Resource‐led Development: An Illustrative Example from Nigeria

Abstract: Several strategies are open to an economy in its attempt to attain sustainable economic development, depending on its historical background and resource endowment. One such strategy is the resource‐led strategy. Nigeria is very rich in crude oil and has reaped billions of petrodollars. However, the country faces the problem of successfully translating this huge oil wealth into sustainable development. This paper employs the vector error correction technique in examining the long‐run impact of the huge oil wealth accruing to Nigeria on its economic development. Basic indicators such as growth, private consumption, infrastructure (electricity), agriculture and manufacturing output growth rates are examined. The empirical results suggest a significant positive long‐run impact of per capita oil revenue on per capita household consumption and electricity generation while a negative relationship is established for GDP, agriculture and manufacturing. Even for those with a negative relationship at current period, there exist positive relationships at subsequent lags. Thus, oil revenue, if properly managed and invested, could be effectively used to induce oil‐led development for Nigeria provided that the initial inhibitions of corruption, lack of transparency, accountability and fairness in its use and distribution are removed.