This paper demonstrates an alternative causal mechanism underlying the anti-democratic effect of resource endowment. Given the acknowledged positive correlation between economic development and democracy, oil rich countries defy democratic consolidation through the puzzling “resource curse.” The resource curse asserts that oil endowment leads to political and economic inequality, which in turns causes increased poverty despite the external revenue largesse. This is a timely research topic given the current shift in American foreign policy to rely more on newly-found oil sources in African countries. Thus, this paper hopes to contribute to the resource curse literature in the under-researched African context by examining Nigeria’s decades-long struggle finally resulting in its tenuous four-year democracy. The Nigerian case study may be applied to newly-found oil sources in African countries with similar contentious ethnic, religious, economic, and political cleavages. Resource-based states undergo a different democratization process from Acemouglu/Robinson redistribution and Przeworski/Limongi democracy models. As the oil revenue spurs economic growth, inequality increases due to the elite’s ability to hoard the concentrated wealth. Oil creates a rentier state where the elite is the direct benefactor of the oil revenues – at the expense of diminishing the elite’s historical dependence, economic redistribution, and democratic accountability to tribal, religious, and mercantile networks (Crystal, 1990). In the case of resource endowment, the rentier state weakens the redistribution model’s argument that resource allocation is forced by the poor’s revolutionary threat on the elite’s capital stock. Instead, state formation is shaped into different elite groups fighting for the spoils. In this study the hypothesis is as external oil revenue increases, concentration of wealth increases and democracy declines. Some exploratory questions include: If rentier states do not consolidate democracy, at what point are the poor pacified? What other factors play into their pacification? What role does capital stock have in this? How does the African context differ from Middle Eastern “resource curse” countries? Most importantly, what factors can reverse the resource curse? Nigeria is a compelling case for this study because it embodies the characteristics of the rentier state; improves the democratization model by extending its analysis to unexamined factors; and provides insight for African oil countries currently encountering the resource curse through its four year fledgling democracy. First, it embodies the characteristics of the rentier state since oil resources constitute 80 percent of the government revenue. In addition, Nigeria had an unequal horizontal and vertical tax revenue distribution system and a large concentration of revenue in the central government. Second, the Nigerian case study improves the democratization model by extending its analysis to unexamined factors. For example, religion plays a defining role in the Christian/Muslim chasm separating the North and the South, coupled with ethnic division and military dominance fueling political instability. Third, Nigeria’s democratic attempt to balance these contentious factors provides insight for newly-found oil reserves in African countries sharing similar ethnic, religious, historical, and political cleavages The study conducts an empirical analysis examining the theoretical linkage among the gini coefficient (World Handbook of Political and Social Indicators III), annual oil price price (20th Century Petroluem Statistics CD Rom 2000 Edition, DeGoyler and MacNaughton), and levels of democracy (Freedom House). These indicators will explore the potential positive correlation of increased oil revenue with wealth concentration and democratic decline. The same trends will be comparatively examined in light of the economic distribution level and annual oil price during Nigeria’s 1999 democratic transition. [ABSTRACT FROM AUTHOR]