Reginald Berry Paper #2

4/1/06 IP537

Nigeria & Oil

Introduction

Oil has been Nigeria’s greatest asset and its greatest weakness. Oil in Nigeria is the

natural resource which has given a foundation to the rest of the Nigerian economy, but

since the 1970s, when this industry began, every othe r industry has been neglected.

Corruption in Nigeria is driven by fuel money, while development throughout the nation

stagnates despite of it. The possible benefits of this asset are unquestionable, but without

proper allocation they are largely missed.

Background

Corruption is the largest institutional impediment to citizen access to resources in

Nigeria. Corruption has ruined the ability of the people of Nigeria to trust the

government. In addition, this lack of trust of the government disconnects the people from

their leadership, isolates them from the one of the few things they may have in common

with their neighbors, and destroys any sense of civic responsibility.

This can be seen best in the case of the Ijaw people in the Niger delta. In the Delta, the

Movement for the Emancipation of the Niger Delta (MEND) is operating. MEND attacks

government oil pipelines in the Niger Delta, steals oil, and is connected to the kidnapping

of Shell (the only company in the area working to extract oil) employees. MEND, along

with other groups that have come before them, claims to protect the interests of the

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people of Ijaw. The people of Ijaw have suffered from two things: exclusion from the oil

revenues the government has reaped from their land (one governor lives in a palace and

owns a yacht), extensive pollution due to the work being done in their area, and human

rights abuses by the oil company (Shell) operating in their area. 1 The Ijaw people support

MEND in their operations precisely because the government has failed to try to meet

their needs.

The economy of Nigeria is stagnated primarily by its over reliance on oil. Dependency on

oil has contributed to a number of anomalies that have severely disrupted other aspects of

its economy, and contributed to the problem of corruption.

Dependency on oil has taken resources and attention away from other industries in the

country. Due to neglect the manufacturing and agricultural sectors have stagnated

significantly since the 1970s, after the Biafran war. 2 Because the rest of domestic

production is focused on agriculture, Nigeria must import manufactured goods. 3 The

cheap consumer goods that Nigeria imports have crippled domestic manufacturing. Oil

dependency makes the Nigerian economy reliant on the ever-changing world price for

oil. It also places a significant amount of control of the country’s economic well being in

the hands of foreign Multinationals (Exxon-Mobil, Chevron, Shell).

1
Bronwen, Manby, “The Price of Oil: Corporate Responsibility and Human Rights Violations in
Nigeria’s Oil Producing Communities”, Africa Division of Human Rights Watch, January 1999
2
Anonymous, “History of the Nigerian Petroleum Industry”, Nigerian National Petroleum Corporation,
February 2006, (http://www.nnpcgroup.com/history.htm )
3
AAAAA, “Background Note: Nigeria”, Department of State, Bureau of African Affairs, March 2006
(http://www.state.gov/r/pa/ei/bgn/2836.htm )

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The oil industry is also not an industry which lends itself well to the even distribution of

receipts. Profits from oil are controlled by the government in Nigeria. The amount of

money that oil provides has led to a significant amount of morally questionable behavior

on the part of the government. Peaceful demonstrations against oil production have led to

violent repression by the government. 4 The Oil and Mineral Producing Areas Derivation

Account (OMPADEC), an account designed to ensure that those in oil producing regions

received some benefits (3%) from oil production, was so ineffectual and rife with

corruption that it was reorganized three times over ten years before it was dissolved by

Obasanjo in 1999. 5 Profits from the oil industry do not tend to address the needs of those

most adversely affected by it. This is addition to the fact that those profits don’t reach the

majority of people in Nigeria.

In order to combat the corruption fueled by the oil industry in Nigeria, control of finances

has to be taken away from the corrupt. To begin to limit oil dependency, new and

emerging industries in Nigeria need to be developed.

Recommendation

For this reason I suggest a national commission for development in Africa, similar to

OMPADEC, not limited to oil producing regions, but operating nationally. For a

mitigation of the problems mentioned above, this organization should not be an

organization for the enforcement of government policy (budgetary, considering its

4
Bronwen, Manby, “The Price of Oil: Corporate Responsibility and Human Rights Violations in
Nigeria’s Oil Producing Communities”, Africa Division of Human Rights Watch, January 1999
5
Anonymous, “Niger Delta Development Master Plan”, The Niger Delta Development Commission,
Chapter 2, 2005, (http://www.nddconline.org/NigerDeltaMasterPlan/Chapter2.htm)

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purpose), but for the implementation of policy directly determined by the communities it

is intended to affect. This organization should work to decentralize government

power/money, counter to the current centralization of receipts from the oil industry. Such

an organization should work to empower Nigerian citizens through the receipt of money

from the oil industry, as oppose to their current exclusion from these profits. Not just the

citizenry, but, in particular, the businesses and industries that they are involved in that are

unrelated to the oil industry.

This organization would have to incorporate oil companies, government administrators,

and the greater Nigerian community. But, unlike much of Nigerian government,

controlling power would lie primarily in the hands of the community.

The funding of this organization would come from the same source; a percentage of

government receipts from oil. The administrative regions would be based around the

current 36 states. Representatives from communities (cities, regions, or cultural groups)

within each region would form committees for each state. It would be responsibility of

each of these committees to determine the use of money from the fund. These funds

would strictly be for the implementation of business development projects. Committees

would have complete decision making power within this limits, but would be advised by

government representatives. Government representatives would also be made responsible

for checking for corruption within these committees, with veto power over their decisions

only based on the incidence of corruption.

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For the Nigerian government, there already is an institution designed to manage

development through oil revenues, which was the result of the reorganization of its

predecessor. The greatest opposition will be to the regionalization of such an

organization. The cost of such a measure may be mitigated through the use of already

existing government infrastructure in each of the states. The most opposition may be

against having members of the Nigerian community, who are not members of the

government, or involved in the oil industry, on the committee, considering that

traditionally the voice of the public has been excluded from policy making. This policy

would also serve to develop civil society in Nigeria, which is generally weak and

divided. 6

Success of this plan would be measured in three ways:

1. The abatement of violence in the Niger Delta – Violence in Niger delta includes

piracy, guerilla attacks, and kidnapping

2. Increased growth of industry (small business, manufacturing, or agriculture) outside of

oil production – The percent contribution of these sectors should increase

3. Increased spending of national oil receipts on development (business, or community)

6
Agbaje, Adigun, “Nigeria: The Fourth Republic”, Democratic Reform in Africa, E-Gyimah Boadi, 2004

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Conclusion

This policy would work to empower Nigerian citizens, particularly those typically

without access to financial resources. It would mitigate the corruption that Nigeria is

plagued with. It would hopefully diminish the anger that many Nigerians have towards

the actors in Nigeria’s oil industry. Also this program would lead to the re-direction of

funds towards other industries, small businesses, agriculture or manufacturing; vital for

the revitalization of Nigeria’s economy.