Breaking the trap of oil dependence and conflict in Nigeria

Breaking the trap of oil dependence and conflict in Nigeria

Breaking the trap of oil dependence and conflict in Nigeria

Until recently, Nigeria was the largest oil producer in sub-Saharan Africa. Despite oil revenues totalling about US$300 billion, the country is still poor and troubled by violent conflict. In reality, oil has long been a cause of conflict in a country where the richest 10 percent control about 40 percent of the national wealth.

Research from the Universityof Benin, in Nigeria, examines why oil has been a cause of conflict in Nigeria.Instead of stimulating economic growth and increasing living standards, oil issues contributed to the Biafran Civil War (1967 to 1970). In theNiger Delta, ongoing uprisings have led to the deaths of thousands since 1999and have forced oil production to be cut by a third.

Civil war is common incountries dependent on oil exports. But the negative outcomes of oil booms canalso be avoided. Norway used North Sea oil to earn first place in the UnitedNations human development rankings; Mexico and Malaysia have also flourished onthe profits of oil. In 2000, Nigeria ranked among the 15 poorest countries inthe world, with 70 percent of the population living in absolute poverty(defined by the United Nations as living on less thanUS$1 a day).

The paper isolates twodistinct dimensions of oil-related conflict risk. The first is violent conflictbetween various ethno-regional groups seeking to control profits from naturalresources. This results from excessive government dependence on oil revenues,unstable systems of revenue distribution, weak political institutions, a lackof transparency and accountability, and a defective property rights system.

The second dimension of riskinvolves recurring violent conflict between oil companies and local communities,conflict between communities and between groups in a given community, as in theNiger Delta. This results from:

  • almost total dependenceof communities on oil companies for the provision of basic amenities andemployment
  • no effectiveassessment of the damage caused by oil exploration and production; poorenvironmental management costs Nigeria US$5 billion a year in ruined land andforest
  • the absence orinadequacy of compensation to affected communities
  • the operation ofJoint Venture Contract (JVC) arrangements between the Nigerian Government andoil companies
  • a reliance on JVCs to operatecommunity development programmes, encouraging federal and state governments toabandon statutory responsibilities and leading to corruption.

If Nigeria is to address the‘resource curse’ and break the link between oil and conflict, it needs to:

  • reduce governmentdependence on oil revenues by diversification, a focus on non-resourcerevenues, tax reform and tackling corruption, including in politics
  • increase formaleducation, income and asset levels amongst the people of the Niger Delta toreduce their incentive to resort to violent protest
  • define legallyenforceable responsibilities for oil companies and government for the provisionof public goods, social services and employment to local communities
  • restructureproperty rights to mineral resources, for example by giving onshore propertyrights to states and local communities and offshore property rights to federalgovernment
  • allocate oil revenues to pro-poor programmes.

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