Nigeria’s oil has cons and pros – and Boko Haram

By Jonathan Power

Oil provides 70 % of booming Nigeria’s government revenues and without that, since tax collection is so poor, Nigeria would be a country without much in the way of education, health facilities, infrastructure building and urban renewal.

People talk suggestively about a corrupt elite creaming off oil money. Although true it is only the cream. The milk itself goes to the state, hence the government’s preoccupation with oil theft which is now on an enormous scale, organised by corrupt businessmen, officials and politicians. (Before that it was the insurgency in the Niger delta where youthful, well-armed, guerrillas sabotaged the pipelines for well over a decade until a peace agreement (a buy out) was negotiated by the underestimated president, Umar Yar A’dua, President Goodluck Jonathan’s predecessor who died on the job.)

The proportion of the economy that oil makes up is now found to be much less than thought. Nigeria has just revised its national income figures. (The International Monetary Fund supports this.) It has handsomely overtaken South Africa to become the continent’s largest economy. The economy of Lagos is one and a half times the whole of Kenya’s. Nigeria has become the 16th largest economy in the world. Some say within ten years it could be in the top five. However, the statistical revision shows that the share of the oil and gas industry in the economy is not 32% but 14%. Nigeria has diversified much more than was ever guessed at.

Today services are the main engine of the economy – contributing half of national income. Telecoms which were before estimated at 0.8% are now reckoned to be 6%. The film industry, Nollywood, an equally fast growing sector, is 1.4%. Manufacturing has also increased.

Despite the many articles about the northern Muslim half of the country being so poor, in reality it varies sharply from northern state to state, being particularly bad in the north east where Boko Haram mainly operates. In contrast Kano, the north’s capital, has an economy that rivals the whole of Ghana, one of Africa’s more prosperous countries.

The earlier statistics underestimated the size of the country’s opportunity and potential. The new ones lower Nigeria’s already healthy debt-to-GDP ratio. It will now, if it wants, be able to borrow more and grow faster. Foreign investment increasing fast will increase faster.

Still if oil does provide the bulk of the government’s revenues it is fair to ask where does the money go? Yes, one can see the tarred roads and new bridges, the new railway line from Lagos on the coast to Kano, a more efficient airport at Lagos, a relatively new airport at the capital, Abuja. Light railways are linking the commuter towns with the city of Abuja. But 50 km from Abuja one can find villages close to the main road with health centres stocking hardly any drugs and ramshackle schools, and the road itself scarred with pot holes.

Electricity consumption is well below the African average. Income distribution is worsening. In the insurgency-torn north east the poverty rate is 60% in comparison to Lagos’s 30% and Calabar’s mere 10%. (The latter is an exceptionally well-run city by any standard and those who worry about the havoc wrecked by Boko Haram should pay it a visit to see the other side of life in Nigeria.) The north east’s unemployment rate is a quarter of the total workforce.

Agriculture does not get the attention it deserves- the number of extension, advisory, agents is miserably low and few are women, even though much of farming is done by women. The elite holds champagne-gorging weddings (I’ve been to one) while many people eke out a harsh existence.

If the country is incapable of helping the poor with sufficient facilities it should consider deploying cash payments. These should be sent regularly by phone, as is now possible thanks to Kenya’s pioneering work. (Africa as a whole has 800 million mobile phone subscriptions and in Nigeria there will be soon almost universal ownership.) Mexico, Brazil and now India are doing this.

Receiving real cash direct to their phone, families can pay for private schools and health clinics which would shoot out of the ground – as they have already in many urban areas, even in the relatively poor parts. Families would be able to afford to buy drugs, fertilisers and motorbikes (useful for transporting goods to market).

Cash payments avoid an inefficient, lazy and sometimes corrupt bureaucracy, as well as all the middlemen. Oil money would go where it is meant to go. And if money reaches the homes of the north east Boko Haram would garner less support.

Oil, if less important than it was, still is the black gold of the country and if used well could transform the territory Boko Haram thrives in.

Copyright: Jonathan Power

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