Elsevier

Journal of Cleaner Production

Volume 35, November 2012, Pages 183-193
Journal of Cleaner Production

The resource curse and the decentralization of oil revenue: the case of Nigeria

https://doi.org/10.1016/j.jclepro.2012.05.046Get rights and content

Abstract

Nigeria is often portrayed as a poster child for countries experiencing the resource curse phenomenon. The pertinent question that confronts policy makers in Nigeria today is no longer whether or not Nigeria is suffering from the resource curse; rather, it is what to do about it. Since the 1980s, various policy initiatives have been adopted by the Nigerian Government to address different aspects of the resource curse but with limited success. It is therefore not surprising that regional governments within the Niger Delta have in recent years turned to Oil Producing Area Development Commissions as a means of reducing the poverty and conflict that is endemic in the region. Drawing on empirical data, this paper argues that the Oil Producing Area Development Commissions have been unable to improve the lives of the people in oil producing communities. It is suggested that this is due largely to their inability to alter the opportunities and incentives for rent seekers and allow for active community and civil society participation. The paper concludes by considering the implications for the resource curse and the way forward for these commissions.

Introduction

The discovery of oil in 1956, and its subsequent extraction since 1958, has over the past 50 years transformed the Nigerian economy from an agricultural based economy to an economy essentially dependent on petroleum. Between 1960 and 2012, oil output exploded from just over 5100 barrels per day to about 2.68 million barrels per day (Ezeah, 2012), and government revenue also rose from N66 million (naira) in 1970 to over N10 billion in 1980 (Watts, 2007).1 Today, the rentier2 status of the Nigeria state is emblematic in the fact that oil accounts for 40 per cent of its GDP, 95 per cent of exports and 83 per cent of government revenue. The centrality of oil in national politics, against the backdrop of pre-oil politics, facilitated the full manifestation of the resource curse.

In socio-economic terms, over the period 1965–2004, per capita income fell from $250 to $212. Between 1970 and 2000 the number of people subsisting on less than $1 a day grew from 36 per cent to more than 70 per cent, from 19 million to about 90 million (Shaxson, 2007, Watts, 2007). Income distribution deteriorated, such that 90 per cent of oil revenue accrued to 1 per cent of the population, while between 1960 and 1999 the country lost as much as $380 billion to corruption and mismanagement (HRW, 2007). Watts (2007) noted that in 2003 alone, 70 per cent of the country’s oil wealth was either stolen or squandered. Similarly, from 1975 to 1983 capacity utilization in Nigerian manufacturing fell from 77 per cent to 50 per cent, and then to 35 per cent by the mid-1980s, a level from which it has not recovered (Shaxson, 2007). Nigeria is currently ranked 156th out of 187 countries in the UNDP’s Human Development Index.3

Oil wealth has potentially transformed the state into an effective tool for corruption. Consequently, military coups and counter coups with military dictatorships were the dominant form of government in Nigeria for over 30 years between 1960 and 1999. For example, while the administration of Babangida who ruled between 1985 and 1993 saw the disappearance of $12.2 billion, General Abacha’s regime is believed to have embezzled one to three billion dollars. In addition, the advent of democracy in 1999 has seen the use of violence as a means of winning elections and holding on to power. As Idemudia (2009a) explains, conflict in the Niger Delta area where oil is extracted has increased both in intensity and scale. Incidence of oil bunkering, kidnapping and ransom demand, electoral violence, and inter/intra-community violence now occur almost on a daily basis. While views on the resource curse thesis remain polarized (see Obi, 2010), the debate in Nigeria today is what to do about it.

Strategies for remedying the curse, however, remain poorly developed, particularly in Nigeria (Siegle, 2005). It is against this background that this paper seeks to bridge this gap by critically examining the extent to which newly created Oil Producing Area Development Commissions (henceforth oil commissions) in the Niger Delta can improve the livelihood of oil producing communities in the region. The focus on the oil commissions initiated by the different Niger Delta states has theoretical and practical benefits for two reasons. Firstly, while works undertaken by Frynas (2000) and Omotola (2007) have explored the effectiveness of the different federal instituted Development Commissions for the development of the Niger Delta region, this paper represents the first attempt to ascertain the effectiveness and relevance of the different oil commissions established by the Niger Delta states (i.e. provincial government). Hence, there is a possibility to explore the extent to which the state controlled oil commissions are different from or similar to the ones instituted by the federal government. Insight gleaned here will therefore be useful in any effort to better address the resource curse problem in the Niger Delta. Secondly, a focus on the oil commissions also offers an opportunity to assess the extent to which the decentralization of oil revenue that seems to underlie this policy response can be effective against the problems associated with the resource curse. Ross (2007) has argued that while there have been arguments for oil revenue decentralization, there is still no systematic analysis or accumulated evidence to strengthen the case for promoting or determining whether it can ameliorate the resource curse. As a result, he argued that we need to know more about the effectiveness of the different strategies to oil revenue decentralization. The specific objectives of this paper are as follows: (1) To identify the successes, challenges and bottlenecks of the oil commissions in carrying out their mandate, and (2) To consider the extent to which the oil commissions are effective for addressing the resource curse from community perspective.

Section snippets

The resource curse and policy response in Nigeria

The resource curse literature is now extensive, and dates back to the early 1990s, as systematically accumulated empirical evidence has suggested that developing countries that are endowed with natural resources tend to underperform economically relative to their resource-poor counterparts (see Auty, 1993, Auty, 2001, Sachs and Warner, 1995, Sachs and Warner, 2001, Pegg, 2006a), exhibit low levels of democracy (see Ross, 2001, Karl, 1997, Moore, 2004) and are more likely to suffer violent

The emergence of oil producing area development commissions in Nigeria

The issue of revenue allocation in Nigeria has been highly contested. Adesina (1998) notes that this is not surprising given that in pluralistic societies like Nigeria, fiscal matters tend to transcend the purview of economics as it assumes political, religious and social dimensions. Hence, the nature of fiscal federalism and revenue allocation formula in Nigeria is such that it has failed to emphasize the derivation principle, and to allocate adequate resources for the development of the Niger

Oil producing area development commissions: structure, mandate and activities

This section provides a brief description of the three Oil Producing Area Development Commissions in Ondo, Delta and Edo States visited (see Table 1). They are as follows: Ondo State Oil Producing Area Development Commission, Delta State Oil Producing Area Development Commission, and Edo State Oil Producing Area Development Commission.

Oil producing area development commissions in the Niger Delta: strengths and limitations

This section critically examines some of the strengths and weaknesses of the commissions. It furthermore identifies the opportunities and threats confronting the ability of the oil commissions to deliver on their developmental mandates in oil producing communities.

Conclusions and emerging issues

There are three main emerging issues from this study. The first emerging issue is that, if we take actual experience of the community members as a basis for assessing the contributions of the oil commissions to improve the livelihood of the communities, one can assert that the oil commissions’ contributions to improve the life of the people in the oil producing communities have been at best marginal. This is because the enabling laws that set up these oil commissions (i.e. public sector

Acknowledgment

The author would like to thank the three anonymous reviewers and the editor for constructive comments on a previous draft of this paper. The author acknowledges financial support for his research from the Social Sciences and Humanities Research Council of Canada and the Heinrich Boll Foundation in Nigeria. I am also grateful to Godwin Ojo, and Destiny Enabunlele for their support and assistance during data collection. Any error is the sole responsibility of the author.

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