Exercise 1

Name: Ej Carl Garcia Section: 4916

Read the article below. Answer the guide questions after.
A Resource Curse
(Source: Balaam, 2013)

In a small town in Eastern Nigeria, it could cost 4,000 naira (about US$25) to fill a gas tank.
Overnight, however, the cost could more than double to 10,000 naira—even though the
government of Nigeria claims it subsidizes the price of oil to keep consumer costs low.
Nightmarish social, political, and economic issues are possessed by a resource curse—a
paradoxical condition many of the locals refer to as being blessed while at the same time being
cursed by the “devil’ sexcrement.” According to the IMF, the Nigerian economy is heavily
dependent on the oil sector, which accounts for over 95 percent of export earnings and about
80percent of government revenues. The country grosses more than $50 billion a year from oil
exports, and yet has a poverty rate of 70 percent. Nigeria exports to foreign entities through the
work of various major oil corporations such as Exxon Mobil, Chevron Texaco, and Shell. It
possesses roughly 3 percent of the world’s proven oil reserves. It began producing oil in the
1970s when many developing nations were targets of international investors. When
international market prices collapsed int he 1980s, Nigeria’s debt mounted and investments
slowed. Since then the country’s wealth has ebbed and flowed with the oil market. Consistent
throughout it all has been a growing division in wealth and power between the haves and the
have-nots. Most of the drilling takes place in Niger Delta, which creates many transportation,
environmental, and socio-political problems. Much of the coastline of the region has been
damaged by the seepage of oil into the water, which impacts fish, fowl, and plant life. Shell
launched a massive campaign to clean up the mess, but it is clearly a situation of too little, too
late. The former capital Lagos is also one of most overpopulated and poverty-stricken cities in
the world. Income inequality, hunger, disease, poor education, and lack of housing are
intractable problems. Because of the wealth generated by oil, Lagos experienced a real estate
boom “during the good times,” as did other major cities of oil exporting nations. Paradoxically,
Lagos is also one of the most expensive cities in Africa. Critics charge that the government has
displaced locals to construct housing projects for the well-off. It is well-known that there is
rampant corruption, money laundering, and racketeering within the government. Economic
liberals tend to blame the state for deterring even more foreign investment. Many structuralists
blame the state for delayed or nonexistent
68 The Contemporary World efforts to improve Nigeria’s water supply, roads, and
telecommunications systems. The rule of law is weak. For example, some of the videos cited
show footage of an incident when some seventy people were killed after they illegally tapped

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 into a gas line. Both the state and Shell Oil claim that these sorts of problems are the reason
why so many Nigerians are poor. On the other hand, a number of revolutionary groups around
the country are openly attacking oil installations and abducting oil executives for ransom. The
government has fought back in ways that included trying and hanging the indigenous peoples’
activist Ken Saro-Wiwa in 1997. In 2009, Shell finally settled a $15 million lawsuit filed by his son
alleging that Shell collaborated with the former military government to make an example of
Saro-Wiwa.

Guide Questions

1. Why does Nigeria have a resource curse? This paradox is primarily caused by the extreme
reliance on a single resource—in this case, oil. A nation is susceptible to changes in the price of
crude oil on a worldwide scale when it depends primarily on that commodity for both its export
revenue and government revenue. Instability in the local fuel market and the economy may
result from this. The oil industry's hegemony has resulted in the disregard for other economic
sectors, including manufacturing and agriculture. Because there are smaller possibilities for
employment and sustainable development, the nation is less resilient to economic shocks.

2. How did private corporations take over the oil resource of Nigeria? The Nigerian government
holds regular rounds of oil licensing, offering licenses for oil production and exploration to
private enterprises via a competitive bidding process. This has additionally opened up the
Nigerian oil industry to private companies. Through a combination of past events, joint
ventures, and governmental policies, private corporations' use of Nigeria's oil resources has
changed over time. A reflection of the intricate dynamics of resource exploitation and economic
development in the nation is the presence in the oil sector of both local and multinational
private companies.

3. Knowing that Nigeria has the oil resource, did it experience energy independence and
security? Inadequate infrastructure for the production, transmission, and distribution of
electricity poses problems for Nigeria's power industry. Consequently, there is a greater need
for petroleum products due to the frequent power outages and increased dependency on diesel
generators for electricity. Despite having abundant oil resources, Nigeria still struggles to ensure
energy security and has not reached energy independence. Fuel subsidies, infrastructure
constraints, domestic energy consumption, power sector problems, security worries, and the
need for diversification are the main causes of these difficulties. Comprehensive reforms,
infrastructure spending, better governance, and an emphasis on energy mix diversification are
all necessary to meet these challenges.

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