The Petro-State

In 1970, Nigeria earned £167 million from oil. By 1974, that figure had exploded to £3.724 billion — a 22x increase in just four years. The 1973 Yom Kippur War and subsequent Arab oil embargo sent prices from $3 to $12 per barrel. Nigeria, which had joined OPEC in 1971, was suddenly flush with cash. The Third National Development Plan (1975–1980) was funded almost entirely by oil. But the money was not invested in productive capacity; it was spent on infrastructure, imports, and consumption. When prices stabilized, the boom became a bust.

The Nigerian National Petroleum Corporation (NNPC) was formed in 1977 through Decree 33, merging the Nigerian National Oil Corporation (NNOC, 1971) with the Ministry of Petroleum Resources. This gave NNPC a dual role: commercial operator in joint ventures AND regulatory overseer. Through participation agreements, government equity rose from 35% (1973) to 55% (1974) to 60% (1979) to 80% (1979, after BP nationalization). But foreign companies retained managerial control. NNPC was described as 'hopelessly inept' and plagued by overstaffing, political interference, and fraud allegations.

Before oil, Nigeria was an agricultural powerhouse: palm oil, cocoa, groundnuts, and cotton were the backbone of exports. But revenue surged, the naira appreciated (Dutch Disease), making Nigerian agricultural exports uncompetitive. Government investment shifted from farms to oil infrastructure. By 1980, agriculture contributed less than 10% of export earnings. The sector that had employed 70% of Nigerians was neglected, and food imports began to rise. The 'resource curse' was not theoretical; it was measurable in every agricultural statistic.

To reduce fuel import dependence, Nigeria built the Warri Refining and Petrochemical Company (1978), the Kaduna Refining and Petrochemical Company (1980), and expanded Port Harcourt (1965 + 1989). Yet by the late 1980s, refinery output was insufficient to meet domestic demand. Technical inefficiencies, maintenance failures, and operational mismanagement meant Nigeria — one of the world's largest crude exporters — became dependent on imported refined petroleum products. The subsidy regime, introduced in the 1970s to stabilize prices, would eventually consume trillions of naira.