Nigeria must break oil-rent model to unlock growth, jobs — Oxford Professor

…urges FG to stop taxing exporters, double non-oil exports

Nigeria must break from an oil-rent economy that shares crude revenues to one that creates productive jobs and new wealth, Stefan Dercon, a professor of economic policy at the University of Oxford, has said.

Growth will face resistance from powerful interests accustomed to the existing arrangement, Dercon warned at the ongoing 32nd Nigerian Economic Summit 2026 in Abuja. “Growth is a gamble. It won’t come easy,” he said.

The country has taken a first gamble through stabilisation reforms but needs a second – a presidential compact of reform-minded officials, exporters, fintechs and governors with public targets on non-oil exports, manufactured goods, power and poverty, not just reserves and inflation, he said.

Dercon, a former chief economist at the United Kingdom’s Department for International Development, said the country’s recent economic stabilisation measures, including exchange rate reforms, had demonstrated the government’s willingness to take difficult decisions but warned that stabilisation alone would not deliver lasting prosperity.

He said Nigeria needed a new development bargain that would bring political leaders, civil servants and business interests together around a common commitment to economic transformation.

He argued that the country’s longstanding economic arrangement had largely revolved around sharing oil revenues among influential groups rather than building a productive economy capable of generating jobs, raising incomes and competing in international markets.

He noted that oil still accounted for about 85 per cent of Nigeria’s exports, leaving the economy vulnerable to fluctuations in global oil prices and limiting the prospects for sustained improvements in living standards.

According to him, income per Nigerian is roughly at the level recorded in 2010, despite earlier reform efforts and periods of oil-led expansion.

Dercon said Nigeria’s experience showed that temporary economic gains driven by commodity revenues could not substitute for a model built around productivity, diversification and sustained investment.

“Because it is to do with its elite bargain. What is the elite bargain? It’s basically the deal that exists between the powerful people in this country, in politics, in civil service, in business, and beyond. And that deal has been largely about sharing what’s in the barrel.

“Fundamentally, it’s been that. So if you think about it, even today oil is about 85 percent of exports. In 2010, the value per Nigerian from this oil, the amount of money that’s taken in the country, was about $255 per person.

“That’s not that much. It’s only $255 per person. But if you can divide this amount of money across about 100,000 people that matter, that’s $400,000 or more.

“I think that was maybe Nigeria. It’s essentially a coalition that works for some, for those that matter. And of course not everybody gets that same, but it is a deal that works for some numbers.

“One of the issues is that the rhythm that held coalitions together and left little for anything else is under pressure. Oil output per Nigerian is now down 60% since about 2000, per Nigerian. I know it’s recovering, and a lot of people hope for it.

“But today that means it’s about $100 in rent that stays in the country per Nigerian. That’s not much. About 60 of it goes to the government.

“I will say that the battle is running dry. And it means the old bargain cannot work anymore for this country. And in any case, if you want growth, you’ll have to change that bargain,” Dercon said.

He cited Indonesia as an example of a resource-rich country that had successfully reduced its dependence on natural resources by maintaining macroeconomic stability, opening its economy to international competition and encouraging the development of manufacturing and processed exports.

He said Indonesia’s experience demonstrated that countries did not need perfect institutions to achieve economic progress but required a sustained commitment among influential groups to policies that supported growth and development.

“Countries do not grow because they have perfect institutions or they have clever plans,” he said, adding that successful economies had developed practical approaches suited to their circumstances and corrected policies when they failed.

Dercon said Nigeria should learn from Indonesia’s experience rather than attempt to replicate China’s state-led development model, noting that China had a long history of meritocratic institutions that Nigeria did not share.

He urged the government to understand the limitations of its institutions and avoid assigning responsibilities to the state beyond its capacity to deliver.

“Know thy state. Be self-aware and expect from the state only what it really can deliver,” he said.

The economist also called on the government to protect the gains made from exchange rate reforms, warning against a return to policies that artificially defend the naira when oil revenues decline.

He congratulated the government for adopting a market-based exchange rate, reducing monetary financing of the budget and implementing tax reforms, but urged it to make those policy commitments difficult to reverse.

Among the measures he identified as non-negotiable were maintaining a market-based exchange rate, avoiding money printing to finance government spending, preventing a reversal of tax reforms and resisting new import restrictions.

He also called for the planned removal of petroleum subsidies to proceed as scheduled, while urging the government to protect vulnerable households through cash transfers rather than artificially low fuel prices.

Dercon said a joint framework between the finance ministry and the Central Bank of Nigeria would help ensure that fiscal and monetary policies remained aligned.

Beyond stabilisation, he said the success of Nigeria’s economic strategy should be measured by its ability to sell more goods to international markets.

He recounted searching for Nigerian-made products while shopping online in the United Kingdom, saying the experience highlighted the limited visibility of Nigerian goods in international markets.

“I want to go to a shop in the UK where I can find goods from this place,” he said.

Dercon urged Nigeria to set a target of at least doubling non-oil exports by the end of the next administration, arguing that export performance would provide a practical test of whether economic policies were improving productivity and competitiveness.

He said Indonesia had transformed its export profile over the past two to three decades, with about 80 per cent of its exports now consisting of processed and manufactured goods.

According to him, exporting forces businesses to improve productivity and compete on quality and cost, rather than relying on government protection to avoid competitive pressure.

“Exports are a test of any growth strategy because it tells you something about what growth is about. It tells you something about productivity,” he said.

He also warned that high import tariffs could undermine the competitiveness of Nigerian exporters because manufacturers depend on imported machinery, raw materials and intermediate goods.

Dercon said Nigeria’s average tariff of about 11 per cent compared with Indonesia’s two per cent could discourage businesses from investing in productivity and competing internationally.

He acknowledged that Nigeria’s 2026 trade measures had moved in the right direction by reducing the list of banned imports and providing for input surcharges to decline to zero by 2036, but argued that the pace of reform should be accelerated.

He explained that manufacturers needed access to imported inputs to produce goods for international markets.

Dercon further urged the government to attach clear conditions and expiry dates to incentives and concessions granted to businesses, warning against prolonged protection that shields firms from competition without delivering improvements in productivity.

He said support for businesses should be tied to measurable export performance and withdrawn when agreed targets were not met.

“Any tax on imports is a tax on exporters. Every concession you give to a business, small or big, has to have a sunset clause and end date. You cannot do this forever,” he said.

He cautioned against using import restrictions to compensate for persistent problems such as poor electricity supply and inadequate logistics, arguing that protection could delay the reforms needed to address those constraints.

Instead, he called for faster refunds of duties paid on imported inputs, better access to testing laboratories, improved land allocation and other measures that would reduce production costs.

The economist also urged the government to establish a presidential compact for productive investment, bringing together reform-minded public officials, exporters, businesses that rely on imported inputs, fintech companies and state governors.

Such an arrangement, he said, should set out publicly disclosed commitments by government and businesses, with delivery plans and measurable targets for the first 100 and 200 days.

Dercon said Nigeria should deliberately build a coalition capable of sustaining reforms despite resistance from groups that benefit from the existing economic arrangement.

He cited earlier reforms in banking and financial markets, telecommunications and payment systems as examples of changes that had required sustained efforts to overcome opposition.

He added that the government needed to recognise that reforms would create short-term costs for some groups and develop measures to manage the transition without abandoning the broader development agenda.

Dercon called for economic performance targets that went beyond foreign reserves, inflation and exchange rate movements to include non-oil exports, manufactured exports, power generation, foreign investment, job creation and poverty reduction.

He urged the government to assign clear responsibility for each target, publish progress and correct policies when results fell short of expectations.

“Growth is a gamble. It won’t come easy,” he said, warning that powerful interests accustomed to sharing oil revenues could resist changes that created opportunities for new businesses and sources of wealth.

He said Nigeria had already taken a difficult gamble through its stabilisation reforms but would need to take another step by building a broader coalition committed to productive investment and long-term growth.