Nigeria has been described as a typical example of the so-called ‘resource curse’ – as a
country rich in natural resources but struggling with poverty and weak institutions. The
system of federalism in Nigeria has also thrown up an intriguing paradox of political
decentralization with low subnational transparency; while states have fiscal autonomy,
and states’ spending constitutes around half of consolidated public spending, not much
is known about how they manage natural resource revenues. The project conducts a
case-study of resource revenue management for two subnational governments in the
oil-rich, but restive Niger Delta. The case-study reveals that the two subnational
governments are highly dependent on volatile federal (oil) revenue allocations, poverty
remains high as public expenditure is not adequately directed at the pro-poor social
sectors, there is low budget transparency, and actual budget implementation is poor.
Furthermore, there are no effective mechanisms for ensuring subnational fiscal
discipline and political accountability. The paper sets out appropriate policy actions that
can improve the subnational management of natural resource revenues. In sum, the
findings of the study indicate that political decentralization within federal political
systems may not necessarily result in improved natural resource governance. Local
context – the nature of socio-political institutions, technical capacity in managing public
finances, and the degree of political accountability, is important in determining how
subnational governments manage natural resource revenues.