their colonial history, has resulted in a “resource curse,” a theory posited by contemporary international relations scholars. Nigeria now finds its economy reliant on the export of oil and renting their oil fields to multinational corporations (MNCs), leading to a commodity industry based on corruption and wealth centralization.
Nigeria’s Resource Curse
The resource curse, a theory and term coined by economics Professor Richard Auty, says that certain circumstances of international trade, history, and industrial cultural development related to a particular abundant resource, cause a country to face an economic situation dependent on the export of this resource; conflicts, corruption, international exploitation, and an underdeveloped economy occur as a result. The benefits of the extracted resource are transferred away from those whose land it is mined from, and into the hands of the hosting government and the MNCs that handle its extraction, transportation, and refinement. The case of the resource curse is found across the continent of Africa that was once entirely an economic playground for European colonists. In short, it is a form of corporate neo-colonialism.
In the early 1800s, Britain began projecting power into Nigeria, but it was not until nearly a century later in 1914 that the Colony and Protectorate of Nigeria formed by the British. The colony was run by Nigerian chiefs that were given instructions by the British government. In 1956, commercial quantities of crude oil were discovered by European engineers. Soon after the discovery, Shell, Mobile, Texaco, and many of other Western oil companies began extraction operations in Nigeria.
As the industry developed, the Nigerian National Oil Corporation (NNOC) was established in 1971 (later reorganized into the Nigerian National Petroleum Corporation) as a state-owned oil company; simultaneously, it joined the Organization of the Petroleum Exporting Countries(OPEC). The NNOC and subsequent NNPC enabled the Nigerian government to participate in the oil market with oil Multi-National Corporations (MNCs). The government has historically “mismanaged” the revenues gained by the NNOC/NNPC, meanwhile receiving royalties from oil MNCs. This money has shown no signs of trickling down and remains in the hands of the Nigerian government leaders.
According to a World Bank Poverty and Equity Brief, approximately 40.1% of Nigerians livedbelow the National Poverty Line, with around 30.9% living below the International Poverty Line ($2.15/day). Further, 90.8% of Nigerians were living below the Upper Middle Income Poverty Line ($6.85/day) as of the most recent World Bank data (2018). This massive poverty rate displays the magnitude of wealth disparity when considering that Nigeria’s 2018 GDP was $421.74B.
As a result of this wealth disparity and resource disenfranchisement, local populations, primarily in the Niger River Delta where most of the oil resides, have shown high rates of militancy. Starting in 2003, regional militant groups organized in reaction to increasing anger over the paradoxical nature of their economic status. A UN Development Program report from 2006 briefly maps the rise in conflicts, highlighting attacks on oil companies’ infrastructure (e.g. Shell, Agip Oil). Violence subsided after 2009, resurged in 2015, calmed again, and has recently escalated due to the Nigerian president’s announcement of a state of emergency over oil pipeline vandalism.
The singular focus on oil production and export caused other industries to wither. While having major deposits of gold, commercially viable timber, and a once massive agriculture industry, all these potentially diversifying economic advantages find little room to compete. The Nigerian economy has found itself in an endless spiral due to its oil resource curse.
A Path Towards Reform
Due to external and internal factors on the oil market including the COVID-19 pandemic, the Russo-Ukrainian War, and oil theft, the production of crude oil in Nigeria has not recovered to pre-pandemic levels. In response, administration of President Bola Tinubu, elected in 2023, seeks aggressive reform to Nigeria’s economy.
Tinubu’s first act was to remove the oil subsidy that cost the government nearly $40M daily to keep the price of oil artificially low. The sudden removal caused a spike in transportation costs and subsequent scrambles for fuel. This reform also caused inflation to skyrocket, pushing the cost-of-living crisis to new levels.
Meanwhile, the International Monetary Fund points out the that the removal of the subsidy, alongside the government’s liberalization of foreign exchange, prevention of fiscal debt financing, and strengthened revenue collection as positive policies that show promise for future economic strength. Nigeria has also been upgraded by financial rating agencies, a sign of potential recovery.
President Tinubu justifies the subsidy removal by angling the act as short-term pain that would lead to a positive future. The president defended the reforms by saying, “Our economy has been in desperate need of reform for decades. It has been unbalanced because it was built on the flawed foundation of over-reliance on revenues from the exploitation of oil.” Meanwhile, a local taxi driver is quoted saying, “The situation is unbearable. As a family man, the already unfriendly economy has been worsened by this removal of fuel subsidy. I have had to suspend my taxi operations and rely on divine intervention.”
Due to these reforms, the Nigerian economy has struggled to cope, signified by the nearly 61% drop in GDP from 2022 to 2024 (approx. $289.6B). The World Bank responded to these attempts at reform and their subsequent economic impacts with the approval of multiple loansto support Nigeria’s economy. These loans, each amounting in the low billions and accumulate to over 15 billion in total, go towards education, nutrition, energy infrastructure, shoring up oil revenue losses, tax reforms, and overall poverty reduction.
Whether or not these reforms are successful at breaking the oil resource curse remains to be seen. However, attempts at reform are a step in the right direction away from the overtly corrupt system of wealth extraction.
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