For more than seventy years, Nigeria's oil story has been a tale of two worlds. On one side are the balance sheets, export figures and fiscal headlines that dominate the national discussion. On the other side are the oil-producing communities of the Niger Delta, burdened with polluted land, damaged livelihoods and chronic poverty.
A recent Business Day headline, “Oil production race tilts in favor of local companies after 70 years”, signals a significant change. Indigenous companies are increasingly taking over assets once controlled by international oil companies (IOCs). Yet this milestone raises a more fundamental question: Has the oil that generates Nigeria's highest revenues really benefited the people whose land sustains it?
Nigeria remains Africa's largest oil producer and one of the world's most oil-dependent economies. Oil and gas contribute about 65 percent to government revenue and more than 85 percent to export earnings. In 2025 alone, Nigeria will produce an estimated 530 million barrels of crude oil, generating about ¥55 trillion ($38 billion) in crude oil sales value.
Yet the actual action of the government, and what ultimately reaches the oil producing communities, is very small. In 2024, total oil and gas revenues were projected to be about ₦15 trillion, about 25 percent below budgetary expectations. Ironically, while production volumes increased, net profits from crude oil sales declined sharply due to costs, cutbacks and inefficiencies. Oil dominates exports but contributes only 9 percent of Nigeria's GDP, highlighting a structural gap between oil wealth and real economic growth.
For host communities, this isolation has been devastating. Gas flaring that has been going on for decades has deteriorated the air quality. Oil spills have destroyed farmland and fishing grounds. Despite earning trillions of naira from crude oil exports over the years, many Niger Delta communities still lack clean water, reliable electricity, quality health care and sustainable employment. The oil race has always been about barrels and budgets – never about human development or ecological repair.
This outcome is not inevitable. Other oil-producing countries demonstrate that resource wealth can be transformed into shared prosperity through deliberate policy choices.
Norway, often cited as the gold standard, funnels oil revenues into Government Pension Fund Global, now the world's largest sovereign wealth fund, ensuring that petroleum wealth supports education, health care, infrastructure and future generations. Strong institutions, high taxation on oil profits, and strict fiscal discipline prevented oil from distorting the broader economy.
The United Arab Emirates (UAE) used oil revenues to build infrastructure, diversify into aviation, tourism, finance and technology, and dramatically raise living standards within two generations. Oil was treated as seed capital, not an end in itself.
Even Alaska offers a compelling grassroots model. Through the Alaska Permanent Fund, a portion of oil revenues are paid annually directly to residents, ensuring that citizens, including remote communities, realize a tangible benefit from resource extraction.
These examples underscore a simple truth: The resource curse is not geological; It is institutional.
Nigeria's current shift toward indigenous oil producers presents a rare opportunity to reset the social contract. However, local ownership does not automatically translate into local profits. Replacing foreign operators with Nigerian firms merely substitutes one group of landowners for another without changing revenue flows, governance structures and community inclusion.
The Petroleum Industry Act (PIA) attempts to address this gap through the Host Community Development Trust (HCDT), which requires operators to contribute 3 percent of operating expenses to host community development. Although this is a step forward, its success completely depends on transparency, community control and enforcement. Without these, HCDT risks becoming yet another elite-capture mechanism with little impact on lived realities.
If Nigeria is serious about ensuring that oil finally works for its people, several reforms are critical:
First, guaranteed community revenue sharing should replace discretionary CSR. Host communities must have predictable, legally protected income streams directly linked to production.
Second, Nigeria should explore non-operational equity partnerships for host communities. aligns ownership incentives; When communities have a financial stake, conflict gives way to security and partnership.
Third, host community trusts should be truly community-led, with independent audits and public disclosure to prevent capture by political and local elites.
Fourth, environmental improvement should be treated as a form of economic justice, not charity. Ecosystem restoration, compensation for lost livelihoods and public health interventions must be mandatory and enforceable.
Finally, local content must truly be local. Beyond Nigerian ownership, oil companies should be required to source labour, services and supply chains from oil-producing regions to build sustainable regional economies in places like Yenagoa, Warri and Port Harcourt.
The IOC's exit shows that the old extract-and-export model is reaching its limits. But output figures alone do not define success. If Nigeria wins the race for oil production but loses its communities, it will have mastery over extraction without development.
The real race is not about who produces more barrels.
It's about who ultimately makes sure the oil works for the people.
