Nigerian sauntered into big resource wealth in the 1960s when oil was discovered in exploitable quantity. With huge revenues pouring in she looked poised to become an economic giant. Before the advent of oil, the country was not doing badly, with our growing solid mineral extractive sector and huge agriculture. Nigeria is a nation so vast and diverse. A walk through varying climatic conditions from South to the North offers diverse potential for any kind of agricultural endeavour. So are the natural resources so prevalent and diverse. Our endowments, in people, culture, climate and resources placed us on a pedestal to top all economic charts. Despite the hundreds of billions of dollars the country had grossed in oil revenues, our developmental experience has been disastrous. Our present economic statistics paints a graphic picture of the sorry state we found ourselves. While our average oil revenue per capita in the mid 1960s was US$33, our GDP per capita was US$245. In the 2000s, our oil revenue per capita had risen to US$325 but the GDP per capita had remained at the 60s level of US$245. What this mean is that the huge oil revenue since the 60s has not translated to any real economic development and improved standard of living. If you remember that 245dollars cannot do for you now what it could in 1965, standard of living had actually nose-dived.
Economic scholars/analysts studying the trend in many resource rich countries have noticed a negative developmental pattern in most of them, what they have come to call the Resource Curse or the Dutch Disease. So infamously named after the Dutch experience, the Dutch disease is a syndrome where exploitation of abundant natural resource exerts a negative drag on long term economic growth. Call it the curse of oil in our case. While some nations are shinning exceptions and others showing growing resistance/immunity to the disease, we are witnessing a growth of deadly strain I can only call the Nigerian disease. The trend was first observed in the Netherlands in the 50s when abundant natural gas production brought rapid foreign revenue but declining local productive sector. There are exceptions as demonstrated by Norway, Australia, Chile, Canada and Botswana. Even though the phenomenon is prevalent in most resource rich countries the fact that countries like Norway and others successfully mitigated the curse reinforced the belief that the syndrome is only a result of poor institutions of government.
The Dutch Disease manifests many symptoms, chief among which is the inability of local productive economy to compete as a result of bloated value of local currency helped by inflow of foreign currency. The high exchange rate means local goods and services are expensive, making them uncompetitive in international market and even encouraging import of cheaper alternatives. Other symptoms of the resource curse, some of which cannot be directly related to the Dutch experience, include weak institutions, official corruption, assertive resource nationalism, internal unrest and even external aggression from envious neighbours. Many of these factors are common in our system but the main effect of the syndrome- the high exchange rate that makes local products uncompetitive is not the case in Nigeria. Even countries that found themselves caught in this economic web are wriggling free, developing resistance to the resource curse. What then makes the Nigerian case so unique? This article is only x-raying those absurdities that make our case legendary.
Official Corruption: It is in fact a comic conclusion now that the only sector that is growing and booming in the Nigerian system is corruption. The excess liquidity/inflow of foreign earnings has the tendency to create administrative recklessness/complacency but beyond this, ours has resulted in unprecedented corruption that has almost been institutionalized. Only in Nigeria is the concept of national cake invented to exalt this malaise. Everybody wants a piece of the cake. Politicians seek office to amass wealth for themselves, their kins and cronies. They deploy every resources of the state to recycle themselves and their descendants in power. The oil resources that should have been used to boost other sectors of the economy only become a rentieristic tool to pay off supporters or suppress detractors.
Subsidization is a major effect of the Dutch disease but the corruption strain in our case is clearly noticed in the much-talked-about subsidy scam. What we have is a clear case of cross subsidization to powerful business moguls that bankrolls elections or who are ghost business fronts for the politicians. It is only in Nigeria that subsidy payments can balloon from #300billion to #2.1billion in one year! We have seen billions of dollars thrown into the turn-around maintenance of refining and power sectors without appreciable improvement.
Poor Institutions: Closely related to official corruption is poor institution. It is hard for efficient and working institution to thrive where corruption is prevalent. Norway and few other countries successfully mitigated the Resource Curse by building strong institutions that eliminates corruption and make sure the oil revenues are ploughed back into the economy to create strong productive base. It’s interesting that in the wake of Norway oil wealth, they resisted the pressure to join European Union (EU) and the Oil Producing and Exporting Countries (OPEC). They broke with every known norm and decided to sell their oil at prevailing international price. They accepted no economic pills sold to them but instead developed systems and institutions that suit them. Norway traditional economy of ship building was struggling at the time of oil discovery but the earnings from oil was heavily invested to transform the sector to hitech companies in oil and gas that are global leaders today. Beyond this they invested in education and educational institutions that became the engine of research that is driving their industries. We have become like the proverbial farmer that consumes all his yields and forgets there should be seeds for the next season. Why are we not investing in our agricultural and solid mineral sector that was the engine of our economy before oil? There are hundreds of oil/gas vessels, rigs, barges and other offshore facilities deployed in our petroleum industry, either owned or leased by Nigerian companies, but we don’t own even one functional repair/refit yard for these facilities, not even to talk of replacing them with home-built versions. In a complex deal wrapped in corruption, the politicians in charge of our oil resources cannot even force the international oil majors to refine locally the oil they produce.
More amazing is the refusal of a national gas company, in which Nigeria has the controlling equity, to sell gas to local independent power projects. Our large population provides cheap labour that the Chinese and Indian industrialists are exploiting but our leaders forgets that this is an asset for a strong manufacturing sector. We cannot even handle basic infrastructure of power and transportation. Yes, our political institutions are seriously floored but when we talk of institutions, the press, civil societies, NGOs and the society at large are involved. We all owe ourselves a duty to hold government accountable by bringing to light their ills, bring them to book and, if need be, by getting to the streets in protest. The Arab Spring of North Africa and Middle East is a point of lesson, that we should not remain so pliable in the face of official ineptitude.
National Oil Company/PIB: In many oil rich countries the National Oil Companies are the engine of national development especially as it concerns local approach to oil exploration/exploitation challenges, refining and the subsidiary petrochemical sector. The Norwegian Statoil is not only a pioneer in technological innovations in the oil industry; it is globally competitive, helping to shore up Norway’s revenue despite declining local production. The Malaysian Petronas and Brazilian Petrobras are two examples where resource rich countries are using the National Oil Companies to develop immunity against the Resource Curse. The Peronas operates in more than 35 countries with cutting edge technology that leaves a global foot-print marching many International Oil companies. Petronas is worth more than $75billions in revenues. Brazil’s Petrobras is worth more than $146 billion in revenues and it is at the forefront of developing home-grown technology to tackle Brazil’s deep offshore exploitation challenges. Our own Nigerian National Petroleum Corporation (NNPC) has remained a badly managed struggling albatross. The NNPC cannot even pose a commanding presence in emerging oil rich neighbours that had hugely benefited from Nigeria in aids and military interventions. Geologic evidence abounds that oil exists in many of our inland basins but the NNPC lacks the wherewithal to weather the challenges of striking oil in these basins, instead they are inviting other NOCs, particularly the Chinese that have done it for nieghbours with lesser prospects, to show them the way.
In a bid to make the NNPC viable, among other things, the government had put together a Petroleum Industry Bill (PIB) that is expected to give a new Petroleum Industry Act (PIA) when passed. The PIB in its present draft has raised a lot of contentious issues bothering mainly on transparency, resource allocation and care for environment. The PIB does not tackle the issue of transparency if it makes the oil minister and her principals’ overloads in the running of the petroleum industry. One cannot overestimate the importance of transparency in a country so polarized by religious/ethnic strife and economic inequality, not in a clime where government has perpetually shown abuse of discretionary powers. The issue of Petroleum Host Community Trust Fund, dubbed PHC Fund, is generating an unnecessary heat. The argument by Northern politicians that the Niger Delta already had a fair deal in the present resource allocation only betray their entrepreneurial laziness. I believe every state government should strive to harness what is in their backyard instead of looking at the oil revenues as a national cake that must be shared equally. The almost 40million people of Niger Delta, 99% of whom live in abject poverty, sure need an intervention fund. Superior argument however is that PHC Fund duplicates the role of NDDC, and that billions of dollars this region had garnered in allocation over the years has not translated to real improvement of life for the common people of the region because of gross mismanagement by their political elites. I think we should only try to build in the bill aspects that will check mismanagement of this fund.
Internal Unrest: Internal conflict is a common thread that runs through most of the resource rich countries. Part of the Nigerian paradox is that ours is assuming a different coloration. While some countries have secessionist conflicts, the Arab revolution took it on the corrupt political class. We seem to be taking it on ourselves in our own aggression. Our resource agitation was more a smoke screen for criminal activities of illegal bunkering and kidnapping. Religious terrorists are holding sway in the North. The government is helpless in the face of these conflicts. With amnesty potentially on table, more regions are likely to explode. Being a regional warrior now is apparently the only way to gate-crash into the corridor of power, if militant leaders are grapping unofficial portfolios that grant them billions of naira to protect our oil installation. What is clear is that all of the crises are a result of the ever widening gap between the rich and the poor, and unemployment with a cabal of less than 1% of the populace festering on what should be our common wealth.
Conclusion: Ours is a land so richly endowed. A land blessed with abundant natural resources, with a large population of excited smart people and shielded by nature from natural disasters. We should not be struggling. If we actually work our land, we shouldn’t be exporters of oil and gas. Our reserves simply shouldn’t be enough to power our productive sector. It is so ironic that we lack electric power even to lit our rooms at night when we export, on daily bases, millions of barrels of hydrocarbons to power cities around the world and to fire their industries. If we export at all, we should be selling finished/refined petroleum products and we will not be missing out on the huge explosion of subsidiary and petrochemical industries. We should not be staring at our problems, let us dare them.
Abah John Abah, sailor, geologist and public interest commentator on energy and environment resides in Lagos, Nigeria.
Support PREMIUM TIMES' journalism of integrity and credibility
Good journalism costs a lot of money. Yet only good journalism can ensure the possibility of a good society, an accountable democracy, and a transparent government.
For continued free access to the best investigative journalism in the country we ask you to consider making a modest support to this noble endeavour.
By contributing to PREMIUM TIMES, you are helping to sustain a journalism of relevance and ensuring it remains free and available to all.
TEXT AD: To advertise here . Call Willie +2347088095401...