Natural Resource Values Should Benefit Citizens, Not Corrupt Government & Corporations
IMF Report Observes Worsening Plight Of Nigerians
| This article appeared originally in The Guardian of Lagos, Nigeria. |
Widespread poverty and squarlor in Nigeria amid increasing revenue from oil has tken the centre stage of a report by the International Monetary Fund (IMF).
The report states that the country would be better off if the leaders had distributed its mineral wealth directly to the people rather than continue with a system which has seen poverty double in the last 20 years.
Reuters reports that the working paper, which does not represent official IMF policy but is aimed at stimulating debate, said that each Nigerian adult would be better off by $760 (about N91,200), the country's economy could be rejuvenated, and debt relief would be possible as opportunities for corruption were reduced.
"We propose a solution for addressing this resource curse which involves distributing the oil revenues to the public," Columbia University economics professor Xavier Sala-i-Martin and IMF research department advisor Arvind Subramanian stated .
"Even with all the difficulties that will no doubt plague its actual implementation, our proposal will, at least, be vastly superior to the status quo," they wrote.
Between 1970 and 2000, the number of Nigerians living in poverty -- less than a dollar a day -- has risen to 70 per cent from 36 per cent, and per capita Gross Domestic Product (GDP) has fallen to $1,084 from $1,113 in purchasing power parity terms.
At the same time, oil revenues have boomed. Since 1965, oil has generated about $350 billion for the country of 120 million people.
The authors calculate that under their proposals to share revenues equally among the population, each household would get about with $140, which would amount to $425 in purchasing power parity terms, or roughly $760 per adult.
With the full exploitation of natural gas, this would rise to $750 per household in purchasing power parity terms or $1,330 per adult.
The resultant changes, and the lack of opportunities for misuse of funds by government officials and corporations, could also open the path to debt relief from creditors who are reluctant to see their money frittered away by corruption. This could generate a further $100 per person.
Oil has been blamed for the ills of many developing nations, including corruption, exposing the budget to price volatility and a tendency to an overvalued currency which destroys domestic industry. Nigeria provides some of the most egregious examples of rent-seeking and corruption, and the use of oil wealth by government officials has produced little for the country, the authors remarked.
"Worse, however, it could actually have contributed to a decline in the standard of living," the report said. They cited wasteful projects funded by oil such as the multi-billion dollar Ajaokuta steel project, in theory Africa's largest plant, which has not produced a single ton of steel..Overvaluation of the naira currency has caused the collapse of Nigeria's agriculture, especially the export sector.
To stand any chance of developing, oil revenues need to be taken out of the hands of government so that the state starts to function more like an economy with no oil -- this would undermine "the corroding process engendered by rents".
"These resources should be distributed directly to the Nigerian citizens, ultimately their true and legitimate owners. This would replicate or simulate a situation in which the government has no easy access to natural resource revenue, just as governments in countries without natural resources," the report said.
The Nigerian authorities would then be left with no direct oil revenues, which were forecast in November to provide two thirds of federally collected revenues for 2003.That would leave the authorities to collect taxes, which are much more difficult to steal and mismanage, and for which in a democracy they could more readily be held accountable.
The authors however noted that the likely future commercial exploitation of Nigeria's natural gas reserves was likely to lead to more of the same corruption which had tarnished almost 30 years of oil development. "Sadly, we feel that natural gas may only aggravate and prolong the 'curse'," they said
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An introduction to the report "Addressing the Natural Resource Curse: An Illustration from Nigeria" and a link to the full report in PDF format can be found here.
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Find out about Alaska's successful system of getting natural resource values into the hands of the citizens, described in this prize-winning essay by Alanna Hartzok Also see the Niger Delta Fund Initiative Nigeria's plight, unfortunately, is far from unique. For more on the paradox of "poverty amid plenty," see the Henry George Institute
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