The making of billionaires in oil-rich Nigeria: Who is powering their rise?

In periods of oil prices hovering around $100 per barrel, Nigeria scoops approximately $200 million per day in revenues from the global oil market. Who are the major beneficiaries of these proceeds?

Roughly two decades ago, 58 per cent of Nigerians were living in absolute poverty. That was equivalent to about 70 million people unable to spend 98 naira ($1.25 adjusted for cost of living across countries i.e., purchasing power parity) per person per day on food items and other basic needs, enough to buy a light lunch, pay for two haircuts or half a gallon of petrol in Nigeria, but not a medium-sized Starbucks cup of coffee in the United States or Costa coffee in the United Kingdom. Then, there was no Nigerian on Forbes’ global list of billionaires. Cut to 2010, these figures have risen: the number

of poor from 69 million in 2004 to more than 100 million and arguably, the number of billionaires from zero to two; and by 2020 the billionaire figure has raced to five with roughly half of the country’s population size subsisting underneath the poverty threshold. In 2010, 7 out of 10 Nigerians were considered poor by this standard.

The combined net worth of these billionaires is approximately $24 billion or $4.6 billion per person. Given that Nigeria’s average income – amended for the wealth share of the billionaires – in 2020 was $1,300, the monetary worth of one billionaire is nearly the total income of over three million Nigerians. That means that for every Nigerian that made it to the Forbes list, there were about 22 million citizens that slipped into poverty. Could this be a coincidence? That the cost of producing or making a billionaire in the country is equivalent to shoving over 20 million people into poverty? Tellingly, it can be asserted that the poorer the poor, the richer the rich: billionaires, powered by rigged government policies, riding on the back of the poor to amass fortunes?

Three of these billionaires mentioned the oil business and one telecommunication as their main/only source of fortune. Yet, the oil industry is not performing as expected, e.g., over 80 percent of gasoline (or petrol) consumed in the country is imported. This is in addition to sporadic supplies and queues at local pump stations. Damningly, internet services are not robust, let alone the availability of broadband connections.

The question
How do these billionaires make their profits? When the system (or the market environment is not operating efficiently, and the rules are being rigged?) Or is something not adding up?

This question reminds me of George Stigler’s claim in “The Theory of Economic Regulation”: “that the state has one basic resource which, in pure principle, is not shared with even the mightiest of its citizens: the power to coerce”. The government uses this power to compel its subjects to pay taxes and follow rules. That power of coercion can be deployed in such a way as to help some individuals and industries at the expense of others. By trying to influence how the state uses its coercive authority, businesses seek to “buy” one or more of the government’s four main products: subsidies; control over competitive entry; regulation of product substitutes or complements; and the fixing of prices.”

It should, however, be noted that it is not a crime to be a billionaire provided that the economic rules and policies that govern the making of billionaires are not twisted – the use of the heavy hand of the government in tipping the balance of the scale – in favour of the super-rich. In a fairer society, when the pie gets bigger and the income of the richest increases, the level of inequality should not be rising fast. That means billionaires are getting richer not through rent-seeking but by contributing to expanding the size of the national pie and by so doing the poor will be breaking free from the iron grip of poverty.

Is there a pathway to the ‘rising tide to lift all boats’?
Since a lack of skills prevents the poor from participating in new economic opportunities, pro-poor growth can be enhanced through investing in the human capital of the poor—namely their education and income-generating skills. Now, there is a widespread lack of access to the financial resources needed for investments in human capital because there is no system in place, as in the developed world, where young Nigerians can access student loans to finance their college educations.
As a result, social mobility has been stagnant in Nigeria for decades. High-paying jobs simply go to those with high-quality degrees. And high-quality degrees are dependent on high-quality education. Because high-quality education is a function of high-quality primary and secondary schools and students can seldom obtain a high-quality primary and secondary educational foundation from Nigerian public schools nowadays, families must buy these credentials from a private school. One needs a large amount of money to buy a high-quality private education; if your parents are poor, you cannot buy a private school education. And so, the children of the rich will always get the well-paid jobs. This cycle reinforces and maintains the widening inequality of opportunity in Nigeria.

The challenge for policymakers, therefore, is to generate more pro-poor growth: growth that leaves no one behind in terms of benefits in that this type of growth lowers inequality and reduces poverty. Strategies for achieving pro-poor growth are more effective when grounded in enough evidence from fact-filled and rigorously researched studies.