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Mineral resource management for national cohesion and progress – Part 2


Kayode Fayemi

The squandering of our riches has been well documented. The opportunity cost of our mismanagement of our most important natural resource has been catastrophically steep. In 2006, According to the World Bank, in the 40 years that followed the discovery of oil in Oloibiri, Nigerian officials stole more than $300 billion of the country’s wealth. This amounts to a sum equivalent to 300 years of British aid for the entire continent of Africa. It also amounts to six times the American assistance given to rebuild post-war Europe under the Marshall Plan.

The most telling manifestation of this criminal mismanagement of our natural wealth can be found in the Niger Delta where decades of oil exploitation have resulted in a legacy of ecological degradation, transgenerational poverty and violence. The Niger Delta is a microcosm of our profound contradictions – the pervasiveness of poverty in the midst of plenty and the failure to use our oil wealth responsibly to maximize our human resources.

Bayelsa, where oil was first struck in commercial quantity in 1956 was connected to the national electricity grid only in 2006. For 50 years, while energy for power generation was being flared on its land, the state struggled to provide its own form of electricity at its own cost.1

The militant groups in the region are largely made up of youths alienated by an inequitable social order and habitually exploited by politicians. They subsequently turned to violence as a means of extracting concessions from both the Nigerian state and the multinational oil companies, the two entities they blame for their disinheritance in the midst of plenty. By mid-2007, attacks by criminal gangs and militant groups had caused several major oil companies to shut down operations thereby cutting output by 30 per cent of national production capacity. Over the past two decades, the Niger Delta has become as synonymous with banditry as it used to be with crude oil.

Nigeria’s tragic odyssey as an oil and gas-rich nation is a cautionary tale in the annals of resource governance. Far from being a means of cementing national cohesion, oil riches became a source of discord and a toxic bone of contention in our politics so much so that it has been said that oil has been a curse rather than a blessing. There is a consensus among scholars that Nigeria ought to be a regional power since it is a major oil exporter and therefore has the revenues to build structures for projecting influence. But the its oil wealth has instead inspired enduring internal strife. Oil wealth has not been invested in building national capacity but has been diverted and squandered by parochial rivalries. Rather than enabling national cohesion, the struggles for access to and control of oil revenues by rival elite factions have, in fact, aggravated Nigeria’s cultural, ethnic and religious differences.2

The renowned political scientist, Samuel Huntington once contended that Nigeria’s size, location and resources make her a potential Africa’s most powerful state, but disunity, political instability, corruption and economic underperformance have greatly undermined her ability to play this role. The thread that connects these debilitating plagues is our failure to effectively manage our natural resources. Nigeria is now globally renowned as the poster child for resource mismanagement. I have always disagreed with the description of oil as a “curse”. This description seems to imply that some metaphysical causality is behind our national underperformance. That the serial squandering of chances afforded us by oil booms to make great developmental leaps forward was someone else’s fault. This amounts to blaming an inert resource for the failure of humans to manage it – a standpoint with which I strongly disagree.

The presence of natural resources in and of itself cannot and does not make a nation great. It simply represents the potential for greatness. The more the quantum of natural resources available, the greater that nation’s potential can be said to be. The critical difference between resource-rich performers and resource-rich underperformers is simply resource management. And effective resource management is the purview of competent elites and capable governments. It is ultimately about human responsibility. Our inability to manage our resources and fulfill our potential reflects our irresponsibility. We must now end this grossly self-destructive culture of governmental, economic and political irresponsibility.

Two factors have converged to make a radical change in our paradigm of resource management absolutely imperative. The first is the increasingly diminishing value of oil in the global economy. New technologies, such as tracking, have unleashed a dynamic of resource abundance rather than resource scarcity, which is resulting in less power concentrated in the hands of a few suppliers. Previously import-dependent consumers like the U.S. are increasingly on the cusp of energy self-sufficiency. By 2013, the U.S., a major importer of Nigerian crude, had already reduced the importation of Nigerian oil to 300, 000 barrels from 1.1 million. In 2014 that figure plunged to zero. Even before this technological shift occurred, we had already ceased to be Sub-Saharan Africa’s sole energy power house. New players like Ghana, Kenya and Liberia have emerged to add to the competition in the market.

Consequently, as oil prices have sharply undulated due to shocks from the global economy, revenues have fallen sharply creating a fiscal crisis as the socioeconomic needs of our rising population become more urgent. Yet, the Federal Government is under immense pressure to deliver public goods – functional healthcare, qualitative education, stable electricity, good roads etc. and to address the huge humanitarian crisis in the North East among other problems that require significant social spending.

According to the National Integrated Infrastructure Master Plan, Nigeria urgently needs huge investment inflows to finance our ERGP and close up our infrastructure deficit. Nigeria’s current “core infrastructure” stock gap (roads, rail, ports, airports, power, water, ICT). Based on international benchmarks is estimated to be USD80 billion. To fund the infrastructure needs of its growing economy over the next 30 years, Nigeria would need to spend about USD 3 trillion. This investment would allow Nigeria to close its current infrastructure gap and sustain an ideal infrastructure stock level of 70% of GDP as it builds and maintains infrastructure assets across all its seven key sectors.

The second factor is the need to diversify the economy which has grown more urgent in the light of these new trends in the global hydrocarbon economy. Over the past three decades, astute watchers have cautioned Nigeria’s reliance on oil as the cornerstone of her economy was inimical to her long term economic growth and development. The consensus among experts both at home and abroad has long been that our overdependence on crude oil had left our economy vulnerable. While previous administrations have all spoken of the need for economic diversification there is a justifiable case to be made that these pronouncements rarely, if ever, left the realm of rhetoric. At best, they were aspirational proclamations. At worst, they simply amounted to postponing the evil day.

• To be continued tomorrow.

• Dr. Fayemi delivered this paper at Federal University of Technology, Akure.

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