Oil and Dutch Disease : The case of Nigeria

Abstract: This essay examines the impact of the phenomenon of Dutch Disease on the agriculture sector in Nigeria since the beginning of the 1980s. Dutch Disease is a misfortune that generally affects resource-rich countries due to exploiting and exporting their natural resources. Dutch Disease seems more widespread in developing countries, such as Sub-Saharan African nations, where natural resources make up a more significant portion of total revenues. In Nigeria, the agriculture sector has long been a substantial contributor to the country's development and employs a large share of the workforce; therefore, the presence of Dutch Disease could have substantial implications for the economy. To examine if Nigeria has suffered from Dutch Disease, annual time series data, mainly from the World Bank, were analyzed using the Engle-Granger Co-integration test and Error Correction Model to investigate the long-run and short-run relationships between the agriculture sector and several macroeconomic variables. The empirical results showed that Dutch Disease has been present in Nigeria and that the over-reliance on natural resources harms the agriculture sector. This essay highlights that further research is needed to understand the role of agriculture in Nigeria's growth and potential policy interventions. Further, it emphasizes the importance of effective management of natural resource revenues and the consideration of a sovereign wealth fund to secure oil revenues for coming generations and buffer against price fluctuations. These strategies may mitigate Dutch Disease impacts and foster sustainable economic growth.