Between 1958 and 1966 Nigerian crude went from a curiosity to the country's largest single export. Production climbed from 5,100 b/d at Oloibiri (1956) to 152,000 b/d (1960), 420,000 b/d (1965) and 580,000 b/d (1966), the eve of the Civil War. Royalties to the Federal Government — 12.5% of posted price under the 1959 Petroleum Profits Tax Ordinance — were the difference between a solvent First Republic and one that ran on regional groundnut and cocoa marketing boards.
The 1959 Ordinance, drafted with Shell-BP's full participation, did three things that shaped the next forty years. It established the 50/50 profits-tax principle Nigeria had not won at independence. It tied 'posted price' to a London-calculated benchmark the producing country could not audit. And it created the derivation principle — 50% of mining royalties returned to the region of origin — which meant the Eastern Region, where every commercial barrel was produced, received a disproportionate share of federal oil revenue right up to 1967. That arithmetic is what Ojukwu was defending when he declared secession.
The Biafran oil war is the under-told centre of the conflict. When the East seceded in May 1967, Shell-BP held producing leases worth roughly £200 million in annual royalties. The company faced a question with no good answer: pay the May 1967 royalty cheque to Lagos (Gowon's federal government) or Enugu (Ojukwu's Republic of Biafra)? In June 1967 Shell-BP's London board, under Foreign Office pressure, decided to pay Lagos. They then quietly authorised the resident manager in Port Harcourt to make a £250,000 'interim payment' to Ojukwu's government — a hedging move that, when discovered by Lagos in July, triggered the federal naval blockade of Bonny terminal and accelerated the war from skirmish to total conflict. Shell-BP's Port Harcourt operations were seized by Biafran forces, run by their own engineers for fourteen months, then re-seized by federal forces in May 1968. The flow of crude resumed under federal control in 1969.
By the time the war ended in January 1970, three things had been settled. The 12.5% royalty was history — the new federal government would push it to 20% by 1974 and 80% combined take by 1977. The derivation principle was effectively dead — slashed from 50% to 45% in 1969, to 20% in 1975, to 1.5% by 1982, to its present 13% only after the 1995 constitution. And the oil industry was now indivisibly a federal asset, run by Lagos (later Abuja) for the benefit of a national budget the Delta would have a steadily shrinking share in. The Civil War did not start as an oil war. It became one within six weeks of secession, and the constitutional settlement it produced — federal ownership, minimal derivation, no community equity — is the structural quarrel the Niger Delta militancy has been re-litigating ever since.
Figure 1
Nigerian crude oil production, 1958–2024 (million barrels per day)
From the first 5,100-barrel cargo out of Oloibiri in February 1958 to a 2.44 mbpd peak in 2005, then a long decline of theft, divestment and force majeure.
Figure 2
Refining capacity and utilisation, 1965–2024
Four state refineries were built; none ran consistently above 50% after 1995; by 2020 official utilisation was zero. Dangote 2024 doubled installed capacity overnight.