Resource curse, enlightened leadership and pressure from below – Part 2

Eynote by Dr. Otive Igbuzor, Chief of Staff to the Deputy Senate President at the launch of two books recently.

Due to the highly volatile nature of oil markets, oil-exporting nations often fall victim to sudden declines in their per capita income and growth collapses of huge proportions. The statistics are startling: In Saudi Arabia, whose proven crude oil reserves are the greatest in the world, per capita income has plunged from $28,600 in 1981 to $6,800 in 2001. In Nigeria and Venezuela, real per capita income has decreased to the levels of 1960s, while many other countries- Algeria, Angola, Congo, Ecuador, Gabon, Iran, Iraq, Kuwait, Libya, Qatar, and Trinidad and Tobago- are back to the levels of the 1970s and 1980s. The surprisingly negative outcomes in oil- and mineral-dependent countries are referred to as the “resource-curse.”

Scholars have shown clearly the linkage between overdependence on oil exports and the production of weak public institutions, authoritarianism, corruption, conflict and primitive accumulation of wealth through collection of bribes and contract inflation.

Overdependence on oil exports is strongly associated with weak public institutions that generally lack the capacity to handle the challenges of petroleum-led development …the influx of rents from petroleum tends to produce a rentier state- one that lives from the profits of oil. In rentier states, economic influence and political power are especially concentrated, the lines between public and private are very blurred, and rent seeking as a strategy for creating wealth is rampant.

Rulers tend to stay in power by diverting revenues to themselves and their supporters…authoritarian rulers use petrodollars to keep themselves in power, prevent the formation of opposition groups and create vast militaries and repressive apparatuses… As a group, oil-exporting countries are significantly more corrupt than the world average (even if Canada and Norway are included). Nigeria, Angola, Azerbaijan, Congo, Cameroon, and Indonesia compete for the position of the “most corrupt” in the annual ratings of Transparency International…policy makers in oil-exporting countries tend to favour mega-projects in which payoffs can be more easily hidden and the collection of bribes facilitated, while eschewing productive long term investments that are more transparent…petroleum is more associated with civil war and conflict than any other commodity. Countries dependent on oil are more likely than resource poor countries to have civil wars; these wars are more likely to be secessionist, and they are more likely to be of even greater duration and intensity compared to wars where oil is not present. Oil may be the catalyst to start a war; petrodollars and pipeline may serve to finance either side and prolong conflict.

Despite this negative proposition, it is necessary to point out that over the past two decades, there is an increased understanding of the problem and what needs to be done to turn resource curse into resource blessing. Interestingly, there are some resource-rich countries with stories of success. For instance, in the 1970s, Indonesia and Nigeria had comparable per capita incomes and both countries were heavily dependent on oil revenues. In the early 2000s, Indonesia’s per capita income was four times that of Nigeria and Nigeria’s per capita had actually fallen from US $302.75 in 1973 to US $254.26 in 2002. Similarly, Botswana is rich in Diamonds and had an average growth rate of 5.2 percent between 1974 and 2002. But in Nigeria, annual per capita GDP remained stagnant in the 1990s and grew by only 2.2 percent from 1999-2003. Furthermore, the United States, Canada, Australia, Chile and Norway are resource rich countries that have made significant progress in human development. The challenge therefore is how to turn the resource curse into resource blessing.

However, as argued in the book, “resource curse” is neither universal nor inevitable adding that a strong governance regime and discipline determine whether natural resources would deliver positive impacts by way of profits for companies, taxes/charges/levies for government and sectoral development linkages. There are good examples like Norway and Botswana who have demonstrated exceptional capacity and capability for managing extractive revenues and Nigeria can learn from them. As a matter of fact, in the last one and half decade, some countries that have large number of poor people like Nigeria have lifted a large number of people out of poverty through enlightened leadership and pressure from below. According to the McKinsey Global Report, 2018, China lifted 713 million people and India 170 million people out of poverty between 1990 and 2013. They achieved this feat through inclusive, pro- poor growth; fiscal policies for wealth redistribution; employment generation; public service provision and social protection.

Conclusion
Nigeria is a country rich in extractive resources. Unfortunately, these resources have benefited only a tiny elite because of resource curse. There are clear examples of countries that have turned resource curse into resource blessing and countries that have lifted a large number of people out of poverty through enlightened leadership and pressure from below. There is an urgent need for Nigeria to turn its resource curse into blessing and lift a large number of people out of poverty. This will require a radical change in the nature and character of the state; leadership selection process; conduct of government business and attitude and response of citizens. In addition, it will require radical changes in politics, economy, socio-cultural relationships, security architecture and the deployment of technology. This requires the patriotic intervention of well meaning and patriotic Nigerians to change the narrative. Enlightened leadership and pressure from below can make the difference.