DevOil: More Than a Commodity

I came across the concept of Development Oil while reading an article by Olisa Agbakoba and Collins Okeke. They describe it as an approach to oil and gas governance that treats resources not just as export commodities, but as strategic assets for national growth. The approach focuses on using oil wealth to drive inclusion, indigenous empowerment, and economic sustainability. It aims to create a fairer, more balanced economy where citizens have a real stake in shaping the nation’s future.

In Nigeria, this concept finds a framework in the Nigerian Oil and Gas Industry Content Development (NOGICD) Act of 2010. The law mandates that all parties involved in the Nigerian oil and gas industry prioritize the use of Nigerian resources and talents in project planning and execution. It’s not about cheap labor; it is about creating real opportunities for locals to learn, thrive, and add value to the economy. The Act also addresses concerns over reliance on foreign expertise and capital by giving Nigerian independent operators and service companies priority for oil blocks, field licenses, and contracts, thereby promoting local ownership and competitiveness in the sector.

Another example of the development oil approach in practice is the Host Communities’ Development Trust (HCDT) provision under the Petroleum Industry Act. This requires upstream oil and gas companies in Nigeria to contribute 3% of their annual operating expenses to a fund supporting community projects in the oil-producing regions. Though the fairness of this 3% is still debated, it makes perfect sense that indigenes also enjoy direct benefits from the oil revenues generated on their lands.

A core part of the development oil model is reinvesting oil revenue to support other sectors like agriculture, healthcare, technology, power, manufacturing, and renewable energy. This strategy helps to diversify the economy and cushion it against market volatility. Sovereign wealth funds play a key role here, managing wealth from natural resources to save for future generations, stabilize the economy, and fund national development projects. In Nigeria, the Nigerian Sovereign Investment Authority (NSIA) manages the country's sovereign wealth fund, which is primarily funded by surplus income from crude oil sales. You can learn more about their efforts here.

Although Nigeria is already leaning towards the principles of development oil, several challenges remain. Even with laws like the NOGICD Act and the Petroleum Industry Act, their success depends on strong enforcement. Without proper implementation, these laws risk falling short of their intended impact. Corruption within the government, companies, and even host communities is another major threat to the success of the development oil framework. Additionally, there are concerns about the environmental costs associated with oil-related activities. This presents a dilemma: while oil drives economic growth, it also threatens the local ecosystem and the livelihoods of communities.

I’d love to hear your thoughts. What do you think are the most important steps to make development oil a sustainable model for Nigeria and similar nations?

Talk to you in my next letter.

Stay E-luminated!

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