Resource curse in Nigeria: are natural resources a blessing or a curse? By ibitomi olawale olalowo
I call petroleum the devils excrement. It brings trouble, waste, corruption, consumption, our public services fall apart, and debt- a debt we shall have for years….
Juan perez aafonso
The economist, may 22,2003.
Resource curse refer to the paradox that countries with an abundance of natural resource have less economic growth than countries that do not possess these natural resources. An abundant of natural resource can bring great prosperity and also have the opposite effect, weaker economy, democracy, less development and in some cases internal division is the paradox of plenty, also known as the resource curse. Countries abundant in natural resource are often thought off are the lucky one, but in reality the reserve is the case. Natural resource can be a burden on the country economy tighten the fate of the country citizen to the oscillating around the commodity market (just like the fluctuation in the Nigeria oil market), opening the door for corruption and exploitation. Resource can leave the economy unbalance as investment and skill labour become skewed toward the abundant of resource.
With abundant of natural resource Nigeria is among the 30 countries in the world with the widest gap between the rich and the poor. According to governmental data from 2020, the Gini coefficient in Nigeria was 35.1 points as of 2019. The Gini index gives information on the distribution of income in a country. In an ideal situation in which incomes are perfectly distributed, the coefficient is equal to zero.
There are six parameters that signified if there is resource curse: Dutch disease, excessive borrowing, corruption, government complacency, neglect of education and violent uprisings. (RC=F(dd,eb,co,gc,ne,vu)
Dutch disease: Dutch disease often crowd out other economic sector leaving the economy to be mono-economy, thereby creating unbalance. A formal definition of Dutch disease, an economic phenomenon wherein both the rapid development of one sector of the economy and the decline of other sectors lead to the substantial appreciation of the domestic currency. Recall before the discovery of oil in 1950s agriculture was the main stay of Nigeria economy, each region were self sustainable with agriculture product that generate massive revenue that was use to service those region.
Excessive borrowing: Blessed are the youth for they shall inherit the debt of their forefathers. Any economy that operate on a mono-economy, usually face this problem. When there is fluctuation in the oil market, and government revenues fall short of its expenditure, government borrows. Over the years, this process has left most government with massive outstanding debts, reasonable borrowing to finance essential sector is okay. But excess borrowings without appropriate planning for investment may lead to heavy debt burden and interest payment, which in turn may create several undesirable effects on the economy.
Government complacency: Nigeria, like most countries owning such important resource is in a situation where there is complacency and lack of attention when it comes to the need for economic diversification. Although several administration have come up with paper work on how to diversify the economy. The resource curse has been the barrier.
Neglect of education: there has been serious neglect of the educational sector, funding for education has been reduced and is far below the needs for institution. Academicians have been owned salaries for months. This has been an attempt to crowd out human capital, which is a major challenge for many countries that rely on natural resources, resource poor countries, on the other hand have made enormous effort with regard to education and investment in education, a good example are the Asia tiger countries, most especially Japan who is a resource poor country, education have contributed in part to their economic success.
Violent uprisings: another major challenge and problem related to the presence of resource ( of oil in Nigeria) has been the steady rise in violence in oil-producing area, armed militant who refer to themselves as freedom fighter. It’s instructive to note that, by 1999 to date oil related unrest has assumed a frightening dimension in the Niger Delta region, the same attribute show case with the discovery of gold in zamfara in the northwestern part of Nigeria.
Corruption (rent-seeking): in a resource rich country like Nigeria, extractive industries pay rent to government, and government use those fund for public expenditure and citizen are less prone to monitor government spending. This begins as the genesis of resource curse. Imagine resource poor countries, where citizen pay tax to the government, government uses these fund for public expenditures, while the citizen are more likely to scrutinize the spending.
Conditions often summed up as the resource curse can, in fact be avoided. Though there are some countries that defy the resource curse in the western world, my interest goes to the only country in sub-Saharan Africa that defy resource curse which is Botswana.
When do resources become curse? The big question is your government accountable to the people when the money start coming in? Resources are money, money is power and unless the government is accountable to the people of the country, there will be resource curse.