The Local Advantage: Corruption, Organised Crime, and Indigenisation in the Nigerian Oil Sector

Working Paper
Published on 15 April 2022
Authors
Jonah Rexer

A previous version of this working paper was published 27 July 2021.

Abstract

Multinationals in the extractive sectors of weak states face resource theft by armed groups. This criminality is often abetted by state corruption, even though firms are willing to pay for protection. I study indigenization in Nigeria’s oil sector, which increased participation by Nigerian firms substantially. Despite evidence that local firms are lower quality, localization increases output and reduces oil theft. A bargaining model illustrates that political connections align law enforcement incentives, solving commitment problems. Data on raids by government forces show that local firms receive preferential law enforcement protection. I find that connections to military elites drive the local advantage.

Authors

Jonah Rexer

University of Pennsylvania