Since the oil crisis of the mid-1970s, Nigeria’s oil and gas industry has grown to become the single largest contributor to Nigeria’s economy, turning over about $25bn annually and accounting for more than one-fifth of gross domestic product (GDP). Soaring oil prices over recent years have seen the Nigerian government reap a revenue windfall. By the end of 2005, high oil prices had propelled Nigeria’s foreign exchange reserves to $28bn, up two-thirds from the $17bn recorded a year earlier, enabling the government to pay down Nigeria’s huge foreign debt and invest in some strategic infrastructure improvements.
However, oil has been far from an unqualified boon to the Nigerian economy, with vast swathes of revenue lost to corruption over the years. The World Bank estimates a paltry one-fifth of oil revenues benefit the population as a whole, while the remaining four-fifths go into the pockets of an elite 1% of the population. Oil wealth has also underpinned the naira, encouraging consumers to depend on cheap imports and hindering more balanced trade and broader development of the domestic economy.
