Nber Working Paper Series Addressing the Natural Resource Curse: an Illustration from Nigeria

Some natural resources – oil and minerals in particular – exert a negative and nonlinear impact on growth via their deleterious impact on institutional quality. We show this result to be very robust. The Nigerian experience provides telling confirmation of this aspect of natural resources. Waste and corruption from oil rather than Dutch disease has been responsible for its poor long run economic performance. We propose a solution for addressing this resource curse which involves directly distributing the oil revenues to the public. Even with all the difficulties of corruption and inefficiency that will no doubt plague its actual implementation, our proposal will, at the least, be vastly superior to the status quo. At best, however, it could fundamentally improve the quality of public institutions and, as a result, transform economics and politics in Nigeria. Xavier Sala-i-Martin Arvind Subramanian Department of Economics International Monetary Fund Columbia University 700 19 Street, NW 420 West 118 Street, 1005 Washington, DC 20431 New York, NY 10027 and NBER [email protected]