Optimal generation and use of oil revenues : a case study of Nigeria
The starting point of this study is the assumption that the development priority of an oil-endowed developing economy is the transformation of its mineral wealth into a solid foundation for selfperpetuating development in the post-resource era. This priority translates into determining, intertemporally, the optimal rate of the resource's depletion and the associated revenues. This dissertation attempts to make a contribution to optimal decisionmaking by suggesting:(a) the adoption of an extraction strategy and expenditure pattern that is linked to the economy's absorptive capacity,(b) the non-isolation of the determination of an extraction policy from other macro-policies such as growth, stabilisation and foreign trade policies. These suggestions are incorporated in a macromodel formulated for a representative oil-exporting developing economy - Nigeria. The macromodel is subsequently used first, in a dynamic optimising exercise and second, the results that are based on the macromodel are used to evaluate the performance of the Nigerian economy since 1970.The technique of optimal Control Theory has been applied to dynamically manipulate the variables of our macromodel in order to achieve specified intertemporal results. The numerical solutions have been analysed in detail. And, when used to evaluate the actual performance of the Nigerian economy, we notice that by not adopting the development strategy embodied in our planning model, oil-led accelerated growth has engendered a reduction in the productive capabilities of the economy through its strengthening of a comprador entrepreneurial structure, underdevelopment of human resources, inflationary pressures and overvalued exchange rate. Furthermore, we observe the incidence of overinvestment and the perennial dependence of the external account on oil exports receipts with its implications for domestic production and cozzumption. In sum, the overriding conclusion is that Nigeria's development strategy since 1970 has been inconducive to the attainment of the economic and social transformation of the economy needed to enhance self-sustaining development in the post-oil era.