On 17th January, 1991; a coalition led by the Americans launched “Operation Desert Storm” against Iraq. This came to be known as the first Gulf war. This came after the invasion of Kuwait by Iraq in 1990 and the imposition of embargo on crude oil exports from Iraq by the United Nations (UN) at the behest of the Americans. And because both Iraq, Kuwait as well as many more nations on the other side were major oil producers and exporters. this led to spikes in international oil price. The chart below shows the pre-invasion and post-invasion spike in international crude oil price.
Nigeria might have made a windfall of at least $12.4 billion as a result of this spike. According to the then Nigerian leader, Ibrahim Badamasi Babangida, the money was used for large infrastructural developments including bridges, ports. Though, many think the windfall would have been wasted.
Dedicated Account for the Windfall
An account was created specifically for the stashing away of the gulf oil windfall. This means the windfall bypassed the federation account allocation committee (FAAC) to be warehoused in an entirely separate account.
According to Okigbo Panel Report, a whopping $12.4 billion passed through this account with $12.2 billion used for non-regenerative and non-beneficial projects.
The Windfalls
The first Gulf War windfall was not the only one, neither first nor last, there some before it in 1973, 1980-82, and others after it in 2011-2014 and 2022. So far, at least five oil windfalls before now, and only the first actually delivered on tangible projects. Others were just frittered away with little to show for.
This war would make international oil price to be volatile and the possibility of a war premium. Hence, the possible windfall in the current situation that is still ongoing must not go the way of these wasted windfalls. Should the windfall come, the revenue must be transparently and efficiently utilized to tackle Nigeria’s perennial challenges in infrastructure, structural transformation, human capital and other productive projects and programmes.
On the back of geopolitical tensions, economists the world over have already hiked oil price forecast for 2026. The world’s two major benchmarks; the West Texas Intermediate (WTI) and the Brent Crude; have all seen increases in oil prices in the last few hours despite oversupply in the market.
