Political Economy of the Petroleum Sector in Nigeria

The relatively slow pace of
Nigeria's development has often been attributed to the
phenomenon of the resource curse whereby the nature of the
state as a "rentier" dilutes accountability for
development and political actors are able to manipulate
institutions to sustain poor governance. The impact of the
political elite's resource-control and allocation of
revenues on core democratic mechanisms is central to
understand the obstacles to development and governance
failure. Given that problems of petroleum sector governance
are extremely entrenched in Nigeria, the key question is
whether and how it is possible to get out of a poor
equilibrium after fifty years of oil production. This paper
uses a political economy perspective to analyze the
governance weaknesses along the petroleum sector value chain
and attempts to establish the links between challenges in
sector regulation and the following major political and
economic attributes: (i) strong executive control on
petroleum governance in a political environment of weak
checks and balances; (ii) regulatory and operating roles
bundled into one institution, thereby creating conflict of
interest; and (iii) manipulation of elections and political
appointments. The restoration of democratic government has
helped improve transparency and management of oil revenue
and reforms at the federal level and proposed reforms of the
petroleum sector hold much promise. At the same time, the
judiciary has started to restore confidence that it will
serve as a check and balance on the executive and the
electoral process. Yet, these reforms are fragile and need
to be deepened and institutionalized. They must be addressed
not as purely technocratic matters but as issues of
political economy and vested interests that must, through
regulation and reform, be aligned with the public interest
and a vision of Nigerian development.