Thursday, 1st June 2023

Resource curse, enlightened leadership and pressure from below

By Otive Igbuzor
12 October 2020   |   2:52 am
Keynote address by Dr. Otive Igbuzor, founding Executive Director of African Centre for Leadership, Strategy & Development (Centre LSD) and Chief of Staff to the Deputy Senate President

Keynote address by Dr. Otive Igbuzor, founding Executive Director of African Centre for Leadership, Strategy & Development (Centre LSD) and Chief of Staff to the Deputy Senate President at the launch of two books on the impact of mining on communities and management of 13 percent derivation by NEITI on October 6, 2020.

Let me begin by thanking NEITI for the innovation it has brought to its work in the last few years by engaging in research and policy analysis to address wider issues in the extractive sector.

It is well known that the rise and fall of Nigeria is tied to the extractives sector. Good management of earnings from the extractive sector has the potential to put Nigeria on the path of growth and development.

At the same time, poor management of the extractives sector has the potential to destroy Nigeria through corruption, poverty, conflict and underdevelopment in what Social Scientists call the resource curse. It is against this background that we can situate the emergence of these two books.

Nigeria ranks 12th in the world for crude oil production and the largest producer in Africa. But it has some of the worst development indicators in the world and hosts the largest number of poor people in the world. Poverty is particularly extreme in oil-producing areas in the Niger Delta. Studies have shown that poverty rates in oil-bearing communities are higher than areas without oil in the Niger Delta.

Oil exploration and production have destroyed the environment and livelihood of the Niger Delta people without creating employment.

It is in recognition of the challenges of the opacity of the extractive sector that NEITI was established in 2004 to among other things conduct regular audits and disseminate the results to the citizens with the assumption that “greater transparency leads to greater accountability.” However, experience by NEITI from 2004 to 2016 indicated that this assumption is too narrow leading to a theory of change that includes measures to translate transparency into accountability including “efforts at deepening and broadening public understanding so that public dissemination of successive cycles of information leads to more informed public discourse, more people asking more meaningful and searching questions of the custodians of oil and gas resources and revenues.” The publication of these two books is in recognition of this new approach to shape the extractive sector and overall governance reforms through policy engagements, thought leadership, and interagency coordination.

The Books
The two books address issues in the mining sector and the oil and gas sector. The mining sector in Nigeria contributed only 0.5 percent to the GDP in 2018 but has great potential because the country is endowed with abundant mineral resources. The minerals of importance include barite, halite, talc, kaolin, gemstones, limestone, marble, granite, iron ore, bitumen, and coal. The Federal Government in its roadmap for the growth and development of the Nigerian mining industry projects to increase the contribution of the mineral sector to 10 percent of GDP within the next decade.

The oil and gas sector is the mainstay of the Nigerian economy. The abundant natural resource in the country has turned to a curse. Nigeria has about 35 billion barrels of proven oil reserve and another 5 billion in development. The oil and gas sector accounts for about 65 percent of government revenue.

The book Impact of Mining on Women, Youth, and Others in selected communities in Nigeria examines the impact of mining on women, youth, and other vulnerable groups in Nigeria’s mining communities. The communities covered are Rimin Zayam in Bauchi State, Enyigba/Ameka in Ebonyi State, Okpella in Edo State, Yauri in Kebbi State, Mai-Abudu in Nasarawa State, and Ilesha in Osun State. The study showed that mining had some positive impact on the communities such as facilitation of rural employment opportunities; opportunity for physical capital development; development of social and economic assets through the fabrication of mining equipment, repair of power pumping machines and motorcycles used for public transportation, communication gadgets such as cell phones and deepening of national integration through inter-group marriages and cross-cultural exchanges by the diverse migrant population in mining communities.

At the same time, there were lots of negative impacts such as dearth and/or gross inadequacy of basic amenities such as housing, roads, electricity, schools, and even health centres; unequal power relations; crude and non-systematic manually-induced artisanal practices that often result in severe injuries, deaths, wastage, environmental degradation, and dislocation of farmers; poor housing, armed robbery, illicit trade in drugs, alcoholism, prostitution; marginalisation of women, and persons living with disabilities and widespread cases of unchecked plunder, opaque operations, and maltreatment of labourers and local population by Chinese and other foreign miners across mining communities.

The book made some recommendations to the government to enforce mining policies and laws; reactivate and strengthen co-ordination of Mineral Resources and Environmental Management Committees (MIRECOs); prioritise the provision of infrastructure; restructure Community Development Associations (CDAs) and ensure a balance/equity between land for mining and agricultural uses. It also recommended to mining companies to comply with government policies and rules; negotiate and comply with terms agreed with Community Development Associations (CDAs) and open up to public scrutiny and transparency and avoid violations of the rights of mineworkers. It also recommended civil society to play its role as chief mediator; build capacity of mining communities; monitor activities of mining companies; advocate for government and partner with the media. Finally, it recommended to mining communities to demonstrate resilience; report misconduct; partner with CSOs, and demand redress over the lack of social amenities and other rights violations in their communities.

The recommendations are in line with our argument of #DoMiningRight. The #DoMiningRight campaign seeks to achieve a solid mineral sector where the right approach to mining is adopted to increase revenue, promote diversification of the economy, improve the welfare of the people, protect the environment and ensure sustainable development.

The book Perception of the Impact of 13 % Oil Derivation Allocation examines the nature of the flow and management of the 13 percent oil revenue derivation funds by state governments in the Niger Delta region. It contains three case studies of Delta, Imo, and Ondo States. The study found out that while the perception was that the intention of the derivation fund was good, the overall impact was considered negative. The report indicated that the establishment of state oil-producing commissions to compensate for oil despoliation and redress underdevelopment of communities was good judgment, well deserved and well-intentioned. It further pointed out that the designation of a certain percentage of disbursed 13 % derivation funds (40 % in Ondo and Imo States and 50 % in Delta State) to address oil community needs are well deserving. However, despite the good intentions, the majority of the communities sampled pointed to opacity and non-disclosure of information about 13 % derivation revenue accruals; top-down approach to community development; open display of hire wired politics, political influence, and patronage that undermines equity and fairness in project conception and execution; underfunding; poor corporate governance; lack of project sustainability and poor quality of projects.

Resource curse, enlightened leadership and pressure from below

The two books show clearly that availability of extractive resources have not translated to improvement in the quality of life for citizens of the communities where the resources are located. Instead, these resources have negative impacts on the lives of the citizens. This in accord with the well-known resource curse occasioned by extractive resources. It has been documented across the world that resource-rich countries have performed worse than those with smaller endowments leading to phenomenon that scholars now refer to as resource curse.

Countries that depend on oil for their livelihood are among the most economically troubled, the most authoritarian, and the most conflict-ridden in the world. The consequences of development based on the export of petroleum have tended to be negative during the past 40 years. Detrimental effects include slower-than-expected economic growth, poor economic diversification, dismal social welfare indicators, high levels of poverty and inequality, devastating environmental impacts at the local level, rampant corruption, exceptionally poor governance, and high incidences of conflict and war.

When compared to countries dependent on the export of agricultural commodities, mineral, and oil-exporting countries suffer from unusually high poverty, poor health care, widespread malnutrition, high rates of child mortality, low life expectancy, and poor educational performance- all of which are surprising findings given the revenue streams of resource-rich countries.

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 over-dependence on oil exports and the production of weak public institutions, authoritarianism, corruption, conflict, and primitive accumulation of wealth through the 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… policymakers 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 pipelines may serve to finance either side and prolong the 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 the 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.

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 a 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.