Utilization of Resource Proceeds for Economic Development of Nigeria: A Revisit of the Resource Curse Theory

Abstract

This paper reviews the resource curse theory in the Nigerian circumstance by examining the utilization of resource proceeds between 1980 and 2022; specifically oil rents for economic development. Employing an ex-post facto quantitative design, the paper integrates time-series regression analysis, stationary testing (ADF), and correlation matrices to evaluate how resource dependence affects Nigeria's development outcomes. The results reveal that the Pearson correlation coefficients among GDP per capita, Oil Rents, Corruption Perception Index (CPI), and Human Development Index (HDI). Oil Rents show a moderate positive correlation with GDP per capita (0.587), suggesting a potential growth-enhancing role. CPI and HDI have the expected relationship but weaker correlations with GDP per capita (-0.022 and 0.133), indicating that their effects on economic outcomes might be more complex and indirect. Perhaps, better understood through interaction effects in the regression analysis. It is therefore, clear to note that, the relationship between GDP per Capita and oil rents, CPI and HDI are on course such that, GDP per Capita increases by $1 if CPI reduces by $0.02; $0.58 increase in Oil Rents brings about $1 GDP per Capita increase while $0.13 increase in HDI results in $1 increase in GDP per Capita. Broadly speaking, the coefficient for oil rents is approximately 35.01, indicating that a one-percentage-point increase in oil rents (as a share of GDP) is associated with a $35.01 increase in GDP per capita, holding all else constant. This suggests a positive but modest correlation between oil rents and economic growth. The R-squared implies that oil rents, CPI and HDI explain about 78% of the variation in GDP per capita; highlighting the presence of other critical explanatory factors such as institutional quality, diversification, and governance. In essence, Nigeria's situation exemplifies the 'revenue without development' paradoxical content, with its wealth failing to translate into reward and improved infrastructure, human capital and long-term economic resilience. The paper submits that governance reforms, economic diversification and institutional quality are expedient to reversing the resource curse trend.