This paper examines the Nigeria's economy in recession, and diversification of the economy through agriculture and other means as alternative. The paper argues that displacement of agricultural products by oil as the focal point of national revenue allocation, is the root cause of the revenue allocation debacle in Nigeria federalism. The focus on revenue sharing rather than revenue generation is the, root cause of political, economic and social imbalance or decay in the contemporary Nigeria and has equally led to the proliferation of unavailable state and local governments and the current recession. The excessive government dependence on oil revenues, an institutional unstable revenue allocation system weak political institutional arrangements, lack of effective agencies of restraints to demand transparency and accountability on the part political office holders. Failure' to translate oil wealth' to sustainable growth and increase standard of living for larger majority of Nigerians and a defective property right structure in relation to mineral resources endowment are the hallmark of Nigeria government. Using content analysis, the paper conclude by making recommendation on how to diversify the Nigeria economy which include the investment and developments of other sectors like agriculture, industries, solid minerals and human resources.