Natural Resources and Economic Performance in Nigeria

Nigeria and some other African nations have heavily relied on natural resources and made little effort towards diversification. This reliance presents a considerable challenge, impeding such a natural resource-rich country from achieving sustainable economic growth and mitigating the negative effects of economic volatility associated with dependency on natural resources. This study examines the effects of natural resources such as oil rents and natural gas rents on economic performance in Nigeria for the period 1984–2022. Using the autoregressive distributed lag estimator, the findings showed that the effect of natural resource rents, particularly oil and natural gas on economic performance was different in both cases. Oil rents had a positive and significant effect on GDP growth in the short run but insignificant in the long run. Natural gas rents had a positive and significant effect on GDP growth in the long run, whereas the first lag of natural gas rents was significant in the short run. These findings underscore the pivotal role of natural resource utilization, particularly in Nigeria's oil and gas sector, in driving economic development. The study concludes that the government should substantially increase the production level of natural gas towards increasing GDP growth. There is also the need to recognize the limitations of over-reliance on oil revenues and prioritize efforts to diversify the economy. There is the need to promote substantial investment in non-oil sectors such as agriculture, manufacturing, and services in the long run.