One of the greatest paradoxes of Africa is that its people are for the most part poor while its land is extraordinarily rich
Nicholas Krislof, International Herald Tribune, May 27th 1997.
The linkage between oil and development is a contradictory one. In some countries, the oil resource has been the cause of development; in others, however, oil has been the curse of development. Oil-exporting Norway, for example, has used the benefits of its North Sea petroleum proceeds to attain the high place it presently occupies on the UNDP List of best social development performance. By contrast, other oil exporters like Nigeria and Angola poignantly lead from the rare (Karl, 2007: 2). Added to this, while oil has given a welcomed boost to development in most developed countries like Russia, United States of America, Canada, France, and Australia, the experience in most developing countries and the Third World fluctuate with the exception of countries like Libya, United Arab Emirate, Oman, Qatar, Bahrain, Kuwait and Saudi Arabia, where oil wealth is more efficiently utilized to diversify the economy and to better the lot of the citizens. Most exponents of oil-led development often draw attention to some of the prospective benefits ranging ―from enhanced economic growth and the creation of jobs, increased government revenues to finance poverty alleviation, the transfer of
29 C. Ukeje, ―Oiling Regional Insecurity: The Implications of the Niger Delta Crisis for security and Stability in the Gulf of Guinea and West Africa,‖ Available at
http://www.garnet.sciencespobordeaux.fr/Garnet%20papers%20PDF/UKEJE%20Charles.pdf.
30 See, http://www.hrw.org/reports/1999/nigeria/nigeria0199.pdf.
33 technology, the improvement of infrastructure and the encouragement of related industries‖ (Karl, 2007: 2).
There is little doubt that the oil industry can be a potent source of huge revenues, if not mixed with corrupt practices engineered by unscrupulous and visionless leadership.
Also, income derived from oil-related rents—such as ―royalties, taxes, oil export earnings, interest on joint venture investments‖ (Omeje, 2007), often create the financial backdrop for the execution of impressive development programmes. This aside, oil fuels technological development in the sense that, as a source of energy, it encourages the technological production of goods and services which creates job opportunities in a country. Contrariwise, ―the consequences of oil-led development can be negative, including slower than expected growth, barriers to economic diversification, poor social welfare performance and levels of poverty, inequality and unemployment‖ (Karl, 2007:
2).
Karl (2007: 2) has also noted that countries over-reliant on oil as the mainstay of development are often characterised by an ―exceptionally poor governance and high corruption, a culture of rent-seeking, often devastating economic, health and environmental consequences at the local level, and high incidences of conflict and war.‖
Moreover, such monocultural economies also suffer from devastating economic, health and environmental degradation at the local level, and high incidences of conflict and war. The oil-development discourse has been largely informed by the resource curse thesis which has emerged strongly since the 1980s. The thesis demonstrates how natural resource abundance can be a curse to a country‘s development (Auty, 2007:
207). In particular, it contends that wealth derived from oil usually brings out high levels of ―corruption, profligacy, social crisis, poor governance, human right abuses and ultimately violent conflict‖ (Gary and Karl, 2003: 9). Thus, ―enormous natural resource endowments blighten [rather than brighten] the prospects for development, paradoxically motivating people to struggle over scarce resources, breeding corruption, marginalization, and armed insurgency‖ (Gary and Karl, 2003: 9).
It is important to note that the idea of the resource curse is not novel. Auty (2007: 207) explains how imperial Spain ―provides a long-recognized example of a country that failed to prosper from the gold and silver shipped from its New World colonies. In contrast, Spain‘s beleaguered Dutch colonies were developing the economic dynamic that was to win them their freedom and make them the commercial model for Western Europe.‖ In his work The Shackled Continent, Robert Guest (2004: 63) argues that,
―governments that depend on natural resources for most of their income are usually venal and despotic.‖ Indeed, most oil-rich Gulf States and African oligarchies such as
34 Nigeria, Gabon, and Equatorial Guinea have a wretched record. The case of Angola is illuminating.
Angola is the world‘s ninth-largest oil producer but most Angolans are poorer than they were when oil was first discovered off the country‘s Atlantic coast (Guest, 2004: 63).
Sadly, ―the [oil] industry [in Angola] accounts for over 90 per cent of Angola‘s export earnings but employs only 10,000 people‖ (Guest, 2004: 63). Angola‘s offshore wells disgorged 800,000 barrels a day in 2000. Half of the country‘s gross domestic product (GDP), as well as nearly all the taxes of the Angolan government, comes from oil. This notwithstanding, many ordinary Angolans do not even know that their country has oil. In Angola, ―oil fuelled a civil war that left [the majority in the country] scorched and starving, while allowing a tiny elite to grow fantastically rich‖ (Guest, 2004: 63). Since the ruling government controlled the oil wells, it had more petrodollars to pay its troops and buy guns which in turn helped them to prolong the fighting and pillaging of resources. As Guest (2004: 67) notes, ―The war gave the Angolan government an excuse (‗national security‘) for secrecy, which made it easy to pocket huge kickbacks on arms deals, or simply to funnel oil receipts into offshore accounts.‖ By one estimate, in the late 1990s between a third and a half of public spending in Angola was not properly accounted for (Angola Country Report, 1998: 16).
By parity with Angola, Nigeria represents the ne plus ultra (perfect example) of the resource curse: ―the country is estimated to have absorbed oil rent in excess of $300 billion during 1974-2004, averaging around an extra 23 per cent of non-oil GDP during 1974-81‖ (Auty, 2007: 208). Consequently,
these revenues transformed a dynamic and diversified economy, which grew by 7 per cent per annum during 1967-74 into a mono-product basket case with a per capita income by 2004 less than one-quarter of what it would have been if it had sustained its pre-oil boom growth rate (Auty, 2007: 208).
In the light of the above, oil in Nigeria can be described as a ‗curse‘ rather than a blessing. Indeed, as one editorial in the Guardian puts it: ―… it has been to our external shame that, unlike most other oil-producing countries, we have neither taken firm control of the industry nor have we reaped bountifully from the proceeds. That is why Nigeria is an unflattering example of the oil curse‖ (quoted in Obi, 2010: 443). In this regard, Obi (2010: 443) poses the germane question: ―Is it not an irony that Nigeria exports crude oil, but imports refined petroleum products despite having four refineries?‖ Importantly, due to the mono-cultural nature of the Nigerian economy, other viable sectors of the Nigerian economy that formerly fuelled development has been
35 sidelined, ―a classic symptom of the ‗Dutch disease‘‖31 (see, Auty, 1993; Collier and Hoeffler, 2004; De Soysa and Neumeyer, 2007: 202).32 For instance, the discovery of oil in Nigeria during the 1970s resulted, regrettably, in the gross neglect of the agricultural sector which was formerly the food basket of the economy. Available statistics indicates that ―from less that 1 per cent in 1960, the contribution of oil to gross domestic product (GDP) rose to 14.6, 21.9 and 26-29 per cent in 1970, 1975 and 1979, respectively. By 1992, it had reached a height of 46.8 per cent‖ (Omotola, 2006: 8).
The contribution of oil to Nigeria‘s export earning has been much higher: ―From 58.1 per cent in 1970, it rose to 95.6 per cent in 1979. Throughout the 1980s and 1990s, it remained very high, accounting for N210 billion or 96.1 per cent of total export earnings in 1996‖ (Omotola, 2006: 8). In 2011, the country suffers from severe shortage of agricultural goods to sustain its huge population; as a result, it depends on massive food importation.
It is quite illuminating to note that that initial research into the resource curse focused empirical attention on the mineral economies, which appeared to have performed especially poorly during the years after 1973. The macroeconomic response of six oil- exporting countries have been analysed by Gelb et al. (1988: 262-288). These countries include: Algeria, Ecuador, Indonesia, Nigeria, Trinidad and Tobago and Venezuela. The conclusion of their analysis shows that ―most governments found it politically difficult to resist pressure to spend the oil wind-falls, so that the over-rapid domestic absorption of the oil revenues triggered patterns of consumption that sustained Dutch disease effects and proved difficult to cut back when oil prices fell‖
(Auty, 2007: 208). By contrast, Indonesia shows that ―a growth collapse can be avoided if sufficient oil revenue is used to diversify the economy competitively‖ (Timmer, 2004, quoted in Auty, 2007: 208)
Part of the problem in Nigeria is the fact that the value system in the country has been devalued, so much so that public treasuries are unabashedly stolen by the same officials mandated to manage them (Agbiboa, 2010, 2011). As Maria Costa pointedly notes, ―between 1960 when Nigeria became independent and 1999 when Democracy was restored, a staggering sum of $400 billion was stolen and stashed away by a generation of corrupt rulers. That is within a space of 39 years…‖ (quoted in Ajanaku, 2008: 36). Notably, Nigeria‘s return to democratic rule in 1999 has done little to
31 ‗Dutch disease‘ refers to ―a process whereby new discoveries or favourable price changes in one sector of the economy—for example petroleum—cause distress in other areas—for example agriculture or manufacturing‖ (Karl, 1997: 5).
32 This situation, according to proponents of the rentier state thesis was due mostly to ―the ready
availability of rent revenue, and the fact that oil rents reduce the political and economic significance of the taxpayer, as it allows the state to be less dependent on taxation‖ (Idemudia and Ite, 2006: 396).
36 ameliorate the situation of pervasive corruption, looting, and rent-seeking activities in the country. In a show of shame, Nigeria has often led from the top in most Transparency International (TI) corruption rankings (see Table 4 below).
Against this backdrop, Babafemi Ojodu‘s (African Concord, 1992: 8) caricature of Nigeria is well taken. He sarcastically articulates that ―corruption has become the major export [of Nigeria] apart from oil.‖ It is useful to note, however, that there is a steadily improvement in Nigeria‘s rankings in recent years. This may point to the fact that ―the on-going initiatives to rein in corruption excesses in Nigeria seem to be making its inroads felt in the country‘s political economy‖ (Agbiboa, 2010: 483, emphasis added).33 Whatever the merits, the state of affairs in Nigeria remains so mangled that the simple task of maintaining existing infrastructures remains a resounding debacle. What is more, some contract figures are extra-legally inflated and those to whom they are awarded conceive them as an avenue to ‗cut‘ their share of the ‗national cake‘. This explains the many ―white-elephant‖ projects that litter the country—an unflattering sign of growth without development (Agbiboa, 2010, 2011a). In the light of the above, it behoves us to ask: What is the trouble with Nigeria? According to Nigeria‘s eminent writer and novelist, Chinua Achebe (1983: 22),
[t]here is nothing basically wrong with the Nigerian character. There is nothing wrong with the Nigerian land or climate or water or air or anything else. The Nigerian problem is the unwillingness or inability of its leaders to rise to the responsibility… of true leadership.
Table 4
Transparency International Corruption Rankings, 1998-2010
Years Ranks
1988 5
1999 2
2000 1
2001 2
2002 2
2003 2
2004 3
2005 6
2006 17
2007 33
2008 134
2009 134
2010 134
33 For a well-documented presentation of the impact of the on-going anti-corruption initiatives in Nigeria, see author‘s earlier publication in 2010: ―The Corruption-Underdevelopment Nexus in Africa: Which Way Nigeria?‖ Journal of Social, Political and Economic Studies, 35(4): 474-509.
37 Source: Adapted from, Agbiboa, 2010, p.483.
Achebe‘s quote is incarnated in the Niger Delta region. The plethora of natural resources in the delta should make it a region with huge potentials in terms of industrial development. Poignantly, however, these huge potentials have remained only on paper. The above paradox has led many Niger Delta inhabitants to view the oil resource as a curse rather than a blessing. Further, Nigeria has been described as a prime example of the rentier state (Kuru, 2002: 52). A rentier state is generally regarded as ―a state reliant not on the surplus production of the domestic economy or population but on externally generated revenues or rents, usually derived from an extractive industry such as oil‖ (Kuru, 2002: 52; Karl, 2007). Frequently, a rentier state is ―without a productive outlook in the sense that revenues from natural resource rents contributes a significant proportion of the GDP and dominate national income distribution, usually at the expense of the real productive sectors of the economy‖ (Kuru, 2002: 52). In other to appreciate the context in which Nigeria is being classified as a rentier state, it is useful to put the Nigerian state in perspective.