Oil, Empire & The Foundations Of A Petro-Economy

The Naval Trigger: Why Britain Needed Nigerian Oil

NIGERIA’S oil industry did not begin as an economic vision for Nigerians—it began as a geopolitical imperative for Britain. The early 1900s marked a shift in global power projection: coal was giving way to oil, and the British Royal Navy required vast, secure petroleum reserves to maintain maritime dominance. Lacking sufficient domestic oil production, Britain sought resources within its empire to avoid reliance on the United States, whose oil exports already dominated global supply.

Nigeria entered this equation not because of proven reserves, but because of geological speculation and strategic desirability. By 1905, John Simon Bergheim founded the Nigeria Bitumen Corporation, acquiring concessions with direct colonial endorsement. Crucially, he secured a monopoly by buying out competing licenses, turning oil prospecting into a British-protected private enterprise.

Despite sinking 15 wells by 1912 at a cost of £143,000, production never materialized at scale. Bergheim’s sudden death in 1912 killed not only momentum, but also financing. The colonial government refused further loans, and by 1914, Nigeria’s first oil company was dissolved. Exploration stalled for nearly 25 years.

Shell/D’Arcy and the Second Coming

Oil returned in 1937 through Shell/D’Arcy, granted an unprecedented concession: the entire country. Early drilling near Owerri (1938-39) yielded nothing, and World War II again paused operations. Systematic expansion resumed in the 1950s, leading to Ihuo-1 (1951), Akata-1 (1953), and 13 more wells—until the breakthrough: Oloibiri, 1956.

Oloibiri shifted Nigeria from speculative geology to commercial viability. By 1958, the first Nigerian crude shipment reached Europe, signaling Nigeria’s entry into the global oil market.

OPEC, Boom, and the Coming Fragility

After independence, Nigeria embraced oil with extraordinary speed. Production grew from 5,000 bpd (1958) to 17,000 bpd (1960), then 45,000 bpd (1966), and 1 million bpd (1970). In 1971, Nigeria joined OPEC, leveraging global price coordination to drive revenue. The 1970s became a Golden Decade, making Nigeria Africa’s richest economy—powered almost entirely by oil.

But the boom masked an emerging vulnerability: agriculture exports collapsed, manufacturing failed to diversify, and oil jobs remained capital-intensive but not labor-absorptive. When prices crashed in the 1980s, the economy plunged. By 1989, Nigeria had fallen to low-income status per the World Bank. The petro-state was born rich, but built fragile.

The Structural Pattern

Nigeria’s oil story reveals a consistent theme:

• Strategic decisions were never centered on domestic ownership,

• Concessions prioritized foreign capital,

• Regulation was designed for resource extraction, not equitable development,

• And the economy became rich in revenue but poor in jobs.