Magoosh GRE

Nigerian Politics and Oil: The Impact of the ‘Resource Curse’ on Governance in Nigeria

| April 2, 2015

1. Introduction
1.1 Overview and Research Question
Since the 1980’s consumption of oil and gas (‘non-renewable natural resources, or NRNR) has increased, with prices also increasing steadily. The world demand for energy is predicted to rise by up to 50% over the next 25 years, with the bulk of demand coming from emerging economies. Most of the demand is predicted to be met through existing resources (oil and gas). Recently, a number of low income countries have sourced oil and gas within their boundaries, resulting in ‘windfalls’ to their economy. West Africa in particular is likely to become a larger oil provider, and already 6 African countries (Angola, Nigeria, Congo, Equatorial Guinea and Gabon) are at least 60% dependent on oil for national revenue (ODI 2006).

Nigeria is now one of the world’s greatest producers of oil, and its economy dependent upon the oil sector. Oil currently represents 65% of government revenue and 95% of the country’s export earnings, with the US one of the main purchasers (EIA 2010). It is ranked by the CIA as the 15th oil producing country in the world, at 2,211,000 barrels per day, and has the highest output of all the African countries (CIA 2011). Nigeria has been a member of OPEC since the early 70’s, and the oil is preferred for its “light, sweet quality”, with substantial reserves of over 30 billion barrels (EIA 2010).

However, oil has not meant unproblematic economic success for Nigeria, and has been associated with a number of problems. These include vandalism and attacks upon infrastructure by local groups, oil theft, and pollution issues leading to loses of land. Security issues are of such concern that some workers have held industrial action over them. Oil has also caused political conflict with a number of groups such as the ‘Movement for the Emancipation of the Niger Delta’ seeking control over oil supplies to redistribute the wealth. Instability has caused production capacity to drop substantially (EIA 2010). Poor management has also dogged the industry: The BBC reported in 2010 that NNPC, Nigeria’s state oil firm, was insolvent, unable to pay debts of over £.3.3 billion, and seeking help from the government (BBC 2010). Recently, there has been increasing awareness of the environmental impact of oil in the Niger Delta, with a number of harmful oil spills totalling roughly 260,000 barrels per year (EIA 2010)

Despite the increase in revenue generated by oil, Nigeria suffers from poverty, with large gaps between the richest and poorest in society. Nigeria’s population, at 110 million people (1995) is the largest in Sub-Saharan Africa, and 2/3 of this number are living in poverty, in predominantly rural, agricultural and traditional societies. The smaller urban population have benefited more from the revenue that oil has brought, although urban poverty is growing faster than rural. Poverty in Africa is complex, with several influencing factors including education, location and culture. Spending on public services is poor, partly due to insufficient resources but also to inadequate management of resources and inefficient use. Transparency and accountability is also insufficient (Worldbank 2010). Further data about Nigeria also underlines this picture (Worldbank 2011). The population overall is still primarily occupied in agriculture, at 60% (with industry and service making up 10 and 30% respectively). Unemployment stands at 12%. Only 10% of the population use a computer, and literacy is relatively low at 68%. The electricity supply is erratic, and telecommunications still under development (WITSA 2009) Despite a poverty headcount ratio of 62%, the population is growing fairly rapidly. Income held by the lowest 1/5 of the population is only 5.9% of overall rate. Life expectancy is low at 52 years, although this is gradually improving. Fertility amongst adolescents is high (152 births per 1000 women 15-19, although falling) and under 5 mortality rate high (160 per 1000, though falling). Only half the population have access to a sanitary water supply (Worldbank 2011).

There is, therefore, a clear gap between the results Nigeria’s oil resources might have been expected to bring, and actuality. This gap prompts the research question for this study:

why has Nigeria such poor socio-economic indicators and poor governance given its huge income from oil?

The ‘resource curse’ or the “notion that natural resource abundance can be a curse” (Auty 2007) is a widely documented phenomenon, with much attention paid to the idea since the 80’s. Given the poor economic and socio-political situation in Nigeria, a related research question arises:

Is Nigeria a good example of the resource curse?

1.2 Brief Literature Review
The ‘resource curse’ has been much discussed since the 1980’s, supplanting a view that natural resources can only be positive for a country (Robinson et al 2006). While definitions of the term are fairly straightforward, opinions differ regarding whether the causes of this gap between expected and actual outcomes of natural resources are primarily economic or political / cultural. What is clear from a general overview of the concept is that natural resources and the way they are used is intimately connected with problems in governance, particularly corruption. Issues with government, management and legislation can lead to various negative outcomes including civil war and increasing gap between rich and poor, and the only apparent way to resolve these is by strengthening government and increasing transparency. This overview helps shape an understanding of the situation in Nigeria. It is clear that oil production, for example, has had a detrimental effect upon the democratic political system, which has only been established recently. Infrastructure has been weakened, for example. In addition, oil has had an influence upon political competition within the country, due in part to Nigeria’s unique make up in terms of ethnic mix, political constitution and federal character. Influence in this area has included more intense struggles for power amongst rivals. There has also been an impact upon the military in Nigeria, and their relationship to politics. In some ways, the impact upon Nigeria’s economy is even more marked than the impact upon the political situation, although the two cannot be considered in isolation. Public services have suffered particularly, with poor distribution and wasteful services. Corruption is also rife in government, particularly that which is tribally influenced.

1.3 Methodology
This study consists of secondary, rather than primary research. Primary research is information newly collected for the purpose of a study, for example a questionnaire or observational research. Secondary data consists of studies carried out by previous researchers (Kotler and Armstrong 2010). Secondary research can serve a number of purposes: it can help identify a research problem, uncover an approach to solving that problem, help in research design, or even answer certain research questions (Crowther and Lancaster, 2008).

In this case, because there is a wide range of literature both on the theoretical nature of the resource curse and on Nigeria’s use of oil, an approach which synthesises existing work was selected, and the research question approached through secondary data only. In addition, the nature of the subject matter is broad, and the costs of conducting useful primary research would be prohibitive. Data was collected from a number of sources including academic journals and text books, government and international statistical websites, newspapers and academic databases. Online searches were conducted using key words including ‘resource curse’, ‘Nigeria’, ‘oil’, ‘petrochemical industry’, ‘Dutch Disease’ and similar, both alone and in combination. Evidence from the last 10 years was preferred, but older texts were used where appropriate, particularly where they related to theoretical discussions. The aim of the study is to evaluate background information on the resource curse before looking at the Nigerian situation.

1.4 Overview of Study
The study will first overview the nature of the ‘resource curse’, looking at the emergence of the concept, and considering definitions and meanings. Explanations of how natural resources can lead to poor outcomes will be considered, and the relationship between resource curse and governance will be discussed in detail, bringing out the damage natural resources can do to society and the part played by weak government and corruption. Chapter three will look at the relationship between the resource curse and democracy in Nigeria, looking at the impact of oil upon democracy and upon the political landscape, in particular how it has affected political competition. This chapter will also look at the relationship of oil to the military regime in Nigeria. In chapter four the subject will be the impact of the resource curse upon economic development in Nigeria, looking at the impact upon public services and the range of negative outcomes including corruption. Chapter five will synthesise the findings of this study. Evidence collected in preceding chapters will be considered in terms of the overall research question, and any implications for future study, as well as limitations, will be pointed out. The study attempts to show that all the evidence points to Nigeria as a clear example of the ‘resource curse’, as, despite the country’s status as a top oil provider, it still struggles with many issues including weak governance, corruption and poverty.

2. The Resource Curse
This chapter will examine the nature of the ‘resource curse’, looking at definitions of the terms and what it means in practice, theories to explain the mechanisms behind it, and in particular the impact of the resource curse upon governance and corruption.
2.1 History, Definitions and Meanings.
Until fairly recently, it was assumed that natural resources can only benefit a country (Robinson et al 2006). Economists traditionally assumed that the discovery of oil and gas, for example, were positive for emerging economies, while one or two dissenting voices questioned this, they were largely ignored (Rosser 2006). The concept of the ‘resource curse’; the idea that resources such as oil and gas could have a negative influence, did not arise until the 1980’s. Since, then, however, the idea has become widely influential, and “numerous studies have presented evidence to suggest that natural resource abundance – or at least an abundance of particular types of natural resources – is in fact a curse for developing countries” (Rosser, 2006, p. 557), with a suggestion that plentiful natural resources can lead to a number of problems including lack of economic growth, higher poverty, authoritarianism and war (Rosser 2006). The concept has been defined by ODI (2006) as follows: “The ‘resource curse’ is the phenomena whereby a country with an export-driven, natural resources sector, generating large revenues for government, leads paradoxically to economic stagnation and political instability”, with Murshed (2004) suggesting in addition that these poor outcomes take place over the long-term, and that there is a marked difference regarding the extent to which countries display the resource curse, with some types of natural resource, including oil, having a more marked relationship with poor outcomes (Murshed 2004). The notion of the resource curse is supported by factual data: OPEC figures demonstrate that GDP per head for a number of oil producing countries decreased by 1.3% each year from the mid 60’s to the late 90’s (Gylfason 2001). Other studies confirm this, including work by Sachs and Warner (1995, 1999) and Busby et al 2004 (Robinson et al 2006).

The ‘resource curse’ has a number of negative outcomes, both economic and political / social. Economically, it has been shown that “there is a negative correlation between resource abundance and economic growth” (Torvik 2009). In addition, it can lead to a widening of the gap between rich and poor (Learner et al 1998; Spilimbergo et al 1999). This may be because the industries concerned are economic enclaves with relatively few links to larger economy, or because unregulated public expenditure makes the inequality worse by for example spending in cities only (ODI 2006). Other economic effects include exacerbating debt, and highlighting problems with existing economic policy and structure, for example previous failures in investment, regulation and trade relations (ODI 2006). There are also many political and social negative outcomes of the resource curse, as governments often fail to use the income in ways which benefit the country as a whole, reluctant to translate the windfall into outcomes which benefit the community, such as investment. Resource richness can also lead to poor development of skills, as it diverts “attention from the process of wealth creation, and institutional and human development”. It can, in addition, highlight issues with infrastructure, administration and efficiency, and public sector management. Finally, public expectations can be out of line with what can in fact be achieved from the increased revenue (ODI 2006).

2.2 Models and Explanations
Models and explanations of the resource curse fall into two broad categories, the economic and the political. Early theorists thought that there was an economic link between abundance of resources and negative consequences, with countries who exported their natural resources having numerous problems including “declining terms of trade, volatile export earnings, an enclave economic structure” (Rosser 2006). Theories of this type often refer to the ‘Dutch Disease’, a categorisation of the resource terms in terms of changes to the exchange rate which are detrimental to other economic sectors (Rosser 2006). Dutch Disease was first noted in the Netherlands in 60’s, when gas was discovered in the North Sea, and has been defined as “the economic phenomenon in which the discovery and exploitation of natural resources deindustrialises a nation’s economy”, with a detrimental effect on the economy of the country. A surplus revenue is created, which in turn leads to an appreciation in the currency value. This then mean that exports are less competitive, as the higher prices mean goods are less attractive to buyers outside the country. Therefore, the country’s output becomes less focused upon tradable goods and more on non-tradable goods. This can lead to the erosion of manufacturing in the country, and hence loss of long-term competitiveness. This is particularly an issue for emerging economies as it puts their future potential for income from export at risk (Findlay and Lundahl 1994). Rosser (2006) suggests there are two parts to the ‘dutch disease’ effect; first, the natural resource sector take resources from other sectors, thus reducing growth in other areas, and second, the extra spending capacity generated from natural resources means a higher demand for other economy sectors, which leads to those sectors becoming globally uncompetitive.
More recently, economists have preferred a political model to explain the resource curse, although there has been considerable argument about the precise nature of the political causes and which are most important. Various authors argue that an abundance of resources leads to irrational behaviour (Krause 1994), that the capacity to supervise economy is constrained (Beblawi and Luciani 1987) or that the relationship with global economies is changed (Perelman, 2003) (Rosser 2006). Some suggest a model of ‘rent-seeking’ rather than ‘profit-seeking’ behaviour explains the resource curse. In rent-seeking behaviour, there is an attempt to “extract value by engaging in mutually beneficial transactions” via “artificially contrived transaction[s]” (Baland and Francois 2000) for example arrangements between firms in the resource industry and government agencies. In a rent-based economy, groups form to gain rent or other benefits from wider society, at the expense of society as a whole. This leads to poorer economic performance, especially during a resource boom, as groups become greedier and want a larger share. This leads to a fall in productivity and growth (Lane and Tornell). It is possible for good governance to work against this though (Murshed 2004).
Overall, for political theories, natural resources lead to “highly dysfunctional state behaviour”, including making bad decisions about policy, for example the failure to adjust spending to rises in income levels cautiously (Gelb 1988). However, it has been suggested (Robinson et al 2006) that while the ‘rent seeking’ model goes some way explaining the resource curse, “these models ignores politicians and political incentives” and take a one-dimensional view of the role played by the state, ignoring the extent to which the state can act independently from groups placing pressure upon them. Robinson et al therefore extent the model to fill the gap they identify, in which resource booms lead to different types of political incentives, which in turn have negative outcomes for the national economy and development (Robinson et al 2006).
In addition to political or economic theories, others suggest that the nature of the natural resource industry is relevant, with the distinction between ‘point-source’ activities, those which concentrate revenue into one small geographical area (oil is an example), and ‘diffuse’ activities, which spread the revenue about (Easterly 2001). It has been suggested that some activities (those associated with point-source rather than diffuse industries) exacerbate the resource curse. In diffuse economies, by contrast, the producers of a resource can also be direct consumers. In Norway (Woolcock et al 2001) the revenue from oil was ploughed back into the community. Murshed suggests that those countries which have showed the most severe cases of resource curse are those with the most marked point-source activities, either in terms of the natural resource itself, or the way the revenue is distributed. (Murshed 2004)

2.3 The Resource Curse, Corruption and Governance.
There is evidence that countries with a resource curse have a less democratic structure: the wealth gained is not translated into social change, internal dissent is suppressed through military means, and oil and mineral resources particularly are linked to the ‘Rentier’ effect (Ross 2001). In addition, Murshed suggests that there are three areas which determine the nature of governance, first, the pattern of exports, with point-source economies having weaker exports and lower growth, second the country’s history of colonialism, which can influence the nature of institutional practice (Acemoglu et al), and the extent of social inequality (Murshed 2004). Overall, it is clear that there is a relationship between natural resources and poor outcomes, and whether an economic or a political model is accepted, poor management plays a central part. It is therefore necessary to improve management of natural resources in order to reap the benefits they can offer. Forward planning and strategy are key. Countries can learn from those who have managed their resources better, including Norway, the UK and Chile, with policies including medium- and long-term planning and reinvestment of revenue in the industry (ODI 2006). This section will look at the impact the resource curse can cause in terms of corruption and government, and at ways this effect can be addressed.

The resource curse has led to a number of negative outcomes including ‘looting’ of resources, civil conflict, the use of bribes, protection, sabotage and hostage taking (ODI 2006). Problems come about as natural resource ‘windfalls’ lead to sudden, large flows of money into government, and are made worse by the use of ‘off-budget’ accounts which fall outside government control and are thus more open to abuse. Many natural-resource-rich countries have seen revenue channelled away from directions which could ultimately lead to competitive advantage (Auty 1997). In Angola, for example, it is estimated that $1 billion pounds were lost through corruption (ODI 2006). Corrupt practice takes many forms, with the ODI (2006) dividing these into the incidental (small scale acts of misappropriation and bribery by individuals) and the systematic (a function of the system, misappropriation by public officials and politicians, and other official people). The first include ‘bribery and kickbacks’, and the second ‘collusion to defraud the public’, including large scale fraud through such means as public tender, donations and bribes, and ‘systemic Bureacratic elites’ (ODI 2006). There is also a link between resource richness and increased risk of civil war and conflict. It is claimed that if natural resources form 26% of GDP, the risk of conflict in any 5 year time period is 23%, with countries with no such resources having a risk of less than 1% (Collier and Hoeffler 2000). Explanations of why this is so vary, but take two basic approaches, with one suggesting that civil conflict occurs because competing forces aim to control the resource or benefit from it (Economic Predation models) and the other suggests that this is due to ‘economic stagnation’, the economy, not the resources, are the key factor in causing civil war (ODI 2006).
There are a number of ways to ease the risk of corruption and poor governance, including institutional strengthening and capacity building. These can include strategies for preventing ‘rent seeking’ behaviours, transparency for revenue payments / distribution, improved legislation against rent-seeking / corruption, deregulation (removes public sector rent-seeking), increasing enterprise and competitiveness, increasing transparency in media and elsewhere, building a consensus on how to best manage resource revenue, increasing the role of civil society (including pressure groups), changing a predatory state to a developmental one and investment in skills. Further suggestions include linking natural resources to the national economy, creating a transparent and accountable system, improving the financial management of the public sector and ensuring that all stakeholders benefit from the resource (ODI 2006)

Taking a more theoretical perspective, better governance can be seen in terms of a model suggested by Auty and Gelb (2001) who divide states into ‘homogenous’ (one predominant ethnic group) or ‘factional’ (several ethnic groups) and also into either ‘benevolent’ (emphasis on welfare of citizens, investment in infrastructure, human capital, reliance on market forces) or ‘predatory’. According to this model, the benevolent state is one which is better equipped to avoid the resource curse. Campos and Nugent (1999) also suggest a model for good governance, which includes various functions including accountability of executive, an efficient civil service, a sound legal structure, ways for stakeholders to take place in decision making, and full transparency surrounding policy decisions.

To summarise, the nature of the ‘resource curse’ is well documented. While there is general agreement about the definition of the term and the range of negative impacts it includes, theorists have differing views regarding why the resource curse comes about. It is, however, clear that there is a link between poor governance and corrupt practices and the resource curse, and subsequent sections will look at the impact of management of natural resources in Nigeria.

3. The Resource Curse and Democracy in Nigeria
The resource curse, it has been suggested above, is evident in many resource-rich nations. This chapter will look at the case of Nigeria, in terms of the political outcomes upon democracy.
3.1 How has Oil affected Democracy in Nigeria?
Nigeria’s nascent democracy has been relatively stable since the onset of the country’s Fourth Republic in 1999. Although there have been several trying moments in the form of political upheavals, inter-ethnic hostility, and social unrest, the country’s democracy has managed to survive and consolidate overall. However, issues pertaining to disregard for the rule of law, undemocratic practices and weak institutional mechanisms have marred the overall democracy since 1991 – despite attempts to build strong institutions and consolidate constitutionalism. In view of this, it is worthwhile to examine the direct or indirect consequences of the oil resource on Nigeria’s democracy – including how the country’s oil wealth affects the democratic character of government, building of institutions, and adherence to the democratic imperative of rule of law.

It is appropriate to begin by exploring some conceptual perspectives on the sort of relationship that exists between the oil resource and democracy. The compatibility of oil wealth and democracy has long been debated in the academic literature (e.g. Ross, 2001; Jensen and Wantchekon 2004; Berrigan, 2004; Dunning, 2008). Although it has been suggested that governments have the tendency to become more democratic with rises in incomes (see for instance Londregan and Poole, 1996; Ross, 2004), another school of thought holds that exceptions to this rule arises in situations where such incomes emanate from a country’s oil resources. In these cases, the ordinarily democratizing effect of high income would shrink as a consequence of the supposedly ‘antidemocratic properties’ of the oil resource. Supporters of this view hold that this is especially evident in Middle Eastern and Sub-Saharan African countries that are ‘cursed’ with the oil resource – where democracy is either altogether absent, or is in untypical application with inordinately autocratic political leadership. The view is therefore that ‘oil and democracy don’t mix’, in general, with the exception of countries such as Norway, Canada and other established democracies where democratic governance has been well-established for some years before oil exploration started (Berrigan, 2004).

In more detail, Ross (2009) has suggested two possible ways by which democracy may be adversely affected by oil; first, he proposes that oil could effectively weaken democratic structures, and second that it could also strengthen authoritarian governments. Indeed, he claims that oil promotes authoritarian leadership by fostering repression in states where there is preponderant oil resources as people in positions of power use all means within their disposal to reduce any internal or external obstacles, in a display of ‘rent-seeking’ behaviour of the type discussed above. From another perspective, it is also suggested that the oil resource weakens democracy by bringing about “poor institutional quality” which not only slows the pace of democratic consolidation and strengthening of the rule of law, but also affects economic performance (Sala-i-Martin and Subramanian, 2003, p.13).

In the case of Nigeria, there are several possible ways of investigating the effect of oil on democracy in the country. One way is to assess the failure of several attempts at democratic transition in the country’s history (for instance the aborted transitions of 1979 and 1993); some scholars suggest that the presence of oil wealth may explain such failures (e.g. Ross, 2009). Another way is to look at the effect of oil on the extant democracy of the country. For example, a country’s oil wealth is deemed to define the power relationships between government officials and ordinary citizens; and the relatively easy access of government officials to the revenues generated from the oil resource inevitably skews the balance of power between them and ordinary citizens in favour of the former (see Sala-i-Martin and Subramanian, 2003, p.16). The idea behind this notion is that the power of public officials over ordinary citizens is so extensive that possibilities of them being answerable to the populace and being held accountable for their actions by the citizenry (in line with sound democratic principles) are severely limited; a fact that is facilitated by the almost unfettered access of public officials to immense oil wealth – to the exclusion and detriment of the largely deprived masses. From either perspective, it is clear that oil has had a detrimental effect upon an already fragile democracy in Nigeria.

The effect of the resource curse on Nigeria’s democracy may also be evaluated from the perspective of institutional failure and weak observance and enforcement of constitutionalism and the rule of law. From this perspective also, Nigerian democracy has suffered. Indeed the phenomenon of weak and compromised institutions has been cited in the academic literature as a rather common feature of countries, including Nigeria, which possess the oil resource (see for instance Mehlum et al, 2006). The complicated socio-political conditions that characterize the struggle for access to oil wealth in Nigeria largely affect the efficacy of government institutions; the need to secure one’s position relative to the oil wealth has often overridden the imperative of allowing the law take its course. During the present Fourth Republic of Nigeria’s democracy for instance, it has been alleged that the scramble for a share of the oil wealth led to series of intricate collusions between militant gangs, security forces, and public officials to sabotage the oil production facilities, engage in oil bunkering, and cover up for unethical practices in the oil industry (see for example, BBC, 2009). Assuming that it is true that security agencies, law courts and other institutions of state that are ordinarily expected to defend the rule of law in Nigeria are implicated in the scramble for a share of the oil wealth, then to a certain extent it can be suggested that the oil resource exerts a corrupting influence on the country’s democratic governance.
In conclusion, the existence of oil reserves in Nigeria seems to have impacted negatively upon the country’s democracy, in terms of impact upon democratic transition, upon democracy as it exists, and greater institutional failure and weakened governance.

3.2. How has Oil Affected Political Competition in Nigeria?
It may be argued that the impact of oil upon political competition in Nigeria is huge, and in fact political competition in the country is centred around a battle for control of or access to the country’s oil resources; in order words, the zeal to control the vast oil wealth may be considered a greater motivation for political competition than the aim of providing purposeful leadership for the citizens (Olarinmoye, 2008). In order to fully comprehend the effect of oil on political competition in Nigeria, it is important to take the political structure, federal character and multi-ethnic configuration of the country into consideration. The difficult ethnic balance that characterise Nigerian political relations is hinged on the struggle between the various ethnic groups and geopolitical zones for representation at the highest levels of political office (Amuwo, 1998). To a large extent, this struggle is further exacerbated by the high stakes inherent in the oil wealth of the country – that is essentially controlled by those at the highest levels of government. Therefore, the struggle for power by major ethnic groups in the country may be interpreted as a struggle for control of the country’s oil resources (VOA, 2006).

It is assumed that, at least in theory, politicians occupying particularly important offices that allow them easier access to oil revenues are better placed to avail their own ethnic groups or geopolitical zones greater benefits concerning the redistribution of oil-resource rents and higher patronage. This notion explains why political competition in Nigeria often has ethnic or regional dimensions; particular ethnic groups who believe that they do not get the political positions they deserve may feel cheated or ‘marginalized’ partly due to the belief that they may be deprived of their due share of the nation’s oil wealth – particularly through political patronage and oil rents redistribution (Olarinmoye, 2008).

On another level, the rent-seeking character of political competition is underscored by the tendency for realignments after political contests, in which the defeated parties, anxious about not being isolated from the ‘rentier space’ – in which proceeds from the oil resource are shared and distributed – often seek to gain the favour of the winners. This results in rather weak opposition and frequent decampment of politicians from opposition parties to the ruling parties at the federal and state levels – all in the bid to remain as close to the ‘rentier space’ as possible (Omeje, 2007).

Another way by which oil has affected political competition in Nigeria is that it has increased the level of desperation among politicians in the quest for power. This desperation manifests in the relatively frequent incidences of violence and other untoward practices that characterise political contests. Apart from reported cases of political assassinations and rampant use of thugs to harass and intimidate opponents (e.g. Igbafe and Offiong, 2007), there have also been suggestions that some politicians incite militant violence in the oil-producing Niger Delta region in order to sabotage the current political leadership and create conditions that may favour their own rise to power (see for instance Langer and Ukiwo, 2009). It is possible to argue that such levels of desperation are not necessarily indicative of the politicians’ passion for service to the people per se, but is rather a reflection of the inordinate desire to access the oil wealth and be in positions in which they can oversee the distribution of patronage to their cronies and associates. It would therefore seem that if Nigeria did not possess the oil resource and the attendant huge annual oil revenues, political office would have been less attractive than it currently is – and perhaps then such high levels of desperation for public office may not be necessary.
In summary, oil resources in Nigeria have had a tremendous negative influence upon political competition, causing new struggles for power which are more intense than ones seen previously.
3.3. How has Oil contributed to the Military Regimes?
To some extent it may be arguable that Nigeria’s oil wealth was a significant contributory factor to the rather lengthy spells of military rule the country has witnessed since Independence in 1960. One point to note is that, in principle, military regimes often purport to be patrimonial in orientation; which means that the military leaders generally believe that it is their responsibility to administer the state and manage, allocate and dispense its resources in the manner that they deem fit in line their personal convictions in the interest of the public. More specifically however, patrimonialism as a distinct feature of many military regimes may be regarded as involving a political system in which the ruling class (in this case military officers) appropriate the power and resources of state essentially for their personal benefits and for their supporters (see Theobald, 1982).

In order to adequately evaluate the impact of the oil resource on military regimes in Nigeria, it may be necessary to first highlight some of the key elements that define the patrimonial character of military rule: (1) government is typically based on a single strongman supported by a close network of state officials (2) state officials typically do not recognize distinctions between public and private realms, (3) political offices are generally regarded as means of patronage by the ruling elite, (4) the political system is often defined by the existence of several patron-client networks (Ikpe, 2000, p.147-148). In view of these defining features of military regimes, the existence of huge oil resources in Nigeria and the consequent inflow of stupendous revenues from crude oil sales evidently provided considerable incentive for the successive military regimes in the country to seek to hold on to power. It is perhaps in this regard that it has been suggested that the oil resource fuelled the rampant corruption associated with past military regimes in the country – particularly those of Generals Ibrahim Babangida and Sani Abacha whose regimes were reputed to have plundered the oil revenues the country earned during their respective spells in power (see for instance Sala-i-Martin and Subramanian, 2003).

Indeed, it is also possible that control of the vast oil wealth of the country helped the military consolidate and prolong its dominance of Nigeria’s political and economic spheres due to its ability to dispense patronage to individuals and groups that assisted in winning support for the regimes. And so not only were the military leaders interested in appropriating the oil wealth for their personal use, they also found it effective as a means of consolidating their power by dispensing favours and resource allocations to interest groups that were considered important for entrenching the military’s hold on power.
Essentially, it may be argued that oil contributed to the military regimes prolonged stay in two key ways: (1) It heightened the patrimonial zeal of the military to remain in power and oversee the management of the huge wealth generated by the oil resource, (2) the oil wealth help them strengthen their position and suppress opposition by dispensing patronage to large segments of society in order to win support and legitimize their hold on power. Outside the scope of this study, but worthy of consideration, is the question of how political competition and the military, both effected by Nigeria’s oil, are related. Does increased political competition cause new military action, or vice-versa?

4. The Resource Curse and Economic Development in Nigeria
From the above it is clear that oil has had a notable, largely negative impact upon Nigeria in terms of its political climate. The impact upon Nigeria’s economy is perhaps greater, as the following chapter will demonstrate.

4.1 How Has the Resource Curse Affected Public Services?
Public service delivery is perhaps one of the key areas in which the impact of the resource curse is most evident. In a sense it may be suggested that the huge oil wealth, underpinned by corruption and incompetence of government officials, contributes to a generally poor dispensation of public services.

There are several dimensions to the effect of the resource course on Nigeria’s public services. One key dimension is the persisting struggle between the three tiers of government (federal, state and local governments) over the formula for sharing of crude oil revenues. Considering the fact that Nigeria operates a federal structure of government, service public service delivery takes place at different levels of government, and therefore to a large extent the successful execution of public services depends on the nature of intergovernmental relations that exist between the federal, state and local governments (Freinkman, 2007). Accordingly, disputes over the sharing of resources among the three tiers of government may significantly affect the provision of public services at all levels – particularly at the state and local government levels. Such disputes are indeed fairly frequent; and the state governments have had cause to question the sharing pattern of the ‘excess crude’ revenues – i.e. surplus revenues beyond the preset budgetary benchmarks (see for instance Business Day, 2011).Yet it is difficult to understand why public service delivery is poor in Nigeria – to the same extent that it is difficult to understand the resource curse or paradox of plenty.

Another important element to note is the tendency of oil producing regions in Nigeria to be plagued by insufficient and inefficient public services. Indeed it has been suggested that the federal structure of Nigeria effectively creates the conditions that facilitate a loss of specificity in public service delivery across all regions in the country – a fact that most adversely affects the oil-producing regions in the Niger Delta who do not receive a substantial share of the revenues from the oil produced in their area, due to extant redistributive arrangements implemented by the federal government (Ahmad and Singh, 2003). This is more so as the public services in the oil producing Niger Delta region may be subjected to considerable fluctuation due to vulnerability to swings in the international prices of oil. But then this effect does not only apply to the oil-producing region alone; the almost absolute reliance on oil revenues to fund projects and deliver public services invariably makes the entire country susceptible to international fluctuations and distortions in oil production as a result of unrest in the country’s Niger Delta.

The aggregate effect of such overreliance on oil revenues to run the government is therefore that there has been considerable inconsistency in public service delivery in the country. Examples of this can be seen in the haphazard or indeed failed implementation of a number of public services such as mass transit train systems, pipe-borne water and various welfare schemes across many states in the country. Although some argue that corruption and inefficiency are the primary causes of the failure of such public services (Thomson, 2003), others have also traced the problem to fluctuations in revenues due to uncertainties in world crude oil prices – which sometimes inhibits the ability of the federal, state or local governments to continue or maintain certain public projects and services. Evidently, this further buttresses the argument against overdependence on oil resources which often leads to indolence and lack of creativity on the part of government in devising stable and multifaceted means of generating revenues with which to implement public services (Karl, 2007).

It has also been noted that Nigeria’s oil wealth promotes profligacy and waste in public expenditure (see for instance Luqman and Lawal, 2011); such governmental profligacy and wastefulness generally follow two broad patterns: (1) more money is spent on the delivery of public services – relative to the value created – than should ordinarily be the case, and (2) Unnecessary or white elephant projects are embarked upon by the government to achieve superficial ends. In both cases, it is arguable that the primary factor that facilitates such wasteful spending on (ineffectual) public services is the availability of ‘easy’ money generated from crude oil sales.

In summary, the resource curse in Nigeria has made a negative impact upon public services, with corruption and incompetence leading to inadequate distribution of resources to those who need it most. This has been exacerbated by a weak infrastructure and delivery network, related to the three-tier government system. In addition, oil has been relied upon to the exclusion of other revenue streams, with detrimental effect. The impact upon corruption is particularly strong, and this will be discussed in the next section

4.2 How Has Oil Fuelled Corruption in Public Services?
One of the most evident manifestations of the resource cause, and a key consequence of oil wealth particularly in most developing countries, is rampant official corruption. The sheer size of revenues earned by rentier states such as Nigeria, and the weakness of institutions that should ordinarily ensure transparency and accountability in the management of government resources – along with a myriad of factors related to patronage and cronyism all conspire to entrench corruption in all levels of government. As has been earlier discussed, government’s profligate spending on public services generally takes the pattern of either overspending on the delivery of certain public services, or initiating bogus or unnecessary ‘white elephant’ projects which consume considerable amounts of money but do not deliver any real value to citizens. In either of these instances, it is often the case that corrupt intent is an underpinning factor at all stages of the projects – from ideation to implementation.

The idea that oil may have contributed to greater corruption in government and in the delivery of public services is not one that should be considered in isolation – otherwise it would seem to suggest that oil in itself has certain inherent properties that fuel corruption. Rather, it is reasonable to assume that oil facilitates greater corruption for the simple reason that it brings more (and easier) money into a political system such as Nigeria’s that has little institutional mechanisms to enforce prudence and accountability. Accordingly, corruption may be considered an integral part of the curse of oil and a fundamental consequence of the resource course that Nigeria’s oil represents (Thompson, 2007).

There are a different ways by which the link between Nigeria’s oil wealth and delivery of public services may be contextualized and evaluated. One, taxation does not represent the main source of income for government and indeed it has been suggested that the extent of tax payment in Nigeria is too low to facilitate any real demand for accountability in government by the citizens (Sala-i-Martin and Subramanian, 2003). This is in line with the belief that, in principle, it is much more difficult to misappropriate revenues that are generated from imposing taxes on the citizens since the tax burden on the latter invariably propels them to insist on accountability and judicious management of their taxes for the general good of the citizenry. Accordingly, since oil revenues have long been the primary source of funding for government projects, the extent to which citizen’s are motivated to make serious demands of their government at all levels is relatively limited – added to the low levels of literacy and political enlightenment on the part of many citizens. These elements create the conditions for government officials to engage in corruption with impunity; a situation that is exacerbated by the weak anti-corruption mechanisms and institutions.

Examples abound that demonstrate how public service delivery serves as an effective vehicle for corrupt practices by government officials and contractors in Nigeria. The country’s prolonged battle with power supply is a notable example of the failure of public service delivery in spite of several billion dollars that have been invested in the power sector by successive governments over the years. Indeed, about USD$16billion was reportedly spent on the power sector during the eight-year tenure of the immediate past administration of Olusegun Obasanjo between 1999-2007, and yet no progress was made in delivering steady power supply for the country – and it has been severally alleged that much of the funds were lost to corruption of public officials involved in disbursing and administering the funds (see for instance Usigbe, 2008). The prevailing perception amongst many Nigerians is that the state run power company – the Power Holding Company of Nigeria (PHCN) is one of the most corrupt public corporations in the country who benefit from so much investment but has failed to deliver acceptable services in terms of stable power supply. But then corruption in public service delivery is not associated with the PHCN alone, other government owned enterprises such as the Nigerian Telecommunications Limited (NITEL), the Nigerian Railway Corporation (NRC), the state run water works, the defunct Nigerian Airways and several other government-run public utility enterprises have largely failed to deliver the services for which they were established due to pervasive corruption and inefficiency which has made many of them moribund. Indeed, the effect of corruption on government’s capacity to effectively deliver public services is so debilitating that it has been estimated to cost Nigeria up to 40 percent of its annual revenues from oil exports (see Reuters, 2004).

The apparently adverse effect of Nigeria’s oil wealth on public services, particularly with regard to corruption, can also be explained from the ethnic or sectarian perspective. As was earlier mentioned, one of the implications of the resource curse on political competition has to do with the scramble by the country’s constituent ethnic groups for control over (or at least a share of) access to the oil revenues. Accordingly, when an individual from a particular ethnic group is elected or appointed to a given public office, there is tremendous pressure on him or her to ensure that in the limited time in which they occupy that position, they would provide financial and other direct benefits to members of their ethnic group as their own share of the proverbial ‘National Cake’ (i.e. oil wealth). Since the public official cannot possibly achieve this through lawful means, they often find it necessary to engage in corrupt practices by misappropriating resources meant for delivery of public services and public projects, and channelling some of the stolen funds towards assisting members of their home community or ethnic group.

Another dimension of this tribalism-driven corruption can be seen in the award of public services contracts by a government official to members of his or her community or ethnic group who are ordinarily unqualified or incapable of efficiently executing such contracts. The result is that, while funds may be released for such projects, they are seldom completed; even where they are indeed completed, they may fall short of the acceptable and desired quality standards, and worse still such poor quality projects are often executed at highly inflated costs. Accordingly, it is important to note the strong linkages between tribalism and official corruption in Nigeria, which invariably affects the quality and delivery of public services in the country.

The resource curse has also fuelled corruption in public services by intensifying the struggle for political relevance which in Nigeria is partly based on the depth of one’s financial resources. Considering that politics in the country is noted to be a particularly expensive enterprise, political office holders may resort to corruption and plundering of the resources meant for developmental projects and public services in order to stay competitive in the ‘money politics’ of the country – especially if they harbour the ambition of contesting for elective office sometime in the future (Adetula, 2008). In the process, public service delivery inevitably suffers. Indeed, the corruption that hinders meaningful public service delivery does not only occur at the top echelons of public office, but also through the rank and file of government workers in the various departments and public corporations who demand bribes to perform their duties, and cut corners in a number of ways. In all of this, the common causative factor appears to be symptomatic of the resource curse that has significantly diminished accountability and transparency at all levels of government in the country – thereby inhibiting effective delivery of public services.
In summary, corruption is rife within public office in Nigeria. This is due to institutional weaknesses built up over time, including a lack of transparency and accountancy. Oil revenue has contributed to an increase in corruption, however the structures which make this corruption possible were already in place, and many can be traced to tribal alliances and unfair allocation of resources to members of one or another ethnic group.
5. Conclusion

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