An examination of determinants of economic diversification in Nigeria: Evidence from the oil and gas sector in the Niger Delta (2000–2020).
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Background of the study
Economic diversification has become critical for Nigeria, especially given its historical overdependence on oil revenues. In the Niger Delta, where the oil and gas sector dominates, efforts to diversify the economy have focused on developing non-oil sectors such as agriculture, manufacturing, and services. This diversification is seen as a means to stabilize the economy against volatile oil prices and to promote sustainable development (Oluwaseun, 2023). Determinants influencing diversification include government policies, technological innovation, infrastructural development, and human capital development. The oil and gas sector’s evolution over the past two decades provides a unique context to study these determinants. While some progress has been made in diversifying economic activities, challenges such as entrenched interests, regulatory bottlenecks, and insufficient investment in emerging sectors continue to impede progress (Chinwe, 2024). Moreover, the interplay between global oil market dynamics and domestic policy reforms has significant implications for diversification strategies. Understanding these factors is crucial for designing policies that can effectively transition the Niger Delta’s economy from heavy reliance on hydrocarbons to a more balanced and resilient structure (Ibrahim, 2025).
Statement of the problem
Despite attempts to diversify, the Niger Delta’s economy remains heavily reliant on oil and gas revenues. Policy inconsistencies, infrastructural deficits, and limited human capital in emerging sectors have hampered diversification efforts (Oluwaseun, 2023; Chinwe, 2024). This dependence increases vulnerability to global oil market fluctuations and undermines long-term economic stability. The lack of robust diversification strategies means that non-oil sectors are underdeveloped, resulting in lost opportunities for broader economic growth. This study seeks to identify the key determinants of diversification and to propose effective policy measures that can facilitate a transition toward a more diversified and resilient economy.
Objectives of the study:
- To identify determinants influencing economic diversification in the Niger Delta.
- To analyze the relationship between the oil and gas sector and emerging industries.
- To recommend policies that enhance diversification efforts.
Research questions:
- What factors drive economic diversification in the Niger Delta?
- How does the oil and gas sector affect diversification efforts?
- What policies can best promote diversification?
Research Hypotheses:
- Strong infrastructural investments positively influence diversification.
- Regulatory reforms facilitate the growth of non-oil sectors.
- Enhanced human capital development drives diversification.
Significance of the study
This study is significant because it addresses the urgent need for economic diversification in the Niger Delta, thereby reducing reliance on oil revenues and promoting sustainable growth. Its findings will provide policymakers with targeted strategies to foster emerging sectors and strengthen overall economic resilience. By understanding the determinants of diversification, stakeholders can implement reforms that improve long-term stability and growth (Ibrahim, 2025).
Scope and limitations of the study:
This study is limited to examining determinants of economic diversification in the Niger Delta’s oil and gas sector, focusing on policy, infrastructural, and human capital factors.
Definitions of terms:
- Economic Diversification: The process of expanding the range of economic activities beyond a dominant sector.
- Oil and Gas Sector: Industries involved in the exploration, extraction, and production of hydrocarbons.
- Infrastructural Development: The construction and improvement of foundational facilities necessary for economic activities.
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