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Investigating the Determinants of Wealth Creation in Nigeria: Does Oil Revenue Allocation Really Matter?

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  • Murtala S. Sagagi

Abstract

In an emerging economy such as Nigeria, people tend to associate their economic progress and well-being to the volume of the oil revenue accrued to their regions/states. Often, non-oil sectors are not considered paramount in the development process of the country. This can hamper entrepreneurship development as opportunities are effectively choked out of consideration in any economic development formulation. The dismal performance of oil-producing economies in the face of huge rents from oil sector and the advent of the knowledge economy, which has fundamentally changed the basis of wealth creation and growth in modern societies, have rekindled interest in the importance of oil revenue to the growth and development trajectory of Nigeria. Part of this performance may be due to the absence of entrepreneurial opportunity. This essay is developed on the premise that, even though oil revenue allocation is important in maintaining internal cohesion, its relevance to generating an enduring and inclusive wealth is questionable. We compared the official social and economic statistics of oil-producing states in Nigeria that received the highest oil revenue allocation and compared them with those of the non-oil-producing states which were given less oil revenue allocations. We could not establish a clear link between oil revenue allocation and wealth creation—measured by low poverty incidence, low unemployment and high capacity to generate internal revenue and provide social services, among the two categories of states observed. It is therefore safe to conclude that other endogenous determinants of growth, rather than oil revenue, accounted for the differences in wealth creation in Nigeria. The formulation of people-oriented development strategy, at state levels, with the aim of improving local productivity and capacity to attract new investments to create or improve competitive industries is recommended, in addition to a holistic approach, to improve governance and social services.

Suggested Citation

  • Murtala S. Sagagi, 2015. "Investigating the Determinants of Wealth Creation in Nigeria: Does Oil Revenue Allocation Really Matter?," Journal of Entrepreneurship and Innovation in Emerging Economies, Entrepreneurship Development Institute of India, vol. 1(1), pages 114-128, January.
    • Handle: RePEc:sae:jouent:v:1:y:2015:i:1:p:114-128
    DOI: 10.1177/2393957514555052
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    References listed on IDEAS

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    Keywords

    Wealth; oil; revenue; formula; development;
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