Nigeria struggles against the curse of oil

Jan 07, 2004 01:00 AM

Nigeria, already the world's sixth-largest oil producer and with large untapped, offshore oil deposits, is expecting to increase its export capacity by 50 % or more within the next few years.
By 2005, according to a US National Intelligence Council forecast, Africa's share of US oil imports will have climbed from 15 % to 25 %, close to the current proportion coming from the Middle East.

Along with Angola, Gabon, Equatorial Guinea, Sao Tome, Cameroon and, more recently, Chad and Sudan, Nigeria has become a crucial player in the world's energy stakes. Yet it is not just environmentalists and anticorruption and human rights activists that have become vociferous critics of the oil economy. Serious doubters can be found at the heart of government itself.
In Nigeria, Nedadi Usman, minister of state for finance, part of the all-female team at the top of the Finance Ministry, told me, "If we hadn't discovered oil we would have been better off today. Once we had oil our agricultural sector collapsed. Oil has made us lazy. When I was growing up I knew I had to use my brains to succeed. The oil generation doesn't feel this. We have become corrupted."

When I first asked Olusegun Obasanjo 20 years ago, after his first spell as president of Nigeria -- he was then a military dictator -- what he had concluded about oil, he said it was a "curse." Four years ago, having just been elected democratically, he seemed to have changed his tune. He told me that oil was one of "God's blessings on a poor country."
But now, after a debilitating battle with corruption, an economic period that has seen the hollowing out of Nigeria's small industrial sector and, not least, continued guerrilla and ethnic strife in the Niger delta area where most of Africa's oil comes from, a fraught, would-be reforming president, who no longer feels he has time on his side, exploded in public recently, "Oil and gas have blinded us. ... Oil and gas have taken us away from the values that we used to know. Oil and gas have brutalized us."

Obasanjo has diluted some of the worst political problems of the oil industry. Last year he announced that Nigeria was going to abide by a ruling it had sought from the International Court of Justice that gave neighbouring Cameroon sovereignty over the oil-rich Bakassi Peninsula. (His minister of defence had instead recommended military action.)
Nigeria and Sao Tome recently promised to publish the financial results of their next licensing round -- a step toward the much sought after goal of demanding that oil companies disclose the payments they make to governments. Domestic pump prices, long subsidized, are being deregulated. Refineries are being privatised. Some observers, such as the chief oil lobbyist for Shell, Larry Osai, have said that at last one can see that oil revenues are being used for development -- roads are being improved, schools better financed and drinking water supplies multiplied.

Yet even for Osai, Nigeria's oil is "an albatross," albeit one, he said, "that hasto be carried." It means, he argued, that Nigeria -- and Africa's other oil economies -- are being drawn firmly within the political orbit of the United States, although so far not too intimately: Nigeria took a position against the war in Iraq.
Washington may be showing more sophistication in dealing with its new oil partners than it has with regimes in the Middle East, but the harsh realities of being an oil economy remain. No country that is dominated by oil has yet found the way to convert oil into prosperity for the ordinary working people.

As Moises Naim, a former Venezuelan trade minister, explains in the current issue of the magazine Foreign Policy, "An economy that relies mostly on oil exports inevitably ends up with an exchange rate that makes imported goods less expensive and exports more costly." Agriculture, mining and tourism, he says, become "less internationally competitive."
Only when a country has a strong democracy, a large economy and an effective public sector, as in Norway andthe United States, has oil not been a seriously distorting factor. The developing countries that have really made it, notably those in Southeast Asia, have lacked oil -- and, often, other natural resources.

The trouble is, as Obasanjo has found, there is no going back. Nothing but maintaining good governance and a more sophisticated democracy can save Nigeria. Botswana, dependent on diamonds, has shown what can be done.
Angola, where nearly all the oil money goes to a corrupt political class, has shown what not to do. Nigeria, the biggest of them all, will be made or broken by oil. Right now, with only three and a half years to go in his final term, it seems the odds are still stacked against Obasanjo.

Source: International Herald Tribune
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