Oil has been more of a curse than a blessing in Nigeria. In a textbook example of what scholars refer to as the “resource curse,” the West African country has failed to reach its full potential due to weak government institutions and inadequate management of the huge income.
The term, which was first coined in 1994 by Prof. Richard Auty, describes a country’s incapacity to exploit its unexpected wealth to better the lives of its people and support its economy. Contrary to popular belief, countries with abundant natural resources experience a greater level of poverty and corruption than they do positive economic development, and they paradoxically experience much slower growth and development than countries without such resources.
These countries, which rely heavily on the export of their natural resources, generally have slower growth rates, lower levels of human development, and higher levels of inequality and poverty. They have also been discovered to have worse institutions and more conflict than economies with limited or very less resources.
It results from the distinct phenomenon of oil exploitation rather than possession and is primarily caused by weak institutions and poor political governance. Multinational corporations, national and foreign governments, foreign financiers and investors, as well as the structures of states and private actors in oil exporting countries, all influence this phenomenon.
Resource wealth can have catastrophic effects. Livelihoods and economies in oil-exporting countries like Nigeria, Venezuela, Angola, and the DRC have been devastated, but throughout history, many nations, including Norway, Canada, and Botswana, have managed to escape the curse thanks to strong state management and institutions that can withstand corruption.
This is important because corruption, a global bane that greatly hinders economic and social growth in developing nations, is the main indicator of the resource curse. Worldwide, an estimated $2 trillion is stolen annually in the form of corruption. With this much money, the world’s infrastructure gap could be closed, malaria could be cured, and children across the world could be provided education.
Corruption is “an abuse of entrusted power for personal or private gain,” according to Transparency International. In 1996, James D. Wolfensohn, the World Bank President at the time, referred to corruption as cancer and urged all nations to work toward transparency and accountability to combat its eroding impacts on society. He listed the effects as shifting resources from the poor to the wealthy, increasing business costs, deterring foreign direct investment (FDI), decreasing public spending, misusing aid, and undermining equitable national development.
The integrity of individuals and institutions is damaged as a result of corruption. Combining social, political, and economic dynamics, it weakens democratic institutions, disempowers sovereign states, and adds to the instability that is stoked by public mistrust and resentment. It undermines democracy by devaluing the voting system, subverting the rule of law, and erecting new bureaucratic hindrances whose sole purpose is to demand bribes.
Self-interest, fear, greed, and the thirst for power are just a few of the many reasons for corruption, but the effects always remain the same, damaging, and long-lasting.
Any country’s ability to handle an infusion of petro-dollars is a tough issue. These counties struggle to handle the surplus cash in a responsible manner. They frequently launch huge, expensive projects without doing thorough due diligence or feasibility studies, putting wise investments at risk. Priority is given to spending on initiatives with lower priorities. They spend lavishly while accelerating ongoing projects.
Then, in response to rising inflation brought on by productivity that is unsurpassed, they scramble to absorb the liquidity and loosen up on financial propriety and discipline. The interaction of these variables causes the currency to appreciate, hastening the economy’s downfall and making non-oil sectors less competitive as exchange rates shoot up. The non-oil industries in the Netherlands were on the verge of extinction as a result of this particular phenomenon, also referred to as the “Dutch illness.”
According to studies, an imbalance develops after an oil boom since the non-oil industries are left underdeveloped. The growing oil sector siphons out labour and capital from vital but less lucrative industries like agriculture, leaving them depleted as demand for those resources rises.
As a result of the windfall’s associated abundance, which resulted in enormous revenues, greater incomes, and superior returns on investments, administrations find themselves in the uncharted ground. Higher incentives for corruption are created when public finances are managed in an incompetent and inexperienced way.
Newfound wealth raises expectations among the masses, which increases demands for resources from both state institutions and civil society. The unemployed, unions and the middle class all call for the creation of more employment while also demanding higher salaries for the same jobs. As bureaucracies grow, they quickly lose their effectiveness or competence, which adds to the growth of foreign debt and trade deficits.
A “rentier state” or economic trap evolves. The majority or the whole of the state’s total revenue comes from the rents paid by foreign individuals, businesses, or governments. This causes the non-oil industries to contract, inflation to skyrocket, imports to rise in both quantity and price, and more money to be spent on political vanity projects, subsidies, and welfare programmes to offset rising living expenses and the depletion of foreign exchange.
Other countries have overcome the resource curse and led their economies to success through clever management and tenacity. Most Nigerian people believe that the country has so far failed. But only time will tell if it is destined to fall into failure.
Nigeria’s lost battle against corruption
One of the major promises of Nigerian President Muhammadu Buhari during his 2015 election campaign was to elevate the failing economy and to take strong actions against corruption.
His presidential campaign had substantial support from the electorate of the country, who were looking for a breakthrough in the struggle against immense corruption. In the lead-up to the elections, even the media extolled his integrity.
Interacting with DW, Nigeria’s Olabisi Onabanjo University economy professor Sheriffdeen Tella said, “One of the major plans on which the present government… came on board, was to tackle corruption. But it has not been able to do so. In fact, the level of corruption has increased so much that people have lost hope in his ability to do this. And corruption has actually fought back. It has not only affected the education sector, it also affected the health sector and all other sectors of the economy.”
Many Nigerians lamented how their lives have gotten worse since Buhari took office and cast doubt on his commitment to wage a war against corruption.
Lanre Arogundade, former president of the National Association of Nigerian Students, argued that the concerns raised by people were valid.
He said, “Nobody can blame Nigerians if at this stage they are doubting the anti-graft war or its effectiveness. And the reason for this cannot be far-fetched. One can give the striking example of the allegation against the accountant general of the federation that he single-handedly stole about 80 billion naira [around €180 million].”
A financial study showed that 365 million naira would be spent in a year if 1 million naira were spent every day. Thus, it would take ten years to spend all 80 billion naira, or around 3.6 billion, and 36 trillion naira to spend over 100 years.
In Nigeria, corruption is unquestionably not a recent phenomenon. It has long been a fundamental part of Nigerian society, permeating almost every aspect of the West African nation.
Nigeria placed 154th out of 180 nations on the Corruption Index published by Transparency International in 2021.
Anecdotal evidence suggests that corruption is socially and culturally acceptable since it benefits members of the family, tribe, or ethnic group.
When ex-Nigerian President Goodluck Jonathan stepped down from office, the country was on the verge of collapse as a result of rampant corruption.
The most populated country in West Africa, Nigeria, is reportedly getting deeper into corruption muck seven years after a historic shift of power justified by the need to eradicate corruption in Nigeria.
Through the anti-graft agency, EFCC, Buhari has arrested, detained, and even prosecuted some public office holders in order to highlight the significance of anti-corruption for socio-economic growth, which is being raised globally. The most recent arrest was the nation’s accountant-general for the staggeringly massive fraud he’s been committing for years.
However, many Nigerians argue that the battle against corruption should go beyond investigations, arrests, and convictions and instead focus on prevention, something the Buhari regime lacks.
“What we have not seen under this government is the prevention of corruption such that it keeps happening again, and again, and again,” Arogundade concluded.
The fraud committed during the past eight years, according to HEDA Chairman Olanrewaju Suraju, will be made public after the current Buhari administration leaves office because law enforcement and anti-corruption organizations are currently hesitant to do so.
“We are going to see a whole lot of exposure after the government leaves office. Many of the law enforcement and anti-corruption agencies are either compromised; timid, to actually reveal some of the atrocities that they know or reported to them,” Suraju said.