The Dutch Disease of Nigeria’s Oil Sector

 While Nigeria has experienced oil-fuelled growth, over-reliance on the sector and a lack of diversification have kept the economy shackled, raising critical questions about Nigeria’s ability to move beyond resource dependence.

On 29 May 2023, during his inaugural speech, President Bola Ahmed Tinubu announced the immediate removal of the fuel subsidy. Following this announcement, prices of petroleum products, especially fuel, skyrocketed. Fuel prices rose from ₦185 per litre to ₦557 per litre, and in October 2024, fuel reached an all-time high with prices ranging from ₦998 to ₦1,500 per litre, depending on the region. The removal of fuel subsidy, apart from increasing living costs, reveals a deeper problem—Nigeria’s over-dependence on its oil sector.

Eliminating fuel subsidies is expected to serve as a safety net for the government in times of crises, ensure the reallocation of resources to more productive sectors of the economy, and encourage economic diversification. Apart from economic reform, the world is moving away from fossil fuels and advocating for low-carbon emission energy sources to protect the environment. The International Energy Agency predicts that around 2030, the world will reach a point at which oil demand and production will go into terminal decline. Hence, there is an urgent need to diversify the economy.

However, the challenges Nigeria faces in achieving true economic reform and diversification are rooted in a history of oil dependence that stretches back over half a century. As global conversations increasingly call for a just energy transition coupled with the national clamour for economic growth and development, Nigeria’s ability to make a change is limited by the enduring effects of what is often referred to as ‘the Dutch disease’.

Every year, The Republic publishes the most ambitious writing focused on Africa, from news and analysis to long-form features. 

To continue reading, Register for a Free Pass.
Already a subscriber? Log in.