It might be more about locking moisture in.. i.e. protecting it. However - given that it's advice from many guitar manufacturers.. I do totally recommend oiling your unfinished fretboards at least once a year.
If you'd like.. you can continue to debate "WHY' one might want to do so.. I'm not going to. But the general consensus is that YES we should oil our unfinished fretboards from time to time. And I'm leaving it at that.
Quoted from the Fender 2011 bass owner's manual
"Oil The Fretboard Periodically: The natural oils in Rosewood, Pau Ferro and Ebony fingerboards may dry out over time. Rough, exposed fret edges are evidence of dry, shrunken wood. It is a good idea to give your fretboard a “drink” of lemon oil, boiled linseed oil or other non silicone-based wood/furniture oil, periodically to preserve its integrity and natural beauty. Note: With the strings removed, apply oil first to a clean lint free cloth, rub into the wood, let it soak in for a few minutes, and then wipe to dry any excess oil. Do not apply oil to the finished surfaces of the bass."
Link Removed - From Gibson
"Tip #7 You may see hairline cracks on a dried-out fingerboard. Gibson’s Luthier’s Choice Fretboard Conditioner is your friend. Or rub one or two drops of oil (mineral, almond, linseed) into the fretboard to condition it. Please don't overdo it, and make sure to wipe off excess oil with a soft, dry cloth.
The jury remains
out on some Lemon Oils – as they are advertized – because many contain added ingredients. Go for special guitar oil: no silicon, no wax and as minimal chemicals as possible. Your Gibson's rosewood or ebony 'board should still get a light oiling at least once a year."
Spector
http://www.spectorbass.com/FAQ
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What is recommended to clean and maintain the fingerboard on my Spector?
We recommend Dunlop Formula 65 01 & 02 Fingerboard Conditioner and Cleaner for our fingerboards. (
what i use)
This can be used with Rosewood and Pau Ferro fingerboards. Sealed (gloss) maple fingerboards can be cleaned with Dunlop Formula 65 care products. Matte finished Maple Fingerboards can be cleaned with a pure lemon oil such as Formby's Penetrating Lemon Oil, to remove dirt, etc.
Bottom line.. it is recommended to oil your unfinished fretboards from time to time. WHY - someone else can answer that. That's a little beyond the scope of the OP. I didn't come here to nitpick.. i just came to encourage the OP to clean and oil his nasty looking fretboard. And yes.. based on my reading, which I'm providing references for at least, oiling is an act of preservation. Replenishing the natural oils in the wood that may dry out over time. That doesn't mean there aren't guitars and basses out there that haven't oiled in decades that seem just fine, but it doesn't hurt to be cautious and overprotective of your slab of wood.