Crude Oil and The Under Development Of The Nigerian State – Moshood Olajide

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By Moshood Olajide

Conventional wisdom in intellectual and politico-economic circles, promotes the view that Nigeria became rich and better off, with the commencement of crude oil exportation, especially when from the 1970s. The leap in crude oil revenue from $367 million in 1969 to $713 million in 1970 $1337 million to a phenomenal $451 billion rise in 2012, is usually cited to support this view. The quadrupling of crude oil prices in some years before the recent crash in oil prices also put the argument in bolder belief.
Inexorably, these impressive statistics made a positive impact on the per capital income of Nigeria. They tend to suggest improved standard of living for the average Nigerians. But it should by now be clear that capital income, like all other macro-economic indexes, is hardly an adequate expression of the standard of living of a population, across the board.
The supposed advantages of crude oil to the Nigerian economy are largely peripheral. A more perceptive look at the entire gamut of the economy, especially against the backdrop of the development agenda would indicate that crude oil has contributed more than any other single factor to under – develop the economy. The extant crisis and continuing under – development of the economy are but mere precipitate of a rent – seeking, free – riding, and coasting culture engendered by crude oil, and characterising the Nigerian state and its local patron – saints.

Crude oil has served to undermine agriculture which is the initial bedrock of the Nigerian economy. It fostered an import substitution industrialization strategy with its attendant external dependency syndrome. It has sustained the colonialism inspired re-orientation of Nigeria’s trade and economic interactions away from Africa which ordinarily should constitute its primary economic constituency. It marginalizes the other sectors of the economy in relation to foreign direct investment (FDI), in the economy and distorts even the crude oil sector itself, in all its ramifications. It has also constraint several economic reform in the country.

In the early years of Nigeria’s political independence, the agricultural sector was the mainstay of the economy. Out of a total land mass, 98.3 million hectares of which 71.2 million hectares were arable, only 34 million hectares was cultivated. Even this was still enough to engage more than 60 per cent of the population, and acted as a base for the economy. According to statistics from the budget office, agriculture’s share of GDP in 1964 was 60.96 per cent. In 1964, it accounted for 70.80 per cent of total export. The country was not only self sufficient in food production, it also had enough for exports. It was obvious then that what the country needed to do was to expand the sector, mechanized it, to reduce, considerably the labour force tied to the land and allow it to be the base of the nation’s industrialization drive.
The Nigerian state failed to do this and attention shifted to crude oil. From there, agriculture started to suffer neglect as the crude oil sector became the centre of all activities while Agriculture’s contribution to the GDP decline tremendously. Whereas oil exportation rise steadily. What is more, crude oil earnings created the illusion that money was not the problem, but how to spend it. It inevitably encouraged unreasonable import based consumption patterns and tastes. Coupled with the dwindling productivity of agriculture, Nigeria had by the 1970s commenced a programme of massive importation of food items and sundry other consumables. This, from the second half of the 1990s to 2013, Nigeria had started expending close to 30 billion dollars on food importation.
It is in the light of these developments and trends that the point can be made that crude oil and agriculture, in the Nigerian economy, constitute different sides of the same coin. The crude oil sector not only grows or expands at the same rate the agricultural sector contrasts, but also the same forces responsible for the growth of the crude oil promote the underdevelopment of agriculture.

Industrialization involves the capacity of a nation to master and locate within the confines of its borders in the whole industrial processes, from conception through the organization of production.
Nigeria’s industrialization drive was still at its rudimentary stage when crude oil made its powerful appearance in the economy in the early 1970s. Rather than using crude oil earnings as a basis for financing a thorough, well focused industrialization programmes, the government always sought the easy way out. It adopted the import substitution industrialization strategy. The assumption underlying this strategy was that If industrialization drive could commence with final touch industries i. e assemblage of finished products, it could be led systematically by backward integrated to the production of intermediate and finally industrial materials.
But Nigeria’s import substitution industrialization was entirely dependent on imported inputs, like completely knocked down parts of finished products.
Nigeria could only adopt this strategy of industrialization only because it was generating enough foreign exchange savings to support and sustain the importation of industrial inputs. One implication of this was that the stability and survival of the entire industry depended precariously on a guarantee of regular supply of foreign exchange needed to pay for imported inputs. Thus overall, crude oil promoted the adoption of the import substitution strategy, and by so doing engendering an externally dependent substitution programme whose dynamics were located outside the confines of the country’s geographical boundaries.

The entire hydrocarbon sector of the Nigerian economy is also ironically underdeveloped by crude oil. The urge to earn as much rent as possible through the easiest means, i. e. export of crude has foreclosed the possibilities of the development of the other sectors of the hydrocarbon industry. In relation to refining, Nigeria exports virtually every drop of crude oil it produced. The possibilities for full capacity utilization in refineries continue to be constrained by social, political factors and forces. This is inspite of the humongous revenue accruing from the sector.
Perhaps, it needs to be added that the multiplier effects of massive refining of petroleum products on job creation, technological advancement, infrastructural development, e. t. c. are lost in a situation in which virtually every barrel of crude produced is exported in raw form.
As well, for many years, the petrochemical sub-sector was neglected. Even the plants does not have any significant on the national economy. These are some of the more important ways in which the underdevelopment of various sectors of the economy is consistent with the logic of Nigeria’s absolute dependence on crude oil exports.
The situation in the gas sub -sector is much more critical. Nigeria is reputed to have 10 tines more than crude oil estimated at 3.4 trillion cubic metres, the reserve according to media reports is expected to last for about 114 years. While this represents just about 6 per cent of the overall reserve of the Organization of Petroleum Exporting Countries (OPEC) , it is enough to make Nigeria the fifth largest producer of gas in the world.
Thus far, billions of dollar has been expended on the LNG product through a joint venture partnership and production sharing agreement. Nigerian owns 49 per cent shares in the LNG company.
Also, as a consequence of the wholesale concentration on crude oil exports, Nigerian loses close to 160 billion naira annually in the solid mineral sector of the economy. This is due mainly to government inability to put in place policies which could have generated revenue yielding activities in the sub-sector. Buhari’s plan to revolutionize the sector is yet to yield any positive result.
In 1994,the Nigerian government, as a demonstration of its commitment to tapping funds from this source, set up the Ministry of Solid Minerals to focus exclusively on the development of this section. Again, as it is the case with the petrolchemical and LNG projects, it is yet to be seen how much impact this effort can make in loosening the stronghold of crude oil on the Nigerian economy.

In the service of the British economy, British colonialism succeeded in orientating Nigeria’s trade away from Africa to Europe. The situation should have changed after political independence but for the emergence and subsequent dominance of crude oil over there Nigerian economy. The process of this structural distortion is clear enough. Because of the marginalization of the other sectors of the national economy, crude oil over the years, became virtually the sole export product. To all intents and purposes, the recent crash in oil revenue which has led to government cutting spending on infrastructure has prove that Nigeria is a mono cultural economy. In a very important way, this reality reduced considerably the scope of the economy, particularly trade interaction between Nigeria and Africa. Crude oil has undermined a cardinal aim of Nigeria in forming the Economic Community of West African States (ECOWAS) – to cultivate the region as a potential market for Nigeria’s industrialization drive. This has also inevitably undermined the most important basis of the integration arrangement – economic cooperation.

Fundamental to the story of crude oil exploitation in Nigeria is the state of the environment in the oil bearing states of the country. With gas flares burning 24 hours a day in very close proximity to human habitation, over 100 oil wells in Village backyards and front gardens: a petrochemical complex, two nil refineries, a fertilizer plant and oil pipelines criss-crossing the land scape above round, all these pose serious threat to the health of citizens in the area. The reluctance of the Nigerian government to recognize the need for a major intervention to protect the environment apparently informs the formation of the Movement For the Survival of Phone People (MOSOP) by Ken Saro Wiwa in 1990.

It is beyond debate that Nigeria’s political economy has over the years been characterized by acute political instability, and the inability of democratic governance to thrive. This is a residue of the acute contest for power by different factions and fractions of the elite. The stakes are considerably high.
The instability attained its fullest height in the civil war period which led to the death of 2 million Nigerians, the nature and direction of which was also greatly influenced by the selfish calculation of Western economic interests focusing strictly on the nation’s crude oil reserves. The annulment of the Presidential election of June 12, 1993 by the General Ibrahim Babangida led administration, the arsons, bloodshed and violence that characterize 2011 Presidential election, the recent Viagra agitation led by Nnamdi Kanu which has led to his incarceration, and the attendant political crisis and acute ethnic distrust in the country ever since, has put in bolder belief the need for the transfer of power between the Geo political zones. But the fear of losing control over the huge oil rents associated with the control of the federal government on the part of the Northern elites, has undermined all suggestions in this regard. The consequences is rising tension in the polity, with increasingly plausible threats of a possible breakdown of the Nigerian state.
For as long as power and resources are concentrated at the centre, in flagrant violation of the most important elements of federalism, for so long shall the contest for central power in the country become so acute, desperate, disorderly, and inevitably violent. What is at stake in terms of oil rents accruing to whichever fraction of the ruling elites in power is too important to be easily jettisoned on the altar of the need for stability and sustainable democracy. Meanwhile, the attraction in power is too great for the fraction that is locked out. Such cannot be expected to simply accept its lot. This is a perfect recipe for political crisis and instability. It is in this sense that crude oil has constrained the possibilities of political stability and sustainable democracy in the country.

The Nigerian polity is convulsing and may eventually die as a result of the acute contradictions and crisis thrown up by the overbearing place of crude oil in the Nigerian economy. It would have been a case of crude oil not only underdeveloping, but actually killing a nation. The Nigerian economy cannot develop as long as all premium is placed on crude exploitation and exportation. The first critical step to take in the circumstances is to start perceiving crude oil in its entirety as a negative rather than a positive factor in Nigeria’s overall development. It is then the country can begin to formulate policies that can steer the nation away from the path of disaster charted for it by crude oil. Even the basic infrastructures, the construction of which crude oil earnings are financed, are disjointed and look more like infrastructures of underdevelopment rather than those for development. The road network in the main cities of the nation has introduced a high degree of chaos rather than smoothen intra-city travels. Airports, like the one in Abuja, the federal capital territory are structurally unsafe, industrial infrastructures like the Ajaokuta Iron and Steel complex have been written off by the World Bank and the International Monetary Fund (IMF) as white elephants and conduit pipe of corruption. And corruption, at all levels in the society, is so acute, giving the characterization of the country as one of the most corrupt nation in the world a tinge of credibility. These issues continue to pose the question whether Nigerians would not have been better off, whether its society would not have been saner, and whether its state would not have been better and effective especially in relation to development and its delivering capability, if crude oil has not been discovered in the country about four decades ago.

Moshood Olajide is a Student of Obafemi Awolowo University Ile – Ife, Osun State.


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