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Political Economy of Oil-Revenue Sharing in a Developing Country; Illustrations from Nigeria

Author

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  • Ehtisham Ahmad
  • Raju J Singh

Abstract

Control over natural resource revenues is a contentious, politically divisive issue in most developing countries-especially for oil production. A typical policy response of the center in such cases has been to introduce revenue sharing arrangements. Such measures have generally not assuaged the aspirations of the oil-producing regions and have exposed them to volatility in their revenue flows that they are generally unable to cope with. An alternative is to assign more stable revenue bases to the regional administrations, together with a general-purpose transfer system that incorporates a floor. This acts as an insurance mechanism for the regional administrations and facilitates the stable provision of public services in the oil-production regions, as well as the possibility of redistribution. We use the recent history of oil-revenue sharing in Nigeria to illustrate the propositions.

Suggested Citation

  • Ehtisham Ahmad & Raju J Singh, 2003. "Political Economy of Oil-Revenue Sharing in a Developing Country; Illustrations from Nigeria," IMF Working Papers 03/16, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:03/16
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    References listed on IDEAS

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    1. Michel Le Breton & Shlomo Weber, 2003. "The Art of Making Everybody Happy: How to Prevent a Secession," IMF Staff Papers, Palgrave Macmillan, vol. 50(3), pages 1-4.
    2. Alessandra Casella & Jonathan S. Feinstein, 1990. "Public Goods in Trade: On the Formation of Markets and Political Jurisdictions," NBER Working Papers 3554, National Bureau of Economic Research, Inc.
    3. Xavier Sala-i-Martin & Jeffrey Sachs, 1991. "Fiscal Federalism and Optimum Currency Areas: Evidence for Europe From the United States," NBER Working Papers 3855, National Bureau of Economic Research, Inc.
    4. Casella, Alessandra, 1992. "On Markets and Clubs: Economic and Political Integration of Regions with Unequal Productivity," American Economic Review, American Economic Association, vol. 82(2), pages 115-121, May.
    5. Persson, Torsten & Tabellini, Guido, 1996. "Federal Fiscal Constitutions: Risk Sharing and Redistribution," Journal of Political Economy, University of Chicago Press, vol. 104(5), pages 979-1009, October.
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    Citations

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    Cited by:

    1. Tsani, Stella, 2013. "Natural resources, governance and institutional quality: The role of resource funds," Resources Policy, Elsevier, vol. 38(2), pages 181-195.
    2. Boris Najman & Richard Pomfret & Gael Raballand & Patricia Sourdin, 2005. "How are Oil Revenues Redistributed in an Oil Economy? The Case of Kazakhstan," School of Economics Working Papers 2005-18, University of Adelaide, School of Economics.
    3. Stela Cani, 2009. "Resource Abundance, Mineral Funds and Institutional Quality," Economics & Management Discussion Papers em-dp2009-04, Henley Business School, Reading University.
    4. Freinkman, Lev & Plekhanov, Alexander, 2009. "Fiscal Decentralization in Rentier Regions: Evidence from Russia," World Development, Elsevier, vol. 37(2), pages 503-512, February.
    5. Xavier Sala-i-Martin & Arvind Subramanian, 2013. "Addressing the Natural Resource Curse: An Illustration from Nigeria," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 22(4), pages 570-615, August.
    6. Yvan Guichaoua, 2009. "How Do Ethnic Militias Perpetuate in Nigeria? A Micro-level Perspective on the Oodua People’s Congress," Research Working Papers 19, MICROCON - A Micro Level Analysis of Violent Conflict.
    7. Frances Stewart & Alex Cobham & Graham Brown, 2007. "Promoting Group Justice: Fiscal Policies in Post-Conflict Countries," Working Papers wp155, Political Economy Research Institute, University of Massachusetts at Amherst.
    8. Dionisio Nombora, 2014. "Sharing Natural Resource Revenues with Affected Communities : Policy Options for Mozambique," World Bank Other Operational Studies 20264, The World Bank.
    9. Guichaoua, Yvan, 2010. "How Do Ethnic Militias Perpetuate in Nigeria? A Micro-level Perspective on the Oodua People's Congress," World Development, Elsevier, vol. 38(11), pages 1657-1666, November.
    10. Akpan, Wilson & Dawood, Mamoon, 2017. "When Foreign Interventions in Domestic Economy Leads to Exploitation: A Case Study of Oil Production in Nigeria’s Niger Delta," MPRA Paper 83099, University Library of Munich, Germany.

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