The Nigerian Petroleum Industry Bill: An Evaluation of the Effect of the Proposed Fiscal Terms on Investment in the Upstream Sector

The Nigerian Petroleum Industry Bill: An Evaluation of the Effect of the Proposed Fiscal Terms on Investment in the Upstream Sector Nigeria and Indonesia provide an interesting contrast with regard to performance and policy during and after the oil boom. Roughly a decade after the first oil shock, Nigeria is faced with several economic problems including a serious decline in its agricultural sector and a deteriorating external debt situation. While some decline in the nonoil traded goods sector reflects efficient adjustment to the oil boom, policy with regard to public expenditure, exchange rates, pricing, and the trade regime could exacerbate such decline and impede readjustment as the boom subsides. The links between oil prices, deficits, inflation, and real exchange rate appreciation are analyzed and Nigerian and Indonesian fiscal and exchange rate and agricultural and foreign borrowing strategies are compared. It is concluded that with the exception of cuts in the deficit since 1984, Nigerian policy following the boom has not been conducive to adjustment to the current period of low oil prices and high real interest rates. Corrective measure and policy options are discussed. A postscript gives post—September 1986 policy changes.