Nigeria’s journey from a primarily agrarian society to an oil-dependent economy reshaped its politics in ways that still resonate today. Before oil was discovered, the nation’s leaders built their power on cocoa farms in the Southwest, groundnut pyramids in the North, and palm oil groves in the East. Political debates centered on how to share farm revenues between regional governments and the federal center. When oil first gushed at Oloibiri in 1956, it was easy to dismiss the find as curiosity; by the early 1960s, however, it had become clear that petroleum would eclipse agricultural exports and redirect Nigeria’s priorities.
The Age of Cocoa and Groundnuts
In the 1950s, Nigeria’s economy relied on agriculture. Cocoa from the Western Region and groundnuts from the Northern Region funded schools, roads, and markets. Politicians competed not on access to oil wealth—nothing of the sort existed yet—but on who could secure the best prices for cocoa and groundnuts in international markets. State governments raised revenue by taxing these exports. Regionalism shaped politics: a politician’s influence rose or fell on the success of local farmers. In this climate, the idea that oil might reshape everything felt remote.
Oloibiri’s Quiet Revolution
That changed when Shell-BP struck oil at Oloibiri in January 1956. At first, just a trickle of crude flowed—far too little to overtake agricultural earnings. But by 1960, oil deposits in the Niger Delta promised far greater volumes than anyone had imagined. When Nigeria gained independence that same year, it still relied for more than half its revenue on cocoa and groundnuts. Yet oil’s golden promise was pushing political leaders to think differently. Rather than debate cocoa tariffs, regional rulers now vied for any say over the new oil fields. It was obvious within a few years that oil would eclipse traditional exports—and that whoever controlled oil pipelines and revenues could outspend those who could not.
Early Revenue-Sharing Disputes
At independence, Nigeria’s founding leaders faced a delicate question: how to divide income from newly tapped oilfields. The 1960 Constitution drilled in a simple formula: 50 percent of mineral revenue went to the producing region, 30 percent to the federal government, and 20 percent into a nationwide “Development Fund.” For regions without oil—like the Western and Northern areas—this arrangement felt ominous. Suddenly, cocoa and groundnuts seemed less important when compared to oil money. Political alliances began to shift. Governors from the West and North feared that without oil, their budgets would suffer. For the crack team of politicians in the delta, however, the formula promised a windfall.
Oil’s Political Pull in the 1960s
By the mid-1960s, oil-wealth politics had taken root. Even though agricultural exports still out-earned crude in total value, control over oil installations became the ultimate prize. Regional leaders and party bosses realized that influence over the Federal Ministry of Finance—or a seat on the revenue allocation board—translated into contracts, jobs, and patronage for their followers. Politicians who once focused on building better cocoa-processing factories in Ibadan or Kano now dreamed of highways or federal offices funded by oil dollars. In those early days, oil was still managed through colonial-era concession agreements, but it fueled a new kind of power struggle: not over farmland but over wells and pipelines.
Civil War: Oil as War Finance
When Biafra attempted to secede in May 1967, the civil war that followed was also a contest over oil. To weaken Biafra’s economic base, the federal government carved the Eastern Region into several smaller states, doing away with the old regional boundaries. Control of Port Harcourt and the Bonny export terminals became matters of life and death: the federal army needed oil revenue to buy arms and pay soldiers, while Biafran forces tried to siphon crude onto the international black market. During the conflict, every barrel sold by the federal government helped finance troops and munitions; by contrast, Biafra’s limited sales could never match those resources. The war underscored a harsh lesson: in Nigeria, whoever holds the oil tugs the reins to both economic and military power.
Post-War Oil Bonanza and Centralization
After the civil war ended in 1970, Nigeria reaped the benefits of rising global oil prices. By 1973, oil revenues had surged from roughly $450 million in 1972 to more than $2.3 billion. Under successive military governments—first General Yakubu Gowon and then Generals Murtala Mohammed and Olusegun Obasanjo—the federal center tightened control over petroleum exports. Instead of returning a greater share of oil money to the newly created states, Abuja increasingly held the purse strings, issuing monthly “statutory allocations” to state governors. State elites, now largely beholden to federal transfers, lost much of their fiscal independence. The idea of local self-reliance diminished as oil dollars poured into federal coffers.
The Resource Curse Under Military Rule
From the late 1960s through the 1990s, Nigeria endured decades of military rule. During this time, oil revenue ballooned, but weak institutions and scant transparency turned the flow of petrodollars into a vehicle for corruption. Military leaders awarded contracts for highways and palaces, often at inflated prices, with little consequence. State governors—appointed by the head of the junta—had little incentive to develop agriculture or local industries, since oil money covered recurrent budgets and civil servant salaries. As roads rotted and schools decayed, the oil windfall enriched a handful of generals and civilian collaborators while leaving most Nigerians untouched.
Agriculture Takes a Back Seat
By the mid-1980s, agriculture—once Nigeria’s backbone—was in decline. Smallholder farmers abandoned the land for “secure” government jobs funded by oil income. When the military government introduced the Structural Adjustment Program (SAP) in 1986, it aimed to revive agriculture, but years of brain drain, deteriorated rural roads, and skyrocketing fertilizer prices stifled recovery. Cocoa, groundnuts, and palm oil lost much of their share in export earnings. Nigeria’s economy became a house perched precariously on oil, fully exposed whenever global prices dipped.
Niger Delta Unrest and Environmental Anger
As oil companies drilled pipelines and flared gas across the Niger Delta, communities felt the damage firsthand: polluted creeks, poisoned farmland, and disappearing fish stocks. In response, local activists like Ken Saro-Wiwa formed the Movement for the Survival of the Ogoni People (MOSOP) in the early 1990s to demand environmental justice and a fairer share of revenue. The federal government’s execution of Saro-Wiwa and eight other Ogoni activists in 1995 ignited international condemnation and fueled grassroots rage. Militant groups soon emerged, attacking pipelines and kidnapping expatriate oil workers. The message was clear: if oil companies and the government would not clean up the mess or lift local people out of poverty, armed resistance would follow.
Democratic Transition and Oil Politics (1999–2010s)
When Nigeria returned to civilian rule in 1999, oil remained its chief revenue source. Presidents Olusegun Obasanjo, Umaru Musa Yar’Adua, Goodluck Jonathan, and later Muhammadu Buhari all found themselves navigating the tug-of-war between federal power, state governors, and the demands of Niger Delta communities.
The 13 Percent Derivation Formula: In 2000, the Constitution guaranteed that oil-producing states would receive 13 percent of derived revenue. Though meant to fund local projects—roads, schools, health clinics—in practice, “derivation” funds often vanished into state treasuries or were used to finance election campaigns. Host communities, expecting new hospitals or boreholes, were left frustrated when the money never trickled down.
Amnesty and the NDDC: By 2009, widespread militant attacks on pipelines and export terminals prompted President Yar’Adua to launch an amnesty program, offering vocational training and small stipends to insurgents who laid down arms. Goodluck Jonathan expanded the program, but mismanagement of the Niger Delta Development Commission (NDDC) and lingering distrust meant the region never fully stabilized.
Fuel Subsidy Protests: Under Jonathan in January 2012, the government abruptly removed fuel subsidies—used for decades to keep domestic petroleum prices low. Petrol jumped from about ₦65 to over ₦141 per liter overnight, triggering protests nationwide. Trade unions, university students, and civil society groups walked off jobs, calling the “fuel-price revolution” too steep to bear. The government backtracked on parts of its decision, but the episode demonstrated how intimately oil policy could ignite mass dissent.
Recent Years: Attempts at Reform and Lingering Conflicts (2015–Present)
In the past decade, Nigeria has wrestled with the twin challenges of diversifying an oil-dependent economy and quelling renewed unrest in the Delta.
Buhari’s Anti-Corruption Drive: When President Buhari took office in 2015, he promised to end oil-sector corruption. In 2021, the Petroleum Industry Act (PIA) merged the Federal Ministry of Petroleum with the Nigerian National Petroleum Corporation (NNPC), creating two new regulatory agencies—one each for upstream and midstream/downstream operations. While the PIA laid a legal framework for transparency, critics argue that entrenched interests still dominate major contracts and that real accountability remains elusive.
New Spates of Militancy: Despite amnesty efforts, Delta communities have seen fresh rounds of pipeline vandalism and kidnappings. Militant factions now demand not only cash but also a larger share of onshore oil profits, ongoing environmental cleanups, and genuine community participation in decision-making about development funds. Attacks on export terminals such as Bonny Light have temporarily halted production, underscoring that oil remains a volatile flashpoint.
Economic Diversification Drives: Plummeting oil prices in 2016—below $30 per barrel—and the COVID-19 shock forced a reckoning: how long could Nigeria rely on crude? In response, some state governments have revived agricultural value chains—cocoa, rice milling, livestock rearing—and explored solid minerals such as limestone and tin. Lagos State, meanwhile, doubled down on fintech and tech startups. Still, many governors and legislators cling to the political clout of oil revenues, slowing fundamental change.
What Oil’s History Teaches Us
Centralization vs. Federalism: Ever since oil money began to dwarf other revenues, Abuja has drawn precious power away from the states. Though the 1960 Constitution granted producing regions 50 percent of oil revenue, the federal center gradually tightened its grip—especially through military rule. Even today, states and local governments cling to “statutory allocations” from federal coffers, with local councils finding it hard to raise sufficient revenue on their own.
Patronage and the Resource Curse: A steady stream of oil money created a web of patronage that few politicians resisted. Generals, governors, and local chiefs all found ways to skim the spoils. When former Senate reports in 2011 exposed massive subsidy fraud, it became clear that corruption had eaten away at every level of government. This is the classic “resource curse”: rather than lifting nations out of poverty, oil wealth can fuel kleptocracy and inequality.
Niger Delta Grievances: The environmental toll—oil spills, gas flares, and ruined farmland—ensured that local communities in the Delta felt excluded from Nigeria’s wealth. Many young men saw militancy as the only way to force government and international oil companies to pay attention. Amnesty programs and community packages helped temporarily, but long-term peace requires both thorough cleanup of polluted land and real channels for local voices.
Economic Distortions: As oil became king, other sectors withered. Commerce, manufacturing, and agriculture lost momentum when the naira strengthened during oil booms. Even after SAP tried to revive these sectors in the 1980s, short-lived price spikes and overvalued currency kept farming and industry on the margins. Today, as global demand for petroleum shows signs of plateauing, Nigeria still wrestles with how to rebuild its countryside and promote homegrown manufacturing.
Global Energy Shifts: As the world edges toward renewable energy—wind, solar, and electric vehicles—Nigeria’s window to invest oil profits wisely is closing. Soon, the era of $100-a-barrel oil may belong to history. This means infrastructure, education, and technology projects funded by past oil dollars must now bear fruit quickly, before oil revenues decline further.
Looking Forward
Oil’s legacy is a double-edged sword. It lifted Nigeria into the ranks of top petroleum exporters and funded highways, dams, and ministries. Yet the same oil income also spawned corruption, centralized power in Abuja, and left behind environmental devastation in the Delta. As Nigeria charts a course beyond oil, it must heed these lessons:
Strengthen Institutions. Passing laws—such as the PIA—matters only if independent regulators can enforce them without interference. Courts, anti-corruption agencies, and legislative oversight committees must operate free from political pressure.
Balance Equity and Efficiency. Revenue-sharing formulas should ensure that oil-producing states and communities receive their fair share, while non-oil regions also benefit from national development. Providing direct grants for local councils in host communities could help bridge that gap.
Empower Local Voices. Long-lasting peace in the Delta requires industries, governments, and communities to negotiate on equal footing: pipeline routes, cleanup efforts, and community development funds should be matters of genuine consultation, not top-down dictates.
Diversify Quickly. If Nigerians hope to escape the boom-and-bust cycle of oil prices, agriculture, mining, and technology ventures must become competitive. Even modest successes—like reviving rice milling in Kano or supporting fintech in Lagos—can reduce dependence on petroleum and create jobs.
Invest in the Future. Oil money should fund schools, especially in Delta towns, and build roads where farmers can take produce to market. Diversification hinges on high-quality education and modern infrastructure; failing to build both risks leaving a generation stranded.
Understanding how oil transformed Nigeria’s politics reveals a story of ambition, conflict, and missed opportunities. The country’s wealthiest era was fueled by crude, yet inequalities deepened and environmental damage mounted. Now, as crude-dependent revenues ebb, Nigeria must navigate its next chapter: using past oil windfalls to build a more diversified, accountable, and inclusive economy. Only then can it turn the promise of petro-dollars into lasting prosperity for all its people.
