A few days ago I found myself seated next to a German gentleman on a Lufthansa flight from Brussels to Frankfurt-am-Main. He was a successful middle-aged businessman who had struck it big in properties investments in Belgium, Germany and Spain. He proudly told me about his new luxury boat and the joy it brings him when he takes his wife and daughter on a cruise in the Mediterranean. We found ourselves comparing notes about our two countries. We all agreed that Germany is today the undoubted master of Europe, with a high level of prosperity, low unemployment, relatively balanced budget – a strong industrial, international trading power.
With its 82 million people, Germany is only half of Nigeria’s population. But Germany has a GDP of US$3.4 trillion and a per capita income of US$42,000. Contrast this with Nigeria’s GDP of US$269 billion and an abysmal per capita income of US$1,657. My new acquaintance lamented the fact that Nigeria has an awful reputation for being such a corrupt and lawless country. Our image is not helped by the ongoing insurgency in the North. As if this was not bad enough, two young Britons of Nigerian parentage recently clobbered down a young British soldier, proceeding to hack him to death in broad daylight – all in the name of Islam. My friend completely ignored my protest that these young men were born in Britain and had probably never set foot on Nigerian soil.
As a German, he found it perplexing that a country of such abundant natural-resource endowments could be so poor and so dysfunctional. I have tired of defending Nigeria as an unpaid ambassador in Europe. Our country is probably the worst product anyone could successfully market anywhere.
As I reflect on this encounter with my German friend, I find myself thinking about the ‘resource curse syndrome’ and its centrality in explaining the Nigerian paradox.
When economists talk of a ‘resource curse’ they refer to a situation whereby a country suddenly stumbles upon a lake of oil or other finite minerals, the earnings from which the rulers go ahead to mismanage in a profligate manner. Given the instability inherent in the world capitalist system, revenues from natural resource exports would tend to be volatile, with booms suddenly being overtaken by troughs in world prices. During boom times, consumption will tend to expand while exchange rates are kept artificially high to maintain the path-dependence on importation of cheap consumer items to feed the appetites of urban elites to the detriment of the rural-agrarian populace. Agriculture therefore would tend to get depressed, impoverishing the vast rural majority. When the bad times arrive, as sooner or later they must, they fly to Washington, cap in hand, begging for loans.
In such settings, government takes the form of a ‘rentier state’ that reproduces itself largely from the collection of rents from transnational mining companies. Such revenues crowd out the domestic productive sector. Rentier states also tend to be rather authoritarian, with bureaucracies that are Byzantine, bloated and infernally corrupt. The entire politics is based on money and the struggle for access to the spoils of office. Nobody remembers to maintain the roads, rails and harbours. Power outages become the order of the day. Without jobs, the youths take to the highway and the seedy streets. Everyone loses faith in the nation, and, before you know it, you have a real banana republic in your hands.
Countries such as Indonesia, Norway, Trinidad and Tobago and UAE make it clear that resource abundance need not lead to the resource curse syndrome. Comparisons have been made between the development trajectories of Nigeria and Indonesia. Both started off with the same initial conditions as resource-rich countries. Both went through periods of political instability, civil strife and military authoritarianism. However, Indonesia has been able to overcome its resource curse, while Nigeria, unfortunately, has not. What makes the difference is obviously governance and leadership, and, indeed, the nature of the social coalition that controlled power in the two nations. Geography may also have played its part. Located in Asia, Indonesia had neighbours with which it had to compete. Japan, its more advanced regional model, also offered a mirror image of how things could be if they put their home in order.
Equally crucial is the fact that whereas the corrupt Indonesian rulers decided to invest most of the accumulated surplus in their country, the Nigerians preferred to haemorrhage theirs abroad. According to some estimates, a dozen Nigerians have between some US$160 billion that has been squirreled abroad, dwarfing our current external reserves of US$50 billion.
Nigeria has what it takes to build a diversified industrial-technological economy. This requires revamping the fundamental pillars of the economy and repackaging the mix of incentives that transmit the correct signals to innovators and entrepreneurs. We also have to put in place the appropriate legal and institutional frameworks which contribute to transparency and good governance. The recent creation of the Nigerian Sovereign Investment Authority (NSIA) is a step in the right direction. I believe that the NSIA will help to promote the culture of saving for the rainy day and not having to spend because excess funds are available.
We must begin today to diversify our economy away from dependence on petroleum. The National Transformation Agenda is anchored precisely on this imperative of structural diversification. But we are yet to see these objectives pursued with requisite urgency and conviction. Our economic governance system has to be improved. We also have to ensure that the civil service is more meritocratic and professional, in addition to an effective system of taxation, competitive business environment and transparent and accountable institutions.
The works of the philosopher John Rawls and Nobel economist Amartya Sen have shown that social justice is also vital not only for the maintenance of social harmony but also for the promotion of material progress central to creating a world-class economy. The curse is not in our oil but in ourselves.
Chef de Cabinet, African, Caribbean and Pacific Group of States.
