Paying for Years of Missed Opportunities

After a period of 62 years as an independent nation, when enormous resources garnered from oil sales were frittered away, and several opportunities to develop other sectors were wasted, the question is how far can Nigeria continue to bank on the oil industry for its economic revival?, asks Festus Akanbi

From whichever angle one chooses to look at it, this year’s independence anniversary is unique in many respects. This is because this year’s edition came on the eve of a general election which effectively marks the end of the current administration that promised to chart a new course for the nation’s economic and political lives when it came on board seven years ago.

Again, the independent anniversary came at a period when virtually all the economic indices are down as the nation’s economy appears to have defied the gains of the period which delivered a boom to other oil-producing nations but manifested in form of economic doom in Nigeria.

The economic history of Nigeria falls into three periods. They are: pre-colonial, colonial and  post-colonial or independence periods. The pre-colonial period covers the longest part of Nigerian history. The colonial period covers a period of 60 years,1900-1960 while the independence period dates from October 1, 1960.

It is not out of place therefore for the international community to have high expectations from Nigeria. This is because, at 62, Nigeria is expected to have achieved a significant level of development, especially with its rich natural and human endowments. 

Unfortunately, however, the level of underdevelopment in the country has made nonsense of Nigeria’s abundant human and natural resources. The list of Nigeria’s problems is quite extensive, as is the case with numerous other developing countries. Issues touching on education, health, infrastructure, inconsistent economic policies, poor human capital development, corruption, inflation and insecurity have consistently hampered development in Nigeria. While some of these problems are gradually reducing, others are getting worse. 

There is no doubt that Nigeria is endowed with abundant natural resources ranging from solid minerals (crude oil, gold, tin, iron ore, niobium, lead, zinc, limestone, salt etc) to arable land with varieties of agricultural products such as palm oil, cocoa, groundnut, beans, melon, corns, rice, among others. The advent of the oil economy however changed the focus away from agricultural development and that set the tone for the current economic challenges facing the country. 

Missed Opportunities

As argued by Aderibigbe Stephen Olomola of the International Food Policy Research Institute (IFPRI), although the country is politically independent, it has not been free to galvanise the resources in the interest of the citizens to achieve the desired level of development. 

“In general, the correlation between available resources and development outcomes in Nigeria has been perverse. The market fundamentalists pressurised the country to abandon its planning strategy while at the same time discouraging the necessary capital investment to ensure sustainable growth and development. 

“The situation is exacerbated by a military intervention which aggravated political instability and stymied democratic governance. Since 1999 when the aberration was put in abeyance together with its stressful and corruption-ridden neo-liberal economic management system, opportunities have been created for economic emancipation and sustained growth. The outcome was an emerging economy with a relatively stable exchange rate, a fairly predictable macroeconomic environment and good prospects for growth,” he stated.

 Meanwhile, most respondents to THISDAY enquiries on the bane of Nigeria’s economic independence, last week spoke almost unanimously that successive administrations should be blamed for bungling the golden opportunities inherent in the enormous human and material resources which the post-colonial government inherited.

In the words of the Managing Director/Chief Executive of Cowry Asset Management Limited, Mr Johnson Chukwu, Nigeria failed woefully to swim with the tide of economic diversification taking place all over the world.

Rather than build on the gains of vast and arable land to strengthen its agricultural sector, both the military and civilian administrations post-independent period had focused on revenue from crude oil sales.

Unfortunately, reliance on crude oil sales is breeding corruption and laziness, two major issues rubbing the country of the gains of oil resources.

In his opinion, a lecturer in the Department of Economics, Western Delta University, Oghara, Felix Ashakah wrote that millions of Nigerians are being pushed into poverty due to the prevailing poor economic policies of the government.

 Analysts contended that nothing better illustrates the pathetic state of the economy like the current inflation rate which accelerated to 20.52 per cent in August of 2022 from 19.64 per cent in the previous month, above market expectations of 20.25 per cent and remaining at the highest since September 2005.

One immediate fallout of this is the regime of corrupt-laden policies as exemplified in the controversial fuel subsidy programme, which has continued to deny Nigerians of the much-needed fund for development projects.

Today, Nigeria is battling untamed inflation, largely caused by food insufficiency, energy crises, large-scale unemployment, insecurity and foreign exchange market crisis.

Amid the unfavourable development comes foreign investors’ flight as well as the sustained exit of multinationals to save havens.

Breaking the Oil Curse

Today, oil earnings account for almost 90% of the nation’s gross export revenue, leaving a paltry 10% for other commodities such as agricultural produce and solid minerals. From the 1970 oil boom era in the country to date, heavy reliance was on oil revenue and with the fluctuation of oil prices and a subsequent sharp decline in the world oil price in recent periods, it is obvious that over-dependence on oil is the major source of revenue could fail the country as it can’t finance the budget as usual.

In 1960, when Nigeria gained independence from Britain, production was 17,000 bpd, rising rapidly to one million bpd by 1970. Like bees, major and independent companies rush to Nigeria when it joined OPEC in 1971 and nationalised the oil industry through the creation of the forerunner of the present Nigerian National Petroleum Corporation Limited. Other interested companies with a strong appetite for oil exploration entered into a joint venture with the NNPC, in an arrangement that conferred the state with about 60% of all multinational oil projects onshore, while the oil company paid most of the exploration and development costs.  Oil revenues have yielded billions of dollars to the Nigerian economy but about 70 per cent of such has been lost to corruption.

Statistics show that despite the oil windfall, more than 70 in every 1,000 babies die before their first birthday, the average life expectancy is less than 46 and only 33% of the population has access to adequate sanitation. 

Another economic paradox in Nigeria is the fact that although the country exports more than a million barrels of oil a day, only about 40% of Nigeria’s total population – 10% in rural areas – has access to electricity.  

As disaffection over the opaque nature of the appropriation of oil revenue rose, people in the oil-producing areas became combative in protest over a combination of environmental degradation and the failure of multinational firms to develop their area. With the rise in militancy, many of the oil firms began to exit Nigeria. Also, due to a combination of outright oil theft and militancy, production was seriously affected, thus setting the stage for the exit of oil firms with its attendant revenue shortages in Nigeria. So, while other oil-producing countries are counting the gains of the oil resources, Nigeria is still battling with how to break the oil curse.

Today, despite the prevailing high cost of crude oil, the scourge of oil theft and vandalism is depriving Nigeria of the boom being experienced by other oil producers.

Oil-exporting nations such as Nigeria, Venezuela, Angola and DRC have seen livelihoods and economies devastated, but there have been many countries throughout history, such as Norway, Canada and Botswana who have bucked the curse through strong state management and institutions that can stand against corruption. 

But the Cowry Asset Management Limited’s chief executive believed that it is possible to break the oil curse. According to him, “The curse was imposed by bad leadership but several countries have broken that kind of curse. One example is Netherland, which has broken the curse. 

Today, oil accounts for an inconsequential part of the Netherlands’ revenue. 

“The US is the largest crude oil producer in the world but crude is not considered as an export commodity in that country. And then several countries that are even major producers in the world especially the second largest producer, Saudi Arabia, are diversifying its economy today.

What has happened is that Nigeria has refused to save. We have enacted Sovereign Wealth Investment Fund but we are not able to transfer funds to that unless we have excess, and right now we don’t have excess.

“Two, we have a concept that has proven beyond doubt that with the right policies, you can develop the economy. Take, for example, the cement industry. It was a policy that led to the development of that sector.”

So, as Nigeria gets set for another transition into a new administration, expectations are high that the various contenders for the office of the President would tell Nigerians how they hope to effectively break the resource curse and develop other sectors of the economy. 

The Nigerian electorate are also expected to elect leaders that will be able to take the country to the promised land.