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‘ENERGY SECURITY AND THE RESOURCE CURSE IN NIGERIA: A CASE STUDY OF OIL IN THE NIGER DELTA (19902010)’
SUMMARY Nigeria is a West African country that is referred to as “the giant of Africa”. The reason is because it is Africa‟s most populous country with more than 150 million people, and the world‟s eighth largest oil producer. Oil was discovered in commercial quantity in the 1950s and generated so much wealth for the country in the 1970s. Since then, Nigeria has been dependent on oil revenue which accounts for over 90 percent of its export earnings. Despite these huge earnings, the country and its producing region (Niger Delta) suffers from poverty, unemployment, insecurity, corruption, environmental degradation, and conflict over oil resource as a result of bad leadership, poor economic management. The oil resource rather than being a blessing has become a curse to the nation because; the excessive reliance on oil revenue has resulted in economic stagnation and political instability. The purpose of this paper is to examine the extent to which oil has been a curse to Nigeria‟s economy and political sector. The paper defines the nature of Nigeria‟s oil curse; it also identifies the causes and effects of the oil curse. Furthermore, the paper analyzes the reasons why the country has not recovered from the oil curse.
TABLE OF CONTENT
TITLE PAGE........................................................................................................................................ 1 ABSTRACT .......................................................................................................................................... 2 ABBREVIATION ................................................................................................................................ 4 PREFACE ............................................................................................................................................. 5 CHAPTER 1 INTRODUCTION........................................................................................................ 7 CHAPTER 2 THEORETICAL FRAMEWORK/LITERATURE REVIEW ................................ 9 CHAPTER 3 DEFINITION AND DRIVERS OF THE OIL CURSE IN NIGERIA ................... 17 3.1 DEFINITION OF THE OIL CURSE (THE NIGERIAN PERSPECTIVE).................................... 17 3.2 DRIVERS OF THE OIL CURSE IN NIGERIA ..................................................................................... 19 CHAPTER 4 CONSEQUENCES OF THE OIL CURSE IN NIGERIA ......................................... 25 4.1 CONFLICT .................................................................................................................................................... 25 4.2 WEAK INSTITUTIONS ............................................................................................................................ 29 4.3 INTERNATIONAL PRESSURE .............................................................................................................. 31
CHAPTER 5 CRITICAL ANALYSIS ON THE PROPOSED SOLUTION FOR THE OIL CURSE IN NIGERIA ......................................................................................................................... 33 5.1 TRANSPARENCY AND ACCOUNTABILITY ..................................................................................... 33 5.2 NATURAL RESOURCE FUND ............................................................................................................... 34 5.3 DIRECT DISTRIBUTION......................................................................................................................... 34 5.4 ECONOMIC DIVERSIFICATION ........................................................................................................... 35
CONCLUSION 36 BIBLIOGRAPHY 38
EITI EU GGESS HDI LDCs N NDDC NEITI NRF OMPADEC OPEC PWYP SAP TI UNDP
Extractive Industries Transparency Initiative European Union Gulf of Guinea Energy Security Strategy Human Development Index Less Developed Countries Naira (Nigeria‟s Currency) Niger Delta Development Commission Nigerian Extractive Industries Transparency Initiative Natural Resource Fund Oil Mineral Producing Area Development Commission Organization of the Petroleum Exporting Countries Publish What You Pay Structural Adjustment Program Transparency International United Nations Development Program
natural resources (natural assets or raw materials which can be used for economic production or consumption). and conflict (which can be classified as inter -state and intra-state). unemployment. Jonathan Di John. However this dissertation takes a different approach by looking at the extent to which Nigeria suffers from the oil curse. I held several meetings with my supervisor Prof Stefan Elbe. There are several works that reflect on issues around the Niger Delta. who guided me in constructing a suitable title for this dissertation (Energy Security and the Resource curse in Nigeria: A case study of oil in the Niger Delta 1990-2010). corruption. have all argued that the issues of the Niger Delta is centered around conflict over oil resources (between the people. their works inspired me to research on the theory of the resource curse. She explained why resource scarcity can cause conflict between states. After attending some classes for the course New Security Challenges. militancy. the Nigerian government and multinationals). All their works are credible and helpful.5 PREFACE In October 2010. Philippe Le Billon. environmental degradation. I started my Masters program worrying about what topic I was going to write on for my dissertation. Terry Lynn Karl. I can say that the lecture inspired me in choosing my topic. Robin M Mills. Ndubuisi Nwokolo. Akeem Akinwale. Bonnie Ayodele. and poverty. I found a topic which caught my attention „Resource Conflict and Energy Security‟. To a large extent. and how resource abundance can cause conflict within a state. lack of infrastructure. The resource curse theorists argue that the discovery of natural resource in developing countries have been associated with devastating effects that leads to political conflict and economic stagnation. . Adekoya Adebanji. Aderoju Oyefusi. The lecture was delivered by Lisa Smirl who explained the key concepts around energy security (the uninterrupted physical availability at a price which is affordable. while respecting environmental concerns). Ike Okonta and Oronto Douglas. Cyril Obi and Siri Rustad. After reading the works of Paul Collier. Prominent writers such as. The aim of this dissertation is to find out if these facts are true in the Nigeria‟s case. Michael Ross.
Thank you. I argue that the discovery of oil has contributed to the economic and political setbacks in Nigeria and its producing region. Also I want to appreciate Ayodeji Oyarinu for his advice and support during the course of this research. as well its effects on the oil producing region. I examine the reasons why some of the solutions to help escape the oil curse have not really worked in Nigeria. To support this I provide the definition of the oil curse in Nigeria. you have made my dreams possible. . I extend my appreciation to my tutors in the school of Global studies for preparing me for the big task of research.6 From my perspective. At this point I would like to acknowledge some people who made this dissertation possible. To bring the dissertation to a close. And finally I want to extend my sincere gratitude to my family for the support and words of encouragement. In addition we look at the economic and political causes of the oil curse. My appreciation also goes to my course mates for the good suggestions and constructive criticisms. First I want to say a big thank you to my supervisor Prof Stefan Elbe for guiding me through the stages of this research. To my friends who checked up on me during the course of this research. explaining the reasons why Nigeria is still economically stagnant. thank you.
Australia. what does the country have to show for it? Instead of economic growth and development as part of its achievement. as well as reviewing some literatures around the theory. Where did Nigeria get it wrong? That is one question this dissertation seeks to answer. In other words. I have broken down the dissertation in four other sections (Chapter 2-5). chapter 5 makes some remarks on some proposed solutions for . To achieve the objective of this study. and political stability. Chapter 4 examines the consequences of the oil curse in Nigeria. my argument is that Nigeria suffers from the oil curse because of the inability to convert its enormous wealth from oil to achieve substantial growth and development. Given Nigeria‟s position as Africa‟s leading oil producer and exporter. Finally. But these relative wealth and economic development from natural resources are visible in developed countries like the Norway. As far as this research is concerned that is the whole idea of the „resource curse theory‟. other studies have associated oil and other mineral resources with high levels of economic growth. Chapter 2 has two tasks which includes. The main issue for developing countries is the fact that they have been unable to use their wealth from natural resources to sustain economic growth and political stability (Collier 2007). Chapter 3 discusses the definition and drivers of the oil curse in Nigeria. It also makes a distinction between the economic drivers and the political drivers of Nigeria‟s oil curse. In essence.7 CHAPTER 1 INTRODUCTION Studies on the resource curse have shown that „the discovery of oil or other natural resources often brings about dreams of wealth and prosperity for developing countries. wealth generation. the main objective of this study is to examine the extent to which the discovery of oil in Nigeria has contributed to the setbacks in its economic and political ambitions. United States. explaining the theoretical framework (resource curse). In contrast. It also takes into consideration Nigeria‟s oil producing region (Niger Delta) and the negative effects of oil on the region. and Canada (Di John 2010). the extent to which oil has become a curse to the nation‟s economy and politics. Sources have shown us that most of its population lives below $1 a day (BBC 2007). these discoveries have instead been associated with devastating political conflict and last economic setbacks‟ (Cited in Humphreys et al 2007). it is ranked amongst the poorest countries in the world. Reflecting on the idea of the resource curse theory. In all too many cases though.
The advantage of choosing this particular study is that it has helped in broadening the knowledge of the resource curse theory in contrast to what other writers have written. academic journals. conference papers. In a nutshell. In writing this work. In terms of scope. newspapers. However. the study would examine the extent to which the discovery of oil has been a curse to Nigeria‟s economy and politics. Interestingly. but not thoroughly. were used. lecture notes. the selection of a particular state study which is Nigeria and Niger Delta gives me an edge to avoid generalizing the idea specified by my theoretical framework (Resource curse).8 the oil curse in Nigeria and why these solutions have been ineffective. online articles/web pages. this research is limited to the study of issues around Nigeria and the Niger Delta from 1990-2010. Before now. Furthermore limited time and the word count for this dissertation won‟t allow us explore issues outside this timeframe. . This dissertation has relied on qualitative research method. but the evidences provided where either shallow or inadequate. I read books citing Nigeria as one cursed with oil. limited time for this research has been one disadvantage of selecting a particular case study. I conclude this study by sustaining my argument that oil has done more harm than good to Nigeria‟s economy and politics. secondary sources which include. The reason for the selection of this timeframe is because there are more evidences of Nigeria‟s oil curse during this period. However historical contribution before 1990 and after 2010 would be considered. books. textbooks. official reports.
he argues that many countries of the world are genuinely developing (of the 5 billion. In other words. He continues by saying that the singular problem with the countries in the bottom billion is one that‟s has to do with growth. I believe we should consider the resource curse thesis to enable us understand what exactly it has to say. The question still remains. Countries with large endowments of natural resources. each bringing different perspectives and arguments to the table. despite the prospects of wealth and opportunities that accompany the discovery and extraction of oil and other natural resources. the countries have failed to grow and therefore remained stagnant and poor. and Central Asian nations. The reason for this selection is because it helps in analyzing the extent to which natural resources could be a disadvantage to a country‟s economic and political progress. Weinthal and Luong 2006. they are small compared to the . In more simple words. In Collier‟s book The Bottom Billion. I have chosen the resource curse theory to serve as my theoretical framework. Paradoxically. Altogether he identifies fifty eight countries and highlights some typical features which includes. such endowments all too often impede rather than further balanced and sustainable development (Humphrey et al 2007:1) see also (Ross 1999. The idea behind the resource curse is this.9 CHAPTER 2 THEORETICAL FRAMEWORK REVISTING THE LITERATURE ON THE RESOURCE CURSE For the purpose of this dissertation. such as oil and gas. countries with abundant mineral resources are prone to have series of negative economic and political outcomes. Collier identifies countries of the bottom billion to be countries from sub-Saharan Africa. 80 percent) often at a fast pace. Soros 2011). is this always the case with all countries that have abundant natural resources? For example Norway has abundance of natural resources. „the real challenge of development is that there are countries at the bottom that are falling apart‟. often perform worse in terms of economic development and good governance than do countries with fewer resources. A wide range of scholars have written extensively in the area of the resource curse. is it cursed? No! (Humphreys and Sandbu 2007). Before we consider their arguments.
the instability of international commodity markets. which argues that resource boom produces a form of short sightedness among policy makers. In an article by Ross (1999) titled The Political Economy of the Resource Curse shows us the political and economical dimensions of the theory of the resources curse. I proceed with the theories around the resource curse. are deemed to be more of a curse than a blessing. growth collapse. ineffective governance and greater political violence. Having cleared the problems around the definition. Humphreys et al (2007)‟s definition seems to generalize the idea of the resource curse by using words like (countries with large endowments…) which signifies that all countries with abundance of natural resources tend to be cursed. Zukerman 2008) Going back to the idea of the resource curse. the poor economic linkages between resource and non resource sectors. and statecentered explanation suggests that resource booms tend to weaken state institutions. He suggests that there are four explanations for the economic dimension of the curse which includes. for most poor countries. The big idea behind the resource curse is that mineral and fuel abundance in less developed countries (LDCs) tends to generate negative developmental outcomes. so it doesn‟t lead the researcher into confusion. and the aliment of the Dutch Disease. but it was important to get a clear understanding. He also . Natural resources. Whereas Di John (2010) and (Collier 2007). decline in terms of trade for primary commodities. high level of corruption. The definitions are insightful. should we agree with Collier‟s argument of the bottom billion. (Collier 2007:1-11. cognitive explanations. On the other hand the political dimension includes three categories. are more specific with their words (LDCs/Poor Countries) tend to be cursed with abundance of natural resources. The reason for this analysis is to clearly bring to our knowledge two different definitions on the idea of the resource curse. which argues that countries that 1) have failed to grow. the societal explanation contends that resource export tends to empower some interest group that favor growth-impeding policies. and their per capita income is low. 2) endowed with natural resources would perform worse in terms of economic development and good governance? Or should we stick to an elaborate definition by (Di John 2010) on the resource curse which says.10 population of either India or China. including poor economic performance.
2) state owned enterprises. Mills (2008) notes that the oil curse affecting countries like Iran and Nigeria has progressed to the extent of severely hampering the oil industry itself. He supports his argument by using the United States as an example. fared considerably better than others because of the choices made by their government during the boom years (1997:191) Di John criticizes Lynn Karl‟s study. . geological knowledge. In the two countries. transportation. which supervises resource extraction in developing states. refining and utilization in natural resources have contributed to industrialization and economic growth in the United States. These institutional changes subsequently define the revenue basis of the state. In his article The Resource Curse: Theory and Evidence. and the role and character of the state vis-à-vis the market. According to him large scale investments in exploration. (Di John 2009. Iran and Indonesia. Following Ross argument on resource boom weakening state institutions. oil revenue facilitated the creation of a substantial. economically Indonesia. Commodity-led growth induces changes in the prevailing notions of property rights. well-educated professional class (Mills 2008:193). Algeria. She argues that. the relative power of interest groups and organizations. and also provides a comparative analysis of the political economy of petro-states which includes Nigeria. especially its tax structure. Lynn Karl in her work The Paradox of Plenty suggest that large revenue from natural resources can have negative effects on state. in turn. In her analysis. 2010) Similar to Di John‟s work. Both according to Ross can lead to a resource curse. He further argues that oil has both positive and negative effects on a nation‟s economy. and political economy of Venezuela. An example of the positive effects can be seen in oil-cursed Iran and Iraq. structural. 1) states inability to enforce property rights. he argues that rentier state theorists such as Lynn Karl have ignored the possibilities that mineral abundance can be central to the development of manufacturing industries. How these state collect and distribute taxes. creates incentives that pervasively influence the organization of political and economic life and shapes government preferences with respect to public policies (Lynn Karl 1997:7) Lynn Karl in her study takes into account the historical.11 adds two other explanations for the curse.
They argue that greed and grievances are more common with rebels who feel that have been marginalized in the trade of natural resources (cited in Humphreys 2005) . ill-conceived structural adjustment policies and failure to regulate the oil industry properly.12 A study by Bannon and Collier (2003) notes that more than a billion people reside in lowincome countries that have failed to put in place institutions and policies that would elevate them to join the group of more developed middle-income nations. I have chosen these three because they are relevant to the dissertation‟s case study which is Nigeria. such as feelings of ethnic or political marginalization‟. systemic corruption. Zukerman 2008. the natural resources trap. Let‟s start with the conflict trap. Collier contends that it is possible for countries to escape these traps but some of the countries that break clear are faced with stagnation as a result of external factors (2007:6) For the purpose of this study. Following the argument by Banon and Collier. and the trap of bad governance in a small country. the conflict trap. Nigeria‟s economic problems were exacerbated by gross neglect of the agricultural sector. Ibeanu and Luckham (2007) have this to say about Nigeria. Collier (2007) argues that countries under this category may be caught in four traps namely. the trap of being landlocked with bad neighbors. economic stagnation and dependence upon primary commodity exports are prone to civil war. they have been mired in economic decline and found to be dependent on natural resources. According to Collier. the natural resource trap and the trap of bad governance. Collier and Hoeffler 2005). cut-throat competition for power and resources. These were not simply policy errors. Poor nations face a high risk of falling into civil war than wealthy ones (Collier 2007:32-34. They were also outcome of money politics. However. all intensified by massive injections of oil money into a political and administrative system that lacked the capacity to absorb them. He argues further that all countries that have all the features mentioned above are not necessarily in the conflict trap. Bannon and Collier 2003. As a result of their poor and stagnant nature. but they are prone to falling into it. (cited in Kaldor et al 2007:56) With this headline message. countries that experience low income. I would pick up the conflict trap. Collier and Hoeffler also suggest that „conflict may be explained either by greed or by grievances.
Akinwale (2008). and cannabis) do not initiate conflict. Nwozor (2010). 1) economic growth has collapsed 2) the resource generates point socio-economic linkages 3) production occurs adjacent to porous national borders 4) the commodity has a high value/weight ratio (e.13 Auty (2005) takes a similar approach and concludes that the risk of conflict is at its highest when. and concludes that water is unlikely to cause major conflict. (for oil conflicts. poverty/poor infrastructure. and is it a problem? He defines Dutch disease as a „term used by economists to describe a reduction in a country‟s export performance as a result of an appreciation of the . already mentioned above by Ross (1999) and volatility in commodity price. opium. also natural resources (e. diamonds and drugs) (cited in Le Billion 2005:30-46) Ross (2004) suggest that not all natural resources are linked to conflict. Nwokolo (2009). and militancy. he contends that there is no evidence/case study that shows that agricultural commodities initiates or sustains conflict. Adebanji (2010). but its availability sustained the military capacities of the conflicting groups. For example Selby (2005) has done a study contrasting Oil and water as a likelihood to conflict. oil and diamonds did not cause the Angolan conflict. Barder (2006) in an article called A Policymakers‟ Guide to Dutch Disease: What is Dutch Disease. oil dependence appears to be linked to initiating a conflict. but a common phenomenon to the natural resource trap is the ailment of the “Dutch disease. but seems to lengthen pre-existing wars. Corresponding to Collier‟s argument on the conflict trap. Ayodele (2010). see also Kaldor et al 2007) The natural resource trap according to Collier (2007) contributes to the conflict trap. but does not sustain the conflict duration. gemstones. Also Oyefusi (2007). weak institutional arrangement. unemployment. Tuschi and Ejibunu (2007). Asuni (2008. Le Billion (2001) studies the political economy and geography of oil and diamonds in correlation with the conflict in Angola. Nordic Africa Institute (2009). a lot of scholars have tried to link natural resources with conflict. and he shares his findings by arguing that. environmental degradation. Omofonmwa and Odia (2009) have done a comprehensive study of oil in Nigeria‟s Niger Delta region in relation to conflict. 2009). He takes his case study from the Middle East. Some have researched particular natural resources using case studies. From his findings. but „local water conflicts are likely to become an ever-more feature of life in the global south‟ (Selby 2005:223-224). They argue that the region have been cursed with conflict as a result of rent seeking. intercommunity rivalry for resource control. Obi and Rustad (2011).g.g.
For example. and production rapidly collapsed‟ (2007:39). Shaxson (2005)‟s work New Approaches to Volatility: Dealing with the Resource Curse in Sub-Saharan Africa argues that volatility depresses economic growth. There are further arguments on the bad governance trap. Bannon and Collier 2003). It becomes profitable to keep their citizens illinformed and uneducated (Collier 2007:66). A different study by Sala-i-Martin and Subramanian (2003) suggest that the problem with Nigeria‟s economic performance is not the aliment of the Dutch disease. violence among individuals is as a result of the struggle for educational attainment. the country‟s other exports such as peanuts and cocoa became unprofitable. In other words countries that . Lynn Karl 1997:5-6). According to him. Humphrey et al (2007). Moving to the bad governance trap. increasing debt further) Humphreys et al (2007:6) notes that countries like Chad and Nigeria fall into the risk of volatility. when prices fall arrears build up on unpayable debts. The high level of corruption impedes development opportunities. Revenue volatility hampers planning. Collier (2007) cites Nigeria as an example of a country suffering from the Dutch disease. but from waste and corruption. Oyefusi (2007) notes that one of the reasons for conflict in the Niger Delta is because of corruption and weak institutional arrangements. Ross (2001). boosts deficits (it is easy to raise spending when prices are high. especially for governments whose legitimacy rests on allocating oil rents) and tends to raise debt (when oil prices are high countries are more creditworthy and tend to borrow more. The governments of these countries have failed to put in place institutions that will foster economic growth (Collier 2007. the idea is simply that bad policies and governance can ruin the development of a country. according to him. Collier argues that corruption has made leaders of these poor countries wealthy and they hinder development in their countries to maintain the status quo. Collier and Hoeffler (2005) Collier (2007) suggest that natural resources (especially oil) tend to make states less democratic. In his words. Ross 1999. in the 1970s „oil revenues built up.14 exchange rate after a natural resource such as oil has been discovered‟ (see also Humphreys et al 2007:5. The second part of the natural resource trap which is volatility. but hard to cut back when price fall.
Citizens everywhere must be assured that oil and gas firms. economic diversification. 2) oil has made democratization harder in nations like Malaysia. Soros (2011). which is. and conflict. but it is a viable way to escape the resource curse. Salai-i-martin and Subramanian (2003) prescribe the creation of a Natural Resource Fund (NRF). Le billon (2006/2007). direct distribution to the general population. leaders to a large extent subdue their oppositions. some have identified the solutions for it. While some researchers have identified the casual mechanisms for the resource curse. the existing literatures on the resource curse are centered around four casual mechanisms. Nigeria. namely. Indonesia. corruption. However they added something new to the list. After looking at some of the literatures that specify the problems and solutions of the resource curse. They both cite Norway as an example of a country that has an effective NRF. macroeconomic policies. For example. Collier (2007a 2007b) suggest that transparency initiative will be key in solving the problem of a resource curse. In oil democratic states. broken down by country and by project. They argue that domestic private ownership is often ignored. Soros (2011) notes that. publish all of their relevant financial information. it is important to visit the literature that has a critic to theory of the resource curse. domestic private ownership. According to them the NRF should be created to ensure accountability and prevent the misuse of resources. and most nations in the middle east. In an article by Weinthal and Jones Luong (2006) titled: Combating the Resource Curse: An Alternative Solution to Managing Mineral Wealth. and 3) non fuel mineral wealth also impedes democracy. . Ross (2001) concludes that. From my perspective. and including all payments made to host-country public budgets Humphreys and Sandbu (2007). NPF. In addition. non democratic oil states are less likely to become democratic. while in non democratic states. 1) natural resources (especially oil) hurts democracy. rent seeking. leaders often practice the politics of patronage. they did a critical survey on proposed solution for the resource curse which includes. Mexico. as well as mining companies. the Dutch disease/volatility. transparency and accountability.15 are rich in natural resources and have existing democracies tend not to follow the democratic norms.
this dissertation seeks to separate them in a specific way. . one that best suits my case study. However there are some gaps that this dissertation seeks to fill up. Using that variable to compare countries. In summary. by identifying what I call the drivers and consequences. the problems. I have chosen my case study to be Nigeria/Niger Delta. it reports that resource wealth in the ground correlates with slightly higher economic growth and slightly fewer armed conflict. so I propose to stick to a definition that is more specific. For example some of the definitions of the resource curse are too broad. the definitions. solutions and critics. In other words one could call it the causes (drivers) and effects (consequences) of the resource curse. existing literatures mentioned above have revealed pertinent issues around the theory of the resource curse including. existing literatures have identified different natural resources and case studies. and the natural resource relevant to this study is oil. they studied 53 countries over 27 years and „suggested that oil abundance has short run growth enhancing impacts and positive level effects on real income. such as changes in technology and the price of oil. Thirdly. The resource curse vanishes when looking not at the relative importance of resource exports in the economy but rather at a different measure: the relative abundance of natural resources in the ground. Therefore oil abundance by itself does not seem to be a curse‟ (see also Di John 2010) Tierney (2008) also suggest that. the casual mechanisms of the resource curse theory have been put together. Secondly. With their data analysis. Although critics have voiced out a different view of the resource curse theory. it is important to note that the theory explains my argument.16 Critics of the resource curse (Calvalcanti et al 2011) argue that the methodologies used by proponents of the theory failed to take into account cross-country differences and dependencies arising from global shocks.
1 DEFINITION OF THE OIL CURSE (THE NIGERIAN PERSPECTIVE) For the purpose of this dissertation. the current President of Nigeria. The lack of development in Nigeria can be traced to a structural condition of underdevelopment. 3. In 2008. In a sense one could switch drivers with the causes of the resource curse. we also look into the drivers. Ross (1999). (1987:8) . One of the best answers comes from someone who you least expect. is this the situation in Nigeria? Is Oil really a curse to the country? Is Nigeria less developed? These questions would be answered shortly. Di John (2010) which says that. By underdevelopment. it means the persistence of stagnation. when he was Vice President at the time. Wenar (2008). One may ask. „natural resources (Oil) abundance in less developed/developing countries tends to generate negative development outcomes. According to him. Oil resource has become an obstacle to prosperity in less developed countries.17 CHAPTER 3 DEFINITION AND DRIVERS OF THE OIL CURSE IN NIGERIA The aim of this chapter is to examine the definition of the resource curse that is appropriate to our study. In other words. I have decided to re-echo the definition provided by Collier (2007). including growth collapse/poor economic performance. Jonathan Goodluck. duality or lack of integration between agriculture and industry and between urban and rural spatial structures. Jonathan Goodluck argued that „the discovery of oil and the dependence of oil has caused Nigeria‟s economy and development to remain stagnant over the last several decades‟… he goes on to say that „the overdependence on oil has put an unpleasant bracket in our national economic freedom‟ (UPI Energy 2008) Olayiwole (1987) answers the question on the issue of Nigeria‟s development. and frequent political instability. Apart from looking at the definition. corruption and ineffective governance‟. inequality as the level of economic activity grows.
Humphreys et al (2007) and Adegbulu (2006) have brought to my attention the economic development of the Asian Tigers. looting of oil resources. poverty. cocoa. In fact the 2010 report notes that Nigeria is ranked 142 (HDR 2010). cotton and palm oil. and left Nigeria behind wallowing in economic stagnation. which is less than $1 a day (BBC 2007). health and income have ranked Nigeria amongst countries with the lowest human development. Furthermore. timber.2 million (BBC 2011) making it the most populous country in Africa. Nwokolo 2009. built a skilled/disciplined workforce. Nigeria can be described as a rich country with poor people. until the discovery of oil in Oloibiri village in the Niger Delta region in 1958 (Rafiu 2011. The Asian Tiger (Hong Kong. Ayodele 2010). conflict. Since the 1970s (which marks the genesis of the oil boom for the country) Nigeria has made trillions of dollars from oil export (Obi and Rustad 2011. Singapore. according to the United Nations Development Program (UNDP) that releases reports on the Human Development Index (HDI) which tracks national achievement in education.18 Looking at these two answers. What makes it more fascinating is when you compare countries that started the race of development with Nigeria in the 1960s. maintained political stability. more than 50% Nigeria‟s population lives below the poverty line. insecurity. Oyefusi 2007). Rafiu 2011). Falola and Heaton 2008). and the Niger Delta accounts for most of the country‟s oil wealth. Furthermore. but the assumption is false. It is more alarming to realize that the Niger Delta region which has an estimated population of 29 million and accounts for over 90 percent of the nation‟s oil revenue live in abject poverty (Akinwale 2008. South Korea and Taiwan) are noted as nations that achieved high growth rates and rapid industrialization between the 1960s and the 1990s. It is important to note that Nigeria is the 8th largest oil producer in the world. you find out that they have achieved and maintained high growth rate. has a population of about 158. environmental degradation. it is important to examine why both commentators have come out with such a strong conclusion about Nigeria and the resource curse. what makes the Asian Tigers unique is that they have pursued an export-driven model of economic development. Nigeria gained independence from British colonial rule on October 1st 1960. invested in high standards of education. Nigeria was initially known to be an agricultural nation and producer of export commodities such as groundnut. With these earnings from oil revenue one will think that the country is doing well economically and politically. For example. and had a zero-tolerance for corruption (Adegbulu 2006:281) . The so called „rich country‟ suffers from corruption. inadequate infrastructures and bad governance (Oyefusi 2007.
(for example oil. ExxonMobil. What is a rentier state? A rentier state is one that receives on a „regular basis substantial amount of external economic rent‟ (Yates 1996. Let analyze if the argument above fits the situation in Nigeria. Onoja 2011). one begins to ask questions. These multinational oil companies have a contract with the Nigerian government to extract oil and share profits (Obi and Rustad 2011). Agip. Chevron. It is worthy of note that not more than 2-3% of the population is involved in the generation of oil revenue. we need to define what rent is. while a majority of Nigerians are . 3. Rentier states are synonymous with four characteristics. namely.2 DRIVERS OF THE OIL CURSE IN NIGERIA 3. Rent can come from natural resources. and Total. the origin of the rent must be external to the economy (meaning all rents must be paid by foreign actors). With these she concludes that a state like Nigeria that have abundance of oil is a rentier /distributive state (1997:48-49).19 At this juncture. Lynn Karl argues that in developing countries. I have decided to adopt Ross (1999) method by dividing the drivers into two dimensions. diamonds. which are the economic and political drivers of the resource curse. The word rent is an economic term that describes the „excess revenues over all costs including normal profit margin‟ (Collier 2007. what is the problem with Nigeria? Why is oil a curse to the Nation? This leads us to the drivers of the resource curse. and timber) and aid (Smirl 2010). Texaco. the country receives its rent from multinational companies: Shell.1 THE ECONOMIC DRIVERS Becoming a Rentier State/Rentier Economy: for us to get a clear understanding of the rentier state and economy. Nigeria is a rentier state because between 1970 and 2006 oil exports accounted for 95% of the country‟s total export and 80% percent of government revenue. the rental situation prevails (in a sense it‟s a matter of decision). In addition. Also oil rents accounts for 40% of the country‟s gross domestic product (GDP) (Idemudia 2010).2. and the government must be the principal recipient of the external rent (Yates 1996). Smirl 2010). only a few are engaged in the generation of rent (while the majority are involved in distribution and consumption). resource rents are received regularly by states from export earnings and are deposited into national treasuries without being checked by domestic private actors.
used to describe the economic situation in the Netherlands. “Nigeria is a rentier state dependent not on the production of goods and services but on the proceeds of unprocessed crude oil delivered bountifully from a long neglected and cruelly cheated Niger Delta” (Daily Independent 2011). Corden (1984). It is called the “Dutch Disease” because it was the title of an article in the Economist published in 1977. Di John (2009). researchers and observers. With these the government ignores the fact that they need to extract income from the domestic economy through taxation. After the discovery of natural gas in the North Sea. Collier (1988. 2007). Maass (2009).20 involved in consumption and distribution (Idemudia 2010). Jazayeri (1986). Barder (2006). This is what Humphreys et al (2007) calls “living off your capital” and investing in irrelevant projects that doesn‟t yield economic growth. Dutch Disease Over the years (1970s till date) the concept of the “Dutch disease” has been a trending topic for economist. and Humphreys et al (2007) have all made references to the aliment of the “Dutch Disease”. Obviously. What and why is it called the “Dutch disease”? “It is an economic term used to describe a reduction in a country‟s export performance as a result of an appreciation of the exchange rate after a natural resource such as oil has been discovered” (Barder 2006). The 1969 Petroleum Law makes the Nigerian government the sole recipient of oil rent (Watts 2004. Lynn Karl (2007). analyst. Humphreys et al 2007). In other words. Therefore the state becomes a spending state instead of a production state (Onoja 2011). and with this their manufacturing sector started underperforming and suddenly other exports became uncompetitive (Barder 2006. . oil exports cause the country‟s currency to rise in value against other currencies thereby making other export activities of the country uncompetitive (Collier 2007:39). Idemudia 2010) The decision of Nigeria to maintain a rentier economy can be drawn from what observers have called „rentier mentality‟ (Yates 1996). Nigeria‟s dependence on oil rent has led to economic loss and stagnation. The idea is that the existence of large revenue from oil rent makes elites in government assume that the revenue will increase in the coming future. Some of have concluded that. the Dutch started receiving large foreign exchange earnings from the exports of gas.
but when the price falls it leads to accumulations of unpayable debts (Shaxson 2005). He supports his argument by saying that Nigeria has not only experienced the “Dutch disease. cotton. acknowledged as the producer of such export commodities as cocoa. the discovery of oil in the 1950s and its export in the 1970s made the country‟s export earnings very high. (1997:5). According to Lynn Karl. or expensive (Maass 2009) resulting to decline in the agricultural sector (Collier 2007). it becomes difficult for government to cut down their spending. To a large extent farming and agricultural sector dropped from 71% in the 1960s to 54% in the 1980s (Lynn Karl 1997:208) hurting the activities of farmers and major producers of cash crops (see also Edohasim 2010). But when the price of oil falls. . Collier (1988) has made it more specific by calling it the “Nigerian disease”. countries tend to borrow more. Gradually the country shifted from an agricultural exporter to a major importer of food. the ailment of the “Dutch disease” doesn‟t come by accident. This is what Collier (2007). when the price of oil is high. Rafiu (2011) notes. Furthermore. The reason is this. Indeed Nigeria was once a world famous agricultural nation. groundnut. As a result of the huge amount of funds coming in from oil rent due to the rise in oil price. Funny as that may sound but that‟s what happens when a country is over dependent on oil revenue. timber. Revenue Volatility The idea behind revenue volatility is this. Weinthal and Jones Luong (2006) call the “boom and bust” circle. The “Nigerian disease” if I must say. and palm oil. it comes as a result of deliberate decision making and wrong policies. thereby leaving other exports such as cocoa and peanuts unprofitable. Today the nation is a world famous importer of everything from toothpick to toilet paper. This is due to the government‟s rentier mentality. government see it as an opportunity to increase their spending.21 The Niger Delta region and Nigeria as a whole is an example of a country with the ailment of the “Dutch disease”. is a result of maintaining a rentier economy.” it has also experienced increase in the price of food and non-tradable goods together with a decline in the production of food and non-tradable goods to the population.
gov.22 Nigeria gained extensively from the oil boom (high oil price) in the early 1980s. Nigeria is ranked amongst the most corrupt countries in the world. a weak reporting system.2 THE POLITICAL DRIVERS Corruption The term corruption can be defined as the „misuse of public office for private gain for the benefit of the holder of the office or some third party‟ (see http://www. the country instituted a Structural Adjustment Program (SAP). To be precise it is ranked number 134 out of 178 countries in the corruption index (Transparency International 2010). there was a decline in oil price. and later (Collier 2007. the centralization of authority and power. Falola and Heaton 2008). According to corruption index by Transparency International (TI). they wanted to recover their loan from the government. pervasive culture of gift giving (Odinamadu 2005) . Although plans were made to write off $18bn of its debt that year. poor remuneration. 3. The government saw it as an opportunity to spend extensively to the extent that they embarked on heavy borrowing. Nigeria had incurred so much debt that the government under the leadership of Major General Ibrahim Badamasi Babaginda decided to embark on economic reform to reschedule the countries debt. by 2005 it was discovered that Nigeria owed $35bn.moj. extortion. Bad leadership. To this effect. ineffective anticorruption laws. by this time banks were not willing to continue lending. embezzlement. favoritism.2. looting. the country‟s economy is still struggling (see BBC 2005). bribery. Aside greed. some observers have highlighted other factors which includes. In 1986. Corruption can take the following forms including. Thinking that the SAP was going to help the country grow economically.pdf). All this can happen as a result of personal greed and ambition by the public office holders. Nigeria is a victim of corruption. which allowed the bulk of repayment of existing debts to be pushed back to 1991.jm/pdf/brochure. money laundering.
Cases of corruption include. They become rich in office. to the police. . it has lost $380bn to corruption (Human Rights Watch 2007). General Abubakar and his government stole $2. The revenue from oil has led to the unstable nature of Nigeria‟s democracy. ballot fraud. Elites in government have used their offices as an avenue to enrich themselves at the expense of others.2bn between the years 1988 and 1994. and currently charged for money laundry and fraud of $290m is James Ibori. citizens are bribed with public funds to get their votes in forth coming elections. A problem that is associated with all works of life. Also. National Identity Card fraud by Internal Affairs Minister (Chief Sunday Afolabi) estimated around $214m in 2003. General Ibrahim Babaginda and his government who looted $12. the Nigerian constitution allows the president to serve for two terms. while the population suffers from poverty and lack of basic amenities. and all sectors of the country (2008:204). Why change the provision of the constitution just for selfish reasons? That‟s one question a few people asked. (Okonta and Douglas 2003) and since its independence till around 2007. it is recorded that Nigeria has been ruled by both military and civilian government. vote-miscounting and political violence.7bn between 1998 and 1999 (Okonta and Douglas 2003). a former governor of Delta state (BBC 2010). Ross (2001) concludes that oil has a negative effect on democracy. The government of President Obasanjo was seeking for a third term (BBC 2006). from the government. Inspector General of Police Tafa Balogun charged for money laundry of over 13bn naira (Nigerian Muse 2006). It shows the high level of personal greed and ambition. For example.23 Falola and Heaton argue that Nigerians deal with corruption on a daily basis. For example Collier (2010) notes that the 2007 elections in Nigeria was attributed to votebuying. The politics of patronage becomes the order of the day. It is important to note that corruption has affected the mode of governance. General Sani Abacha and his government looted $10bn from oil revenue from the Niger Delta between 1993 and 1998. as political leaders would do anything to retain public offices because of the benefits from oil revenue. For instance.
He argues that it is wrong for the government to support the initiative of providing personal computers at affordable rates to a society that lacks electricity. In addition to the list of wrong investments includes. Some people have referred to it as white elephant project meaning failed projects (Oyedele 2008). In this chapter. Oyedele 2008). From my view the government has not only wasted oil funds on irrelevant and unrealistic projects. Again Dike (2006) brings to light another error of the Federal Government. the nation‟s capital (BBC 2003) at the expense of the undeveloped Niger Delta region. . I consider the effects of the oil curse in the country. what exactly has the government done to improve or aid development for the country? My response would be investing in wrong. irrelevant projects. This is an utter waste of government fund (Maass 2009. education. and employment are abandoned for irrelevant projects. Primary needs such as water.000 seater stadium in Abuja. it has also misplaced its priorities on what to invest on to foster economic growth. In other words. electricity.24 Wastage of oil revenue After corruption comes wastage of oil revenue. For example a project like the Ajaokuta steel complex worth billions of dollars is yet to produce a slab of steel. health care. the building of the 60. apart from looting funds from oil. I have brought to the fore the economic and political drivers of the resource curse in Nigeria. One big question that comes up is. good roads. The next chapter takes into account the consequences of the resource curse.
So what will be useful in this definition is the aspect of control of oil resources. or diamond‟. In a sense. it means the people are angered because they see their resource wealth leaving their region and benefiting others (Humphreys et al 2007). While others feel that it is not the production alone that matters. Our main focus is oil as we already know. Robinson (2008) notes that „a resource conflict is a war fought to gain or maintain control of scarce national resources. giving the chance for embezzlement. suspicion. the people feel that resource wealth is unjustly/unevenly distributed (Humphreys 2005) Also there is a claim that national authorities have misused oil revenue. Feelings of unfairness and injustice. It leads us to the idea of the resource conflict. So how is conflict relevant in this case? It is relevant because natural resources tend to foster conflict (Ross 2004.25 CHAPTER 4 THE CONSEQUENCES OF THE OIL CURSE IN NIGERIA Having analyzed the drivers of the oil curse in the previous chapter.1 CONFLICT According to Upreti. public complaints and protests involving arguments. rather it is flowing in abundance. this chapter addresses the effects of the oil curse on Nigeria as a whole. Some writers have argued that „the production of natural resources is liable to give rise to various types of political frustrations within a country and especially in producing regions‟ (Humphreys et al 2007:13). and violence. This can occur as a result of pollution and oil . such as oil. physical assault. The drive for the control of oil resources can happen as a result of grievances by oil producing regions who feel that they are economically marginalized (Le Billion 2007). To expand. looting and corruption (Collier and Hoeffler 2005). as well as the oil producing region (The Niger Delta). water. anger. and it is important to note that the resources being discussed here is not scarce. emotion. and mistrust can lead to conflict‟… (Upreti 2004). Bannon and Collier 2003). Again there are claims of environmental depletion and degradation. Let‟s proceed with some of the effects of oil in Nigeria. „conflict refers to disagreement. 4. it is the dependence upon these resources that can lead to both political and economic frustration (Collier 2007).
Cross River. pineapple. The region covers about 75. the region is rich in both renewable and non renewable natural resources such as gas. the region is known for the production of cocoa. Apart from oil. Imo. Delta. The act of stealing/looting oil is known as “bunkering”. let‟s examine Nigeria‟s oil producing region (the Niger Delta) 4. rebels will do anything to fight for oil resources.1 THE NIGER DELTA AND CONFLICT Before we look at the issue of conflict within the region. In terms of the duration of conflict. it is important to get familiar with the geographical location and activities of the Niger Delta. David and Gagne 2007). fishery. Most of the people in the oil producing region rely on these things for survival. Ondo. they decide to fight for them (David and Gagne 2007) In addition. These states are. and forestry. These rebels decide to loot the nation‟s oil resources (see Collier 2007. cashew. This is a term invented by the people leaving in the Niger Delta region (Asuni 2009). croplands. In all of these. it is easier to sustain conflict even without the support from super powers. rice. Akwa Ibom. Bayelsa.000 square kilometers. According to them. Abia. bitumen and wildlife (Tuschl and Ejibunu 2007). The population is estimated to be about 30 million people (Nordic African Institute 2009). Ross (2004) argues that oil dependence can be linked to the initiation of conflict but cannot sustain conflict. Rebels can now equip and sustain themselves with alternative sources of revenue which includes the illegal trade in oil. and yam in large quantity (Omofonmwan and . and when they are taken away from them.26 spillage by oil companies. and Edo. the uneducated/ unemployed see it as an opportunity to enrich themselves. The Niger Delta covers nine out of the thirty six states in Nigeria. They form rebel groups bearing this in mind that since the elites in power have enjoyed their own share of the oil revenue.1. since there are huge funds coming in from oil. it is their turn to do so. making it the largest wetland in Africa (Obi and Rustad 2011). depriving the people of freshwater. With a lot of issues been raised as regards oil and conflict. Rivers. In terms of Agriculture. timber forest products and non timber forest products. In contrast to this Bannon and Collier (2003) argue that oil dependence fuels and sustains conflict.
Agbu 2008). (Oyefusi 2007) The region is blessed with the enormous amount of natural resources (especially oil) and still. Now the big question is what are the people in the Niger Delta fighting for? . One can relate this to the beginning of the “Dutch disease” already highlighted in chapter 3. the Nigeria‟s capital city Abuja) leaving the region in abject poverty (Champion Dec 17. the region has witnessed a series of armed conflict all because of the drive to control the oil wealth of the region. pipe-borne water. Also the region has a lot of fishermen because of the availability of marine habitats. This is what observers have called “the paradox of doom in the midst of boom” (Agbu 2008).200 oil wells and produces over 2 million barrels per day that passes through 275 flow stations (Ayodele 2010). Furthermore. In fact some argue that it is 90% (Obi and Rustad 2011) while (Okonta and Douglas 2003) argue that is 95% of the nation‟s foreign exchange earnings. neglected. Whatever the case might be. Jan 13 2010). the region has over 5.27 Odia 2009). Agip. Mobil. it is at the bottom of the civilization ladder. Foreign companies involved in oil exploration and extraction in the region include. marginalized and cheated. From the 1960s till date. All the Agricultural activities in the region came to a halt after the discovery of oil in commercial quantity in 1958. the region still has majority of its people living in abject poverty. and Texaco. They blame the cause of their misfortune on greed and corrupt practices by government and oil companies (Oviasuyi and Uwadiae 2010. The years between 1990 and 2010. Having this at the back of their minds. good roads. Shell. They lack access to primary needs like. proper health care. telecommunication. When it comes to the production of oil. Chevron. they have decided to embark on conflict to express their grievances. the headline message is that the country gains so much from oil produced in the Niger Delta region. there are strong believes that their oil wealth have been used to develop other parts of the country (e. see also The Guardian. With these it is said that oil accounts for most of Nigeria‟s foreign exchange earnings. In clear words. and security (Omofonmwan and Odia 2009. The people living in the region feel abandoned. electricity. Elf. oil has become the most important commodity in Nigeria‟s export (Falola and Heaton 2008). employment.g. 2003).
The people are also exposed to health risks as a result of contaminated water (Maass 2009. The farmlands are unusable. one of the hostages. For example Mills notes. Some observers argue that the drive for resource control is just a selfish ambition. illegal oil bunkering. The disagreement to this principle has led to the formation of militants/rebels who seek to control the region‟s oil wealth (Ahonsi 2011). Reported illnesses include.000. because of the conflict within the region. a British man. was shot dead and two others were injured… (Mill 2008:127-128) With all the violence happening within the region. The people and leaders of the region are not satisfied with 13% derivation principle set by the country‟s constitution (Luqman 2011). thirty armed men with Ak47s drew up in speed boats by the offices of Agip Company in the oil city of Port Harcourt. the country‟s oil production reduced from 2 million barrel per day to 800. nine people were killed.28 Total control and ownership of resources have been the demands of the oil bearing communities of the Niger Delta. Violence has been dominant in the pursuit of their agitation for resource control. The people of the Niger Delta have complained of environmental damages caused by oil exploration and production. On January 24. The right of control still remains in the hands of the Federal Government.5 million tons of oil has spilled into the Niger Delta over the past 50 years. eight of them police. sabotage on oil facilities. They also argue that oil should be for the benefit of the nation even though it is produced in the region (Sun. abdominal pain. Environmental degradation also serves as a reason for conflict. In November. fever. armed robbery and piracy (Asuni 2008). During a rescue attempt. cough. Jan 9 2010. the Okono/Okpoho oil field was attacked by gunmen in boats. Nigerian Tribune Jun 5 2009). Okonta and Douglas 2003). in the Niger Delta. making the region one of the five most polluted locations on earth‟… . A great loss in terms of revenue for the country (Vanguard July 8 2009). they are yet to gain total control of the oil resources. The derivation principle is the rent and royalties paid back to the oil producing states. Marine life and crops have been destroyed by pollution from oil spills. who took seven workers hostage. In 2009. cancer. and the gunmen escaped with tens of thousands of dollars from a bank in the facility. and diarrhea (Okoh 2005). killings. 2006. In the ensuing gunfight. and the water unsuitable for fishing (Ibeanu and Luckham 2007). Ahonsi (2011:30) notes that „1. Militant activities include kidnapping for ransom of oil company workers.
On second thought oil multinationals are not the only ones to blame for the environmental damages.29 Oil spills according to Ayodele (2010) „devastate the environment and generates conflicts between the host communities and oil multinationals‟. if oil companies have the right equipments to explore oil and they still cause environmental damages. making them less likely to resolve social conflicts and provide public goods such as health care and education.2 WEAK INSTITUTIONS Alayli (2005) argues that „oil revenue can weaken government institutions.2009. and finally intercommunity clashes for unsettled boundaries and resource control. unemployed youths. . Odih 1998/1999. unemployed youths and political elites (Daily Sun July 19. oil theft by militants. 2010) To show the complexity of crisis in the region. Let‟s look at the issue from this perspective. These conflicts have led to the death of many people. Ogbijaw/Itsekiri 1995-2004 (Okoh 2005). how much more the people who don‟t have the right equipments. In the space of 9 months in the year 2004. and top politicians have also contributed to the environmental hazards (Asuni 2009). Ijaw/Ilaje 1998-2000. In a nutshell. The Guardian May 22 2009). more than 1000 people were killed and over 5000 people were displaced from their homes because of the conflict in the region (Newswatch May 4 2009. 4. clashes between the people and oil multinational for environmental degradation. rendered many homeless and also contributed to the destruction of oil facilities in the region. Urhobo/Itsekiri 1997-2002. The motive to get rich quickly has a negative effect on the region‟s environment. 2005). they were also 581 recorded cases of oil pipeline vandalism (US Fed News April 18. the crisis in the region revolves around clashes between people and the government for reasons of underdevelopment and resources control. It was recorded that between 2006. the Ogoni crisis 1994/1995. you also have inter-community conflicts which are sparked up by unsettled boundary problems and disputes over oil bearing lands. Some of the reported conflicts include. For example it was discovered that over 1000 illegal refineries were being operated by militants.
ng/?page=project&id=2) you would see its progress on physical infrastructure/community needs which include. and the Ministry of the Niger Delta established in 2008 (Idemudia 2010). For example OMPADEC collapsed as a result of inadequate planning (Oviasuyi and Uwadiae 2010) while the NDDC suffers from corruption. Sun Jan 9. For example going through NDDC website (http://www. the Niger Delta Development Commission (NDDC) established in 2000. limited capacity. They argue that these institutions have suffered from poor planning. 2010). it is difficult to establish an effective bureaucracy that can resolve social conflict and provide public goods‟. Some of the roles of these institutions are. 2009). We must commend the efforts made by the government to promote development in the region. Despite these progress reports. It is sad to see a new ministry established in 2008 already suffering from lack of funds. observers have branded these institutions as a total failure (Daily Champion Oct 20. looting and mismanagement of public funds. At this point no one needs to tell you that the policy implementation is wrong. (water. 2009). Some observers believe that the money spent on security in the region can be invested on providing employments/education which would reduce cases of militancy and criminality (Newswatch May 4. There is a reported case of an alleged N69bn scam involving the institution (see Adisa 2011). The funds allocated to the ministry in 2009 was N50 billion. These institutions includes.gov. the Oil Mineral Producing Area Development Commission (OMPADEC) established in 1993. corruption. and limited community involvement (Idemudia 2010. Furthermore. The Ministry of the Niger Delta suffers from insufficient funding.30 According to him. a state can have weak institutions because of its reliance on oil revenue. employment and road) projects (see also Daily Champion Sept 8. poor government funding. electricity. I called it in the previous chapter „misplacement of priorities‟ on the path of the Federal Government. instead of taxes.nddc. hospital. school. to foster economic development. provide physical infrastructure and community needs. Without taxation. Luqman 2010. enhance and sustain the natural environment (Omofonmwan and Odia 2009). whereas over N400bn was allocated for security in the region (Newswatch May 4. he suggests that the „much of government‟s strength comes from its capacity to extract taxes from the population. In Nigeria. the government has taken bold steps to create institutions for the purpose of tackling the crisis in the Niger Delta region. 2009) . Oviasuyi and Uwadiae 2010. 2010). In their minds security comes before development.
31 Weak institutions will continue to be in existence if poor planning. India. mismanagement of public funds. The Nordic African Institute (2009) argues that „the Niger Delta is important to global energy security‟. its oil production has contributed to development of the global economy. the next question would be. In fact one observer notes that when the militants sneeze the global oil market catches severe cold (Agbu 2008). Some American observers highlighted that the escalating crisis in the Niger Delta threatens America‟s energy security (Lubeck et al 2007). But most especially to foster good economic relations since globalization has opened up the door for economic interdependence. what is energy security? This part explains energy security in two perspectives. The United States. For example Nigeria is the fifth supplier of oil to the United State (Mu Li 2009). Countries that are key partners with Nigeria in the oil business includes. 2008). and in 2006 India imported 11percent of Nigeria‟s petroleum products (The Statesman Oct 30. 4. insufficient funding are not tackled adequately. China. the EU imports 20 percents of Nigeria‟s oil (BBC 2009). That is why the crisis in the Niger Delta is termed a global issue because every pipeline disrupted brings an increase in oil price (African News Sept 28. The first explanation would be from Robinson (2008) who notes that „energy security implies guaranteed access to a reliable supply of oil at a reasonable price‟. He goes on to say that energy security may be threatened by the destruction of oil facilities as a result of conflict or sabotage. The second explanation of energy security comes from Yergin (2006) who argues that „energy exporting countries like Nigeria will focus on maintaining the security of demand for . After Nigeria joined the Organization of the Petroleum Exporting Countries (OPEC) in 1971. Since Nigeria is a rentier state. it is prone to establishing weak institutions and there is a high tendency for conflict escalation. 2007). Britain and the European Union (EU). It shows Nigeria‟s importance in the international arena.3 INTERNATIONAL PRESSURE Resource rich countries are bound to be faced with pressure from the international arena to make good use of their revenue for social investments and economic development (Bannon and Collier 2003).
The interdependent nature of energy security (Security of “supply” and “demand”) has made international stakeholders to continue mounting pressure on Nigeria to tackle the situation of conflict and corruption in the oil producing region. The main objective of GGESS is to „collaborate with stakeholders to ensure the security of supply of oil from the Gulf of the Guinea. 2006). there is a call for a peaceful environment to aid continuous business transactions. Gabon and Angola. Cameroon. In as much as the main objective of GGESS has both security and development intentions. Equatorial Guinea. It is important to note that international pressure has not brought an end to the crisis in the Niger Delta. Britain. Part of the result of international pressure has been the establishment of the Gulf of Guinea Energy Security Strategy (GGESS) in 2005 by Nigeria and the United States (Vanguard Aug 31. whilst promoting sustainable development of the region in a climate of peace‟ (Thisday Aug 31. On the other hand the Nigerian government wants to receive its regular revenue from oil production. Meanwhile there are more pressing needs like education and employment that the region lacks. Bearing in mind that there are multinational companies operating in the region. Other members of the initiative include. For example the United States and Britain are more concerned with crude oil theft and small arms trafficking which they believe fuels violence in the Niger Delta (Thisday Aug 31.32 their export. 2006). This explains the N400bn allocation on security highlighted in the previous section (see weak institutions). . The international stakeholders are more interested in the security aspect. which will after all generate the overwhelming share of government revenue‟. 2006).
Le Billon (2006/2007). The aim of this chapter is to briefly examine some of the solutions suggested by scholars. Nigeria decided to adopt the EITI initiative. Firger 2010). I highlighted the consequences of the oil curse in Nigeria. 2010). They were established in 2002 by the British government and some NGOs (Le Billion 2006/2007). showing the negative effects of oil in the producing region (Niger Delta). In the words of Kaldor et al (2007) „transparency and accountability should apply to private and public actors. Firger (2010) Soros (2011). commentators.1 Transparency and Accountability Bannon and Collier (2003). Two movements have been set up to support the transparency/accountability initiatives. Moreover this dissertation will be incomplete without making some remarks on some of the prescriptions for escaping the oil curse in Nigeria. some observers have argued that the initiative is a failure because corrupt practices are still in place (Firger 2010). gas and mining companies. In as much as the NEITI mirrors some of the objectives of the EITI. becoming the first candidate country with a statutory backing. Kaldor et al (2007). have suggested that transparency and accountability is a key motive in curing the oil curse. 5. Side by side with the prescriptions. The aims of these initiatives are. we also consider why some of these solutions have been ineffective in Nigeria.33 CHAPTER 5 CRITICAL ANALYSIS ON THE PROPOSED SOLUTIONS FOR THE OIL CURSE IN NIGERIA In the previous chapter. 1) Publish what you pay (PWYP) campaign 2) Extractive Industries Transparency Initiative (EITI). . domestic and international‟. policy makers. in resolving the oil curse. They argue that it can be used to curb corrupt practices by host governments and other stakeholders. to urge a mandatory disclosure of all payments to host governments by oil. It launched the Nigerian Extractive Transparent Initiative (NETI) in 2007 (Idemudia 2009. ensure that the revenue from extractive industries contributes to sustainable development and poverty reduction (Weinthal and Luong 2006.
However it will be difficult. The executive secretary was accused of using the organization‟s funds for his personal campaign funds in running for governorship (ThisdayLive Aug 24. Wienthal and Luong 2006). 5. In a sense the people will protect oil facilities having at the back of their minds that it is a source of revenue for them and not the government.3 Direct Distribution Tuschl and Ejibunu (2007). United States. and smooth out fluctuations caused by oil price volatility. Idemudia (2010) argues that the NEITI has done well by publishing the payments made by oil companies to the Nigerian government but has failed to monitor the actual expenditure of oil revenue. 2010). Furthermore Nigeria doesn‟t have the institutions to encourage savings for future generations.34 For example in 2010 there was a recorded case of fraud in the NEITI. if not impossible to work in a country like Nigeria. selfish. By doing this. According to them.2 Natural Resource Funds The idea behind the NRF is to stabilize income and expenditure. and also save some of the oil wealth for future generations (Kaldor et al 2007. Sala-i-Martin and Subramanian (2003) suggest that oil revenue should be distributed directly to the Nigerian population rather than being held by government. In addition. The NRF if created would only increase the spending power of the government who loves engaging in white elephant projects. The corrupt. This suggestion is a good one but I would rather agree with Weinthal and Luong (2006) who contends that there is a limitation to this solution. and visionless political elite would rather sustain the oil wealth for themselves and their families than think of future generations. it will reduce the crisis in the region. and Canada. They argue further that citizens especially those in the Niger Delta should directly get the oil revenue. direct distribution will . 5. The NRF has been successful in developed countries like Norway.
says the former minister of finance. which will further stifle the growth of small and medium enterprises in the Niger Delta region‟ 5. The educational sector has its own drawbacks. Dr Olusegun Aganga (Abayomi 2011). One big question is what happens to those who don‟t have the funds to send their children abroad? One answer would be. and tourism to aid development. Sadly the economic diversification approach won‟t be successful until the country addresses the issue of infrastructure. and tourist has been denied this opportunity because of the ongoing crisis in the Niger Delta. . education. A famous producer/exporter of cocoa and other agricultural products in the 1960s has become a famous importer till date. Recently it was reported that a large number of students in the country failed numeracy (Mathematics) and literacy (English) examinations (Ovuakporie 2011). cope with the education system at home. parents would rather save up to send their children abroad to get quality education. The government has ignored this suggestion (1987:175). With this horrible effect.4 Economic Diversification From the onset observers like Olayiwola (1987) have pleaded with the Nigerian government to diversify its economy by not relying on oil but focus on other sectors like agriculture.35 „reduce the incentives for citizens to engage in entrepreneurship. A beautiful country that is supposed to attract investors.
the Nigerian government should focus more on domestic policies. conflict. weak institutions. wastage. What the region needs is sustainable growth and development. This study outlined the definition of Nigeria‟s oil curse. something to break the paradox of producing wealth and living in poverty. Again we looked at the extent to which proposed solutions have been ineffective in the Nigerian situation. but also suggest that citizens elect honest politicians who are ready to serve and remove Nigeria from the mess previous politicians have put the country through. led to the creation of weak institutions. Researchers. To a large extent I support the idea of transparency. Can Nigeria escape the oil curse? An honest answer would be I‟m not sure. education. Referring to the country as one that is less developed. and suffered from corruption/wastage of oil revenue. The solutions prescribed above by observers and scholars to the Nigerian government have fallen short because Nigeria doesn‟t have the enabling environment to adopt the solutions. So I do not only recommend the creation of credible transparent institutions. I recommend the following ideas to the Nigerian government. These drivers have brought conflicts in the Niger Delta.36 CONCLUSION What this dissertation has established thus far is the fact that oil has been a curse to Nigeria‟s economy and politics. It would reduce cases of conflict in the Niger Delta. What the country has is an enabling environment that condones corruption. If good infrastructures are made available. it goes a long way in eradicating corruption. health care. It should focus more on developmental policies rather than security policies. Supporting the first point. crime. This is because it serves as a reflection of our foreign policy. The government should review its domestic policies. While we spent time identifying problems and some ineffective solutions. if it would make efforts to escape the oil curse in the nearest future. one that makes provisions for Agriculture. I also examined how Nigeria became a rentier state. and uneducated youths. employment and all. and welcomed unnecessary international pressures on the country. For example Nigeria should not be fighting for a non permanent member seat in the United Nations Security Council (African News Jun 24 2009) when we have several crises in the Niger Delta and religious crisis in . acquired the Dutch disease. observers should constantly assess the progress been made by the Nigerian government. poverty.
but it has also contributed to ruining the country‟s political and economic ambitions. . The words are very clear in this statement. as we grasp them by the blade or the handle‟ (Ghanian Chronicle feb 28 2008).37 Plateau state. Finally. To a large extent oil has done more harm than good in Nigeria. Oil is a good natural resource which has brought wealth in many ways to the country. „crude oil has become like knives that either serve us or cut us. I believe the government should attend to situations in the country rather than focusing on outside ones.
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