Faculty of Education, Social Sciences and Law

School of Politics and International Studies

Research Student: Dr Joshua Olaniyi Alabi

The Dynamics of Oil and Fiscal Federalism: Challenges to Governance and Development in Nigeria

Photo of Dr Joshua Olaniyi Alabi

My main research question is ‘To what extent does the process of oil revenue management and allocation between Federal, State and Local governments results in failure to achieve satisfactory path of economic and social development for Nigeria’

To explore this hypothesis, I begin from an examination of how oil revenue is allocated by the State. How do they allocate resources? How has that changed over time, what are the implications of such allocation, and how does it affect the character of the country's resources and development? This is intended to show how economic reproduction is assured through politics by the flow of surplus and its distribution.

The state's management of revenue allocation produces hegemony or consensus politics despite the frictions and political crisis that have characterized the Nigerian state since independence in 1960, and one of the major mechanisms the state in Nigeria has to sustain its hegemony is oil. The consequences has been that some regions are more developed than others, notably the oil producing Niger Delta with incessant series of militant attacks on oil production facilities and personnel because of what they term 'underdevelopment' of their region by successive regimes.

It examines the challenges of perceived underachievement of growth and failure to deliver on the promises that mineral resources in this case oil generated. From the 1950s, there was an assertion in development economics that the availability of abundant natural resources in a country will lead to rapid socio-economic development, they "believed in the power of natural resources to lift developing countries out of poverty" (Shultz.2005:31), and that the governments of the natural resource-rich countries can easily collect revenues and provide good governance and economic development for their citizens (Ross, 1999:301).

But the experiences of most mineral and oil-exporting countries since the 1970s  has clearly demonstrated that the export of oil and other mineral resources does not automatically transform less developed countries into flourishing economies within a generation or more. This debate was rooted in the resource crisis of the 1970s and early 1980s, but is now being revisited since the two gulf wars and in particular since the recent past increases in oil prices following the invasion of Iraq by the United States led allied forces, and the current decrease in oil prices due to the global financial crisis.

Nigeria like most oil exporting federal countries with general government is subject to, and not immune from the effects of oil revenue volatility. However its peculiar negative impact resulted from the over dependence on oil revenue, and the pattern of its distribution among various stakeholders. Consequently, there has been intense struggle and crisis for the control of political power at the centre by various regimes, because those who control political power also control the revenue accruing from oil.
 
What I seek to do is to explore some of the consequences on the development and politics in Nigeria where there is such volatility of that particular resources and more than 90% of revenue income accrues from such product, and I am not just exploring the economic characterization of the crisis but also to see whether there are any political consequences that gives room for corruption and mismanagement of resources. Not just the relationships between politics and economic but what the political changes have for shaping the economic; the dialectical relationship between economic and politics. To see the certain fit between the economic stimuli coming from the world outside in the form of oil revenues and the governments' mechanisms for allocating resources and the way the whole process is politically managed.

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