The Blessing of Natural Resource Endowment and Curse of Corrupt Leadership


Femi Falana

I am thankful to the management, staff and students of the Oduduwa University for the invitation extended to me to deliver the 2016 Convocation Lecture. Permit me to congratulate the new graduates, their parents and other well wishers on this historic occasion. In view of the recession to which the economy has been subjected the new graduates are going to be confronted with unemployment upon the completion of the national youth service. However, since this university has placed premium on vocational education I am convinced that its alumni and alumnae are sufficiently equipped to face the challenges and vicissitudes of life with courage and equanimity.

Up till 1980, final year students in the tertiary institutions attended job interviews on campuses and in their places of engagement during the national youth service year. Thus, upon the completion of the service every graduate would have been gainfully employed and armed with conditions of service which included the provision of car and housing loans. But due to the gross mismanagement of the economy and lack of vision on the part of the ruling class youth unemployment has assumed a dangerous dimension .The situation is getting worse as thousands of employees are losing their jobs due to economic recession. Having lost the opportunity to channel the enormous revenue realised from the sale of oil the ruling class has turned the natural resource into a curse. Apart from wasting about $500 billion realised from the sale of crude oil the ruling class has engaged in borrowing billions of dollars for development but which were largely diverted to enrich a few public officers with the connivance of the lenders.

Paradox of Plenty
In the framing of the topic of this lecture, the organisers put natural resource as the blessing and corruption as the curse. However, not a few would disagree with the characterisation of oil as a blessing, definitely not the millions of the victims of environmental degradation, underdevelopment and gross injustice in the Niger Delta. And surely oil cannot be said to be a blessing to the millions of illiterate and malnourished children who are condemned to a future of poverty because of the failure of the Nigerian state to plan for development amidst huge revenues from the sale of crude oil.

The debate on resource curse is certainly an old one. Some development experts also refer to the phenomenon as “paradox of plenty.” Elsewhere, the debate had begun before the discovery of oil in Oloibiri in Bayelsa State in 1956. The literature on it is indeed a huge one including the influential studies by the American economist, Jeffery Sacchs and others. And talking about how public officers misuse the oil money, recently, about a dozen governors went to the United States to take some lessons on governance in some institution.

Just imagine that this is happening in this information age. For our purpose in introducing the topic, we do not need to fly to America or anywhere like our governors for ideas. We simply visit one of the leading American websites for financial information and investments called Investopedia. Investopedia defines resource curse as follows: “A paradoxical situation in which countries with an abundance of non-renewable resources experience stagnant growth or even economic contraction. The resource curse occurs as a country begins to focus all of its energies on a single industry, such as mining, and neglects other major sectors.

“As a result, the nation becomes overly dependent on the price of commodities and the overall Gross Domestic Product becomes extremely volatile. Additionally, government corruption often results when proper resource rights and an income distribution framework is not established in the society, resulting in unfair regulation of the industry. The resource curse is most often witnessed in emerging markets following a major natural resource discovery.”

In a way, that sums up the position of those who actually see the natural resource as a curse. This school of thought does not share the optimism of the blessing otherwise embodied in the natural resource.

Our focus in this lecture is a critical examination of the role of the forces that conspired against our people to turn the exploitation of natural resource into a curse. The forces include politicians, bureaucrats and the oil multinationals. By the way, it should be noted that the American Investopedia doesn’t include the role of the oil multinationals in turning the blessing of natural resource into a curse.

If you ask the Ogoni people of Rivers State how oil became a curse to their land, they would tell you the sad story of their interaction with Shell, the giant oil multinational. The role of foreign banks and other institutions in facilitating the looting of the oil money and providing safe havens for the loot ought to be factored into a comprehensive definition of the resource curse. The curse has internal and external dimensions. This is by no means an attempt to shift the blame abroad. Nigerians in the public and private sectors have looted oil revenues and in the process they got willing helping hands from corrupt individuals and organisations in the metropolis.

Even though agriculture was the mainstay of the economy in the first republic the post independence development model was influenced by the former colonial regime. As industrialization was deliberately not promoted Nigeria remained a producer of raw materials to feed the industries in Europe and the United States. Indeed, the crisis of underdevelopment was compounded by successive military regimes which squandered the oil wealth.

Thus, in spite of the abundant wealth from crude oil and other raw materials the military rulers could not manage the economy in the national interest. In fact, one of them actually confessed that the problem was not how to make money but how to spend it. No doubt, lack of planning and over reliance on pro imperialist economic prescriptions paved way for the pauperization of the people. With large scale looting of the treasury the ruling class had to resort to borrowing from western multilateral institutions. To repay the loans and fund the budget the military dictators introduced austerity measures.

The profligacy of the political class in the second republic led to the promulgation of the Economic Stabilization Act by the Shehu Shagari administration. As the civilian wing of the ruling class could not implement the harsh economic programs of imperialism the military returned to power in December 1983. But as the Buhari/Idiagbon junta resisted the takeover of the economy by imperialism a palace coup led by General Ibrahim Babangida was executed. Three years later, the IMF/WB engineered the imposition of the Structural Adjustment Program on the nation. With the ruination of the economy by SAP the Sani Abacha junta came up with vision 2010 while the Olusegun Obasanjo administration opted for NEEDS. However, each of the economic programmes has enriched a few at the expense of the majority of the people. Having failed to invest the oil wealth in the years of abundance the governments are now broke.

The Buhari administration has blamed the economic crisis plaguing the nation on the fall in the price of crude oil and the looting of the treasury by the PDP government. Since these are manifestations of the pseudo capitalist system operated in Nigeria we do not share the baseless optimism of the federal government. In any case economic recession has always been with the poor in Nigeria. The Constitution has not helped matters. Section 162 thereof provides for the sharing of the oil revenue without imposing any duty on the governments to invest such revenue in infrastructural development.

Resource Blessing and Its Perversion
Oil, gas, solid minerals and other natural resource that Nigeria precariously depends upon are non-renewable. This is an indisputable geological fact. Yet it is frightening listening to our economic managers discussing the nation’s economic debacle with oil as the first and last words. Economic management has been reduced to monthly sharing of revenues accruing to the federation account. You then wonder if Nigeria will disappear from the world map if a geological accident happens tomorrow morning and the crude oil deposits vanish. Indeed, all of us have cause to worry about the socio-economic (and by implication the political) future of Nigeria. Yet the bitter truth is that the oil wells would be exhausted one day. Maybe this eventuality will happen in the next three decades. Meanwhile, Nigeria even lacks the capacity to determine precisely how much of the crude stuff is extracted by the oil companies, which exclusively own the requisite technology of exploration and drilling.

Nigeria is also reportedly lacking in even the meters to gauge the oilrigs. So the prognosis for the future is scary given the current trend of killing corruption and abysmal lack of planning. You would even be more disgusted when you compare the giant of Africa, Nigeria, and Mauritius, a small island off the east coast of Africa. Mauritius has no mineral resource. But education is free up to the university level. There is free healthcare for all including free heart surgery. Transportation is free for all children. About 87% of the people own their homes. The nation places a high premium on the social safety net. It is remarkable, that former Chief Economist of the World Bank and Nobel Laureate in Economics, Professor Joseph Stiglitz, has recommended the “ Mauritius Miracle” to other countries including the United States and nations of Europe.

About 51 countries have been identified by experts as natural resource –rich. Ironically, some of these resource-endowed countries are among the poorest on earth in which basic needs of the people are not met due to gross economic mismanagement. They are susceptible to the curse of oil, gas, gold, bauxite, copper, uranium etc. Nigeria is prominent in the inglorious list of nations chronically afflicted by the resource curse.

But let us look at the highly inspiring exceptions of two small countries in Africa, one is rich in diamonds with other minerals and the other has some oil deposits. Botswana is rich in diamonds, cobalt, copper and other minerals. As a matter of socio-economic planning and law, revenue from the exploitation of natural resource is devoted to capital expenditures. Expenditures on education and health are included in the capital budget because they are regarded as human capital investments. The example of Botswana has proved that natural resources need to be a curse in a country where planning and visionary leadership are in place.

The second example is the oil-producing Sao Tome and Principe. The country’s Prime Minister Patrice Emery Trovoada spoke at a forum here in Nigeria last year where he proudly declared that revenues from oil could only be “a bonus” to the budget as the country relies principally on agriculture and tourism. He said he had no cause to lose his sleep because of fall in oil revenues. The focus of the tiny country is on human capital investments. It is tempting to dismiss these exceptions as small countries without the huge economic problems of Nigeria. You must, however, recognise that they are small countries with big ideas about the future. They are small nations on the path of a huge progressive development.

In contrast, Nigeria is a big country with a limited vision. Oil has become a negative factor of underdevelopment of Nigeria for some reasons. First, development plans were abandoned because of the cheap source of revenues from oil. Lip service has been paid to agriculture, industrialisation and even technological and scientific advancement. Secondly, the corruption in the Nigerian state could survive on the royalty from oils without revenues from any other source including taxes. Thirdly, investments in human capital –education and health- have declined. The more petrodollars roll into the public treasury, the more poverty exacerbates. This has been the familiar narrative especially in the last 30 years when the ruinous Structural adjustment Programme (SAP) was imposed by the military regime of General Ibrahim Babangida and corruption became institutionalised.

Corruption, a Curse Fuelled by Oil
Corruption is doubtless a curse planted on the path of Nigeria to development. The fuel for this menacing curse is provided by another curse that is the curse of the historical mismanagement of the natural resource including oil and other resources. If you take a graphic look at the profile of corruption deriving from the oil revenues in the four decades, you would see a burgeoning problem. In 1980, there was a massive outrage when the matter came up in the National Assembly that N2.8 billion of oil money was missing. About 14 years later, the Okigbo Report said the figure of oil money not accounted for by the regime of General Babangida was over $12 billion. Another dictator, the late General Sani Abacha enriched himself to the tune of $5 million. By 2011, the nation was treated a theatre of the absurd when hundreds of billions of naira were allegedly taken by fuel subsidy merchants without importing fuel.

In the latest report of the Nigeria Extractive Industries Transparency Initiative (NEITI), about $20 billion remains unremitted to the federation account by the oil companies. No one is being tried for this alleged economic crime. It is interesting that government is not enthusiastic enough about recovering the looted funds. Its focus is on borrowing against which the future oil revenues could be mortgaged.
Already Nigeria is talking of signing a crude-oil contract with India for $15 billion. With that India would have access to cheap oil from Nigeria for years to come.

Meanwhile, the money that should be spent on schools, hospitals, roads, bridges, water supply, cheap transportation and potable water supply has been looted and taken into safe havens. The money has been spent on mansions abroad and private jets. With this trend in a nation, the blessing of natural resource has been perverted. It has become a curse. Such a nation is on the path of underdevelopment.

Nigeria’s Image of Corruption
To further appreciate the enormity of the role of corruption in the perversion of natural resource that could have otherwise been a blessing into a curse, it may be useful to ponder how Nigeria is perceived externally. Dozens of foreign scholars, experts, journalists and other observers have written volumes about corruption in Nigeria especially in the oil sector. For some of them Nigeria has simply become a metaphor for resource curse. We may choose to ignore some of the cynical and sometimes prejudicial comments from abroad such as the one made recently by former British Prime Minster David Cameron that Nigeria “is fantastically corrupt.” However, a distinguished university audience such as yours cannot afford not to ponder sober observations by scholars from abroad on the ruinous effects of the resource curse on the political economy of Nigeria. For instance, an American noted political scientist, Francis Fukuyama, in his recent book entitled “Political Order And Political Decay”, devotes a whole chapter on Nigeria to make a point about how corruption could be a cause of political decay.

Hear what Fukuyama said about Nigeria: “It is estimated that from the 1970s to the early 2000s, Nigeria took in about $400 billion in oil revenues. Unlike the East Asian export-led economies, this money was not ploughed back into investments in either physical or human capital (that is education). Nor did it have much of an effect on the incomes of ordinary Nigerians: indeed poverty rates, and other indicators of development, such as child mortality rates, barely budged…

“So where did all the money go? The answer, not surprisingly, is that it went into the hands of Nigeria’s political elite. The elite centres on a series of ogas, or Big Men, and their patronage networks. Some of the ogas are descendants of the traditional elite that ruled prior to the arrival of British colonialism, but others are self-made men -former military officers, businessmen and politicians who succeeded in using the political system to enrich themselves.” Can you imagine, even Fukuyama talks about the “ogas”!
As we discuss the cancer of corruption on Nigeria’s development fabric, it is important to think about the immense reputational damage in the global arena that the activities of the corrupt elite have caused the nation. So lawyers, journalists, scholars and other professionals who attempt to rationalise the problem or divert attention from it should think seriously about the image of Nigeria.

In spite of its commitment to promote accountability in governance the National Assembly is apparently determined to frustrate the prosecution of politically exposed persons. Having not been allowed by the Nigerian people to confer immunity on themselves from criminal prosecution the national assembly members have usurped the powers of the President to appoint the members and staff of the Code Conduct Bureau and Code of Conduct Tribunal. With respect, the national assembly members were not properly advised in the circumstance. Otherwise, they would have known that the purported amendment of the Code of Conduct Bureau and Code of Conduct Tribunal Act by did not take cognizance of section 154 of the Constitution which has empowered the President to appoint the members of both bodies subject to the confirmation of the senate and section 156 of the Constitution which has conferred powers on the Code of Conduct Bureau to appoint its own staff.

The amendment has also sought to amend the Constitution by insisting that no charge will be filed against any public officer who has not been confronted with allegation of the breach of the Code contrary to the finding of the Court of Appeal in the case of Bukola Saraki v Federal Republic of Nigeria. Since the relevant provisions of the Constitution have not been amended the purported amendment of the CCB/CCT Act by the national assembly is of no legal effect whatsoever. In order to slow doen the anti corruption crusade the national assembly has failed to confirm the appointment of the Acting Chairman of the Economic and Financial Crimes Commission, Mr. Ibrahim Magu.

Like the national assembly the other arms of the government have not keyed into the anti graft policy of the Buhari administration. The ministers and other top officials of the government who have been linked with corrupt practices have been given a clean bill of health without any investigation. Instead of charging some indicted ministers to court the state governments which are the complainants have abdicated their constitutional duty to the federal anti graft agencies. On their own part some of the anti graft agencies have kicked against the promotion of accountability and transparency in government. For instance, in spite of the clear provisions of the Freedom of Information Act the Code of Conduct Bureau has continued to deny access to the asset declaration forms submitted to it by public officers.

Apart from lack of interagency collaboration for effective performance the anti graft agencies have concentrated attention on the recovery of a few billions of Naira allegedly stolen by politicians and military officers. In spite of the pressures of civil society organizations the multinational companies involved in large scale looting have not been questioned. The anti corruption policy of the government requires a comprehensive review while the fund recovered so far should be managed by a Committee whose members are drawn from credible civil society organizations.

The criminal diversion of public funds by the ruling class pales into insignificance when compared with the amount of capital flight promoted by western governments and multinational companies. Curiously, the Buhari administration has failed to address capital flight and round tripping by financial institutions. Otherwise, why has the government been reluctant to ask the EFCC to recover and sanction the oil and shipping companies which underdeclared the crude oil worth billions of dollars shipped from Nigeria under the Jonathan administration? Why has the government failed to recover the $20. 2 billion withheld from the Federation account by the NNPC and some oil companies from 1999-2012? Why has the government not inquired into the allegation that the sum of $25.4 billion was laundered and illegally taken out of Nigeria by a telecommunication company? Why has the government failed to recover the looted wealth of the nation which has been traced to financial institutions in the West and the United Arab Emirates? Why has the CBN failed to recover the $7 billion deposit and N600 billion bailout given to the commercial banks in 2006 and 2008 respectively? Instead of intensifying efforts to recover such huge funds the government is determined to take a loan of $29.6 billion.

Having made appreciable progress in the investigation of the diversion of public funds by certain individuals and corporate entities the national assembly ought to reject the request of President Buhari to further plunge the nation to debt. The national assembly should also kick against the proposed sale of public assets as it will further concentrate wealth in the hands of a few people. The federal government should be tasked to recover the looted wealth of the nation and prosecute the culprits notwithstanding their political affiliations. The payment and servicing of debts should be investigated as the loans were substantially diverted by a number of unpatriotic public officers.

What is to be done?
The first thing is to demystify oil in the political economy of Nigeria. We must return to development planning. Government revenues should derive primarily from taxes to be collected from economic players in agriculture, industries and technological advancement and the public sector. As Professor Biodun Jeyifo has rightly noted, “Before Nigeria became one of the world’s largest oil producing countries, we were well on our way to using surplus accumulation from export or so-called ‘cash crops’ to transform our economy into a modern capitalism with an internal industrial base for light consumer goods for a very large ‘home’ market that embraced virtually all of West Africa. The richest Nigerians then did not depend, as they do now, on patronage from government, federal or regional.” We must move away from a cargo economy to the knowledge economy. You cannot develop a knowledge economy without huge and deliberate investments in human capital in the areas of education and health. The development of Nigeria depends on its greatest assets –the human beings especially the youth. The future of Nigeria is not oil. It is even more so with the focus on greener sources of energy by the major oil consumers.

The global agreement signed last December in Paris on Climate Change is a loud signal to the nations such as Nigeria where oil is all. Implicit in the agreement is that the world economy should consume less oil; it is a pact against the central role of hydrocarbons in economic management. The agreement is to limit carbon emissions. As soon as alternative sources of energy are discovered the economic importance of hydrocarbons will eventually reduce. That is an unmistakable signal of peril, (not promise) for a nation whose economy depends mainly on the sale of oil. The economy should be weaned from oil. It has depended on petrodollars for too long and the consequence has been poverty, misery on the streets and underdevelopment.

The environment of the Niger Delta should be reclaimed and the injustice done to the region should be redressed. To this effect not less than 3 percent of the 13 percent derivation fund paid to oil producing states should be channeled towards the development of the oil producing communities.

The socio-economic hemorrhage called looting should be seriously tackled by the Nigerian people. Government should employ the force of example by punishing corrupt elements in the corridors of power. Government should also set up a loot recovery agency that could generate more money than what the government is struggling to borrow under humiliating terms. The process of loot-recovery should be handled in a more sophisticated manner. All cases of corruption should be prosecuted to prove that socio-economic crimes are a threat to development and welfare of the people.

Finally, for several years after the attainment of political independence our universities were involved in the planning of the economy. At that time our universities served as centres of knowledge and ideas for the benefit of the society. But following the imposition of the Structural Adjustment Programme in 1986 the ruling class has allowed the Breton Woods institutions to design and manage the Nigerian economy in the interest of imperialism. It is hoped that the economic recession will challenge our universities to join issues with the free marketers with a view to compelling the government to do away with neo liberal policies which have subverted the sovereignty of the nation.

(Being the Text of the Convocation Lecture delivered by Mr. Femi Falana, SAN at Oduduwa University, Ile-Ife, Osun State recently. It was originally titled ‘The Blessing of Natural Resource Endowment and the Curse of Corrupt Leadership: Critical Perspectives on Nigeria’s State Of Underdevelopment)