Ethnicity is a very salient issue in Nigeria. It is highly mobilized and contested especially with regards to access to resources, opportunities, rights and responsibilities within the Nigerian state. This paper adopts a socio-historical methodology to examine the roots of ethnicity, and the implications for democracy and development in Nigeria. A social constructionist approach is adopted to show the constructed and open ended nature of ethnicity. The paper reveals that ethnicity was a colonial creation which has been reconstructed over time to reflect changing perceptions, aspirations and contentions and needs. Over the years ethnicity has been mobilized to contest inclusion/ exclusion, issues in Nigerian political process and structure thereby undermining the democratization process. This has had far reaching implications for development. The paper recommended restructuring of the Nigerian state as well as continuous socialization of Nigerians to embrace nationhood and nation building as against allegiance to ethnic groups