Nigeria Struggles Against The Curse Of Oil
International Herald Tribune
Thursday, January 8, 2004
The gift that corrupts
LAGOS 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 percent or more within the next few years. By
2005, according to a U.S. National Intelligence Council forecast, Africa's share
of U.S. oil imports will have climbed from 15 percent to 25 percent, close to
the current proportion coming from the Middle East.
Along with Angola, Gabon, Equatorial Guinea, São Tomé, 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
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 neighboring Cameroon
sovereignty over the oil-rich Bakassi Peninsula. (His minister of defense had
instead recommended military action.) Nigeria and São Tomé 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 privatized. 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
has to 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 Moisés Naím, 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 and the 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.
The writer is a commentator on foreign affairs.
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