There is now a large body of empirical literature on the appraisal of oil sector to the Nigerian economy. However, majority of the literature focus on the challenges faced by the Nigerian economy as a result of the discovery of oil industry. Others have addressed it’s impact to the development of the economy.

Eke (2007), empirically evaluate the relationship between the oil industry and the improvement of the Nigerian economy. The data suggest that discovery of oil sector has thrown many problems to Nigerians. The data suggest that the benefits gained has made the Nigerian government loose focus on administration as every individual and the government centre her hope on the gains from the oil sector for survival. Moreover, instrumental variables procedures indicate a strong connection between oil industry and development of Nigerian state and economic growth in the long run if the government applies more effort to development. Claude (2010), has highlighted the challenges of oil sector in the nation’s economic growth. The result of the long run analysis underscores the predominant role of the Nigerian government. The issue is that industry is faced with poor funding for investment. Though the gains accrued from the industry is overwhelming, the government never took it serious to invest to the benefit of Nigerians.
Mbam (2010), carried out a comparative study of several oil rich countries. The estimates in this study were based on data from four oil producing countries in the world. The results showed that the main determinant of investment and economic growth was cash flow. In Nigerian situation, the government instead of using the cash flow for investment in other sectors of the economy to enhance economic growth, they chose to hoard it in their private account thereby retarding development in the long run. Zeufact (2007), studied the investment behaviour of oil industry in Nigeria between 1986 and 1993.The findings revealed a negative influence on uncertainty on investment. Corruption seems to also have played a decisive role in capital accumulation. The government of military dictatorship chooses to acquire wealth to their own personal account rather than the development of the Nigerian economy. This led to the destruction of the Nigerian refineries and the building of individual refinery to make more gains to their individual benefits.
Adjasi O. and Ogumbe A.(2008), studied the effect of oil industry on economic growth between 2000 and 2006 using a dynamic panel data modeling setting. Results largely show a positive relationship between the industry and the economic growth of the nation. Further analysis based on the level of economic development and oil productions are conducted. The results reveal that the positive influence on the nation’s economy is as a result of the military dictatorship. The military as observed is not accountable to any one and as a result, uses the countries oil wealth •the way they like. Equally, when the democratic government took over, issues on development came in and this adds to the high increase of per capita income and improved Gross National Product (GNP).
Ochulor (2010), empirically assessed the relationship between oil market improvement and long run economic growth in Nigeria for the periods 1985 - 2005. The study used secondary data while four models of multiple regressions were specified. The regression results which were obtained using the ordinary least squares (OLS) show that sales from crude oil prices statistically have no significant effect on economic growth in the country during the periods 1985-2005.
The major implication of the findings is that if oil industry is to significantly contribute to rapid economic growth, policies must be fashioned out to eliminate those factors that blur the effectiveness of the vehicle or transmission mechanism through which oil production prices influence economic growth. Based on the, findings, there should be an improvement in the utilization of the gains from oil sales. This will entail improvement in the physical infrastructure, more efficient share of transfer and delivery and provision of adequate policies on the sharing formula. Also, there should be improvement in the institutional regulation, environment and legal frame work such that a balance is maintained between the soundness and utilization of money accrued from sales.
Ochiagha (2011), looked at the relationship between oil industry and economic development using times series data for eight Arab countries and the regression results showed a positive and significant relationship between the growth rate of income and the growth rates of oil production. Consequently, isolating the contribution of oil production to the development of those countries has, proved difficult because the citizens of those countries are considered benefiting from the gains of oil industry.

Nigeria is blessed with abundant oil and other natural resources, its own mismanagement and corruption has prevented it from fully reaping the benefits of these resources. The country is one of the world’s largest producers of oil, yet this has not had a significant impact on the welfare and standard of living of its citizens, the majority of whom live below the national poverty line (Nwaroh, 2012).
Oil is largely an enclave sector in Nigeria having a few forward and backward linkages with the rest of the economy. It remains a decisive force for economic performance. Its impact is transmitted through the income effect mediated through public spending and imports. Oil GDP is clearly more volatile than the non-oil GDP and often experiences rapid growth in value added with the tread usually reflected in volatile growth for the economy as a whole.
Dappa (2011), describes the impact of oil on the standard of living of Nigerians as follows:

Employment Opportunities
Oil industry in Nigeria has improved the standard of households through the employment of their young graduates whom through salary yield improves the living standard of many households.

Infrastructural Development
Through the income yield from oil sector, the government-Federal, state and local councils develop their areas of jurisdiction infrastructurally. Abuja got developed infrastructurally as a result of the income yield from oil sector.

Re-distribution of income
Oil sector helps in the re-distribution of income among regions which improves the standard of living of Nigerians especially those in rural areas.

Increase in Per Capita Income Per Head
The impact of oil transmitted through the income effect. The living standard of individuals got improved. The per capita income per head will increase and most households will meet up with their scale of preferences.
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