Abstract
Purpose: the purpose of this research paper has been to evaluate what the Nigerian government has done to manage its oil resources efficiently. The objective of doing this has been to establish what the government ought to do to ensure these resources are managed efficiently so that future generations can benefit from them significantly.
Methodology: in order to achieve this objective, the research paper has collected primary data from online sources. In addition, the research paper has evaluated past studies as part of its secondary data. After collecting these data, the researcher has evaluated the implications of the results by discussing them.
Findings: the research paper has established that oil constitutes over 90 percent of the country’s export income. In spite of this fact, the research paper has established that Nigerian government has not done much to safeguard the interests of its citizens as well as spur economic growth in the country from its huge oil revenue. More importantly, the research paper has established that there lacks efficient policies for managing resources in the country because the government has not done enough. Accordingly, the high corruption levels together with constant conflicts in the country continue to hamper economic development in the country.
Practical implications: in relation to the above findings, future generations in the country may not benefit significantly from the country’s oil deposits.
Originality: in terms of contribution to natural resource economics, this research paper indicates that Nigerian government needs to do something to ensure that future generations benefit significantly from the oil deposits in the country.
Introduction
Nigeria is an African country located on the western part of the continent. The country has a population of over 100 million people. Although the country has a large surface area, there is no doubt that this huge population competes for the scarce natural resources in the country. Accordingly, there is the need to ensure that the few resources in the country are managed properly. Oil is estimated to contribute over 90 percent of the country’s export. In relation to this fact, it is the country’s major foreign income earner that is expected to boost national economic growth. Studies demonstrate that countries may mismanage their natural resources not because of over relying on them, but because of failing to have policies for managing them (Van Der Ploeg, 2011). Countries such as Nigeria should learn from such lessons so that they can develop efficient policies for managing their resources. In contrast to this expectation, studies have shown that Nigeria is far from managing its oil resources efficiently. Some of the reasons attribute to resource misappropriation in the country are corruption and inefficient legal policies (Ugbomeh, & Atubi, 2010).
This research paper is aimed at evaluating what the Nigerian government is doing to protect its oil deposits so that future generations can benefit from these resources probably at the time the resources will deplete or fail to produce much oil as they produce today. The research paper is based on the fact that oil energy is a non-renewable energy that will deplete at one given time. As such, oil-rich countries such as Nigeria ought to develop policies geared towards protecting their oil resources as well as ensuring that oil revenue is utilized in the best way possible. Although the paper does not imply that Nigerian government has not done anything about this issue, the paper wants to evaluate the extent at which the government has gone in protecting its oil reserves. Accordingly the paper will evaluate what the government has done as it evaluates what it is supposed to do and it has not done.
Research questions
The following questions will be addressed as the research paper tries to evaluate what the government is doing to safeguard the interests of its citizens as well as manage its resources efficiently.
Will the current oil extraction in the country be a blessing or a curse to future generations?
What has the government done to spur economic growth from oil revenue?
Literature review
Previous studies have shown that natural resources can either be a blessing or a curse to a nation. A study by Van Der Ploeg that evaluates this issue establishes that resource-endowed developing countries tend to mismanage their resources because they have bad institutions. The study also establishes that developed countries tend to manage their resources properly because they have efficient policies for managing resources. This notwithstanding, the study establishes that developed countries such as USA may have mismanaged their resources in the past not because they relied heavily on their resources, but because they failed to develop their mineral potentials via appropriate policies. This implies that even if Nigeria may be over relying on oil as its main export, this may not be worse than failing to develop policies for managing those resources. Accordingly, investing in mineral-related knowledge would be a noble thing for countries such as Nigeria that struggle managing their resources (Van Der Ploeg, 2011).
Another study by Idemudia that focuses its attention on poverty reduction by Nigerian oil companies among people living in their neighborhood establishes that these companies fail to reduce poverty. The study argues that these companies fail to meet their goals on poverty reduction because they are not committed to reducing poverty as they are committed to making profit (Idemudia, 2009). In relation to this argument, some studies claim that these companies often cite insecurity in the region as a way of evading their social corporate responsibilities in the region.
Previous studies have also shown that availability of natural resources does not necessarily translated to economic growth in some oil-rich countries. Indeed, studies have shown that some oil rich countries do not benefit significantly from their oil deposits like non-oil producing countries do from those oil deposits. Although this does not mean that oil-rich countries do not benefit from their oil deposits, it means that these countries sometimes fail to plan properly. Accordingly, they do not earn more taxes from oil as their counterparts do. According to Ugbomeh and Atubi (2010), resource-rich countries tend to have more conflicts than countries with fewer natural resources. In fact, Nigeria has experienced a number of conflicts in its oil-rich region. These conflicts have hampered oil extraction as well as oil management. They have further hampered development in the oil-rich regions. For this reason, communities living in oil-rich regions lag behind economically. With regard to these conflicts, some economists have argued that many oil-rich countries would have been better off if they had not discovered oil. Although this argument does not aim at downplaying the role that oil play in economic development, it aims at demonstrating how natural resources can be a curse if not managed properly. To some extent, Nigeria has an experience of the sort given that majority of its oil-rich regions face constant conflicts from neighboring communities (Ugbomeh, & Atubi, & 2010).
Previous studies have further shown that political considerations influence oil extraction in one way or the other. A study by Kisswani establishes that OPEC members consider political affiliations of their citizens when deciding the amount of oil to be released in the market. In contrast to our expectations, the study establishes that OPEC countries do not necessarily aim at making profit only, but they also aim at influencing world politics by the amount of oil they release into the market. The study argues that OPEC countries maximize profit when they do not want to harm anyone one in the market. However, when they want to harm someone, they release fewer numbers of oil barrels into the market (Kisswani, 2014).
Research methodology
The research paper will collect its data from both primary and secondary sources. The primary data will come from Nigerian official sources. However, other credible sources other than the Nigerian ones will also be considered in the process of collecting the data. The secondary data will come from past studies. As for this data, an in-depth analysis of past studies will be conducted with an aim of identifying what they have achieved after evaluating the issue at hand. Once the data from the two sources have been collected, they will then be synthesized to provide an overview of the issue. The aim of doing this will be to evaluate what the Nigerian government has done with the view of proposing what it should do to manage its oil resources efficiently like most developed countries have done.
Results
Secondary data
In terms of management, past studies indicate that the government took long before taking over the role of managing oil deposits in the country. A study by Ogiri and his colleagues indicates that the government did not act swiftly in managing the oil sector in the 1960s because the sector’s contribution to the national economy was insignificant. The study claims that government’s role at the time was only oversight. Despite the fact that the oil sector became an important part of the country’s economy in the 1970s, the study further claims that the government did not do much except creating a body that was mandated with regulating the sector (Ogiri et al., 2013). In relation to this fact, sufficient policies for managing the oil sector have not been instituted.
Majority of past studies evaluated in this research paper indicate that Nigerian government has neglected Niger Delta in terms of development. A study by Ugbomeh and Atubi conducted in 2010 established that the region is among the least developed regions in the country. The study established that the region lack infrastructure, social amenities as well as non-oil industries. The study also established that people that live in the region live in poor conditions. The study claimed that the region does not attract government’s attention thereby it lags behind as other parts of the country (Ugbomeh, & Atubi, & 2010).
Other past studies have established that the government has not been able to create employment in the country from oil revenue. In contrast to the expectation that oil revenue would create more jobs, a study by Abdulkabir and his colleagues conducted in 2015 established that the government has only been able to create few jobs from oil revenue. The study established that if oil sector in the country was to be managed and regulated properly, it would create more jobs than it creates at the moment (Abdulkabir et al., 2015). However, this is not the case because the government does not manage and regulate the sector properly.
Past studies have also established that the legal framework that governs environmental sustainability in Nigeria is fragmented. A study by Emoyan, Akpoborie and Akporhonor that evaluates the environmental implications of oil extraction in the country establishes that there lacks a well-established legal framework governing oil extraction in the country. In spite of this fact, the study establishes that the legal framework narrowly contributes to environmental sustainability in the country (Emoyan, Akpoborie, & Akporhonor, 2008). To make the matter worse, the legal framework prevents local communities from seeking legal redress when pollution occurs in the region.
Primary data
A look at the following table that highlights the country’s debt crisis indicates that the country’s debt is on the rise. This gives an impression that the country is unable to settle most of its debt from oil revenue. Although this table does not provide the latest data, the national debt stands at about 10,718.43 million US dollar. This indicates that the country has a huge debt that needs to be settled.
Year
London club
Paris club
Promissory notes
Multilateral
Others
Total
1997
2,043M
18,980M
1,613M
4,373M
79.2M
27,088M
1998
2,043M
20,839M
1,597M
4,237M
65.8M
28,773M
1999
2,043M
20,534M
1,486M
3,933M
69.3M
28,065M
2000
2,043M
21,180M
1,447M
3,460M
143.8M
28,274M
2001
2,043M
22,093M
1,292M
2,798M
122M
28,348M
2002
1,441M
25,381M
115.3M
29,606M
55.6M
30,992M
2003
1.4b
27.5b
0.9b
3b
0.05b
32.9b
2004
1.4b
30.9b
0.8b
2.8b
0.05b
35.9b
2005
1.4b
30.9b
0.8b
2.8b
0.05b
35.9b
With regard to oil deposit, the country has about 37.2 billion barrels (Ugbomeh, & Atubi, & 2010). Although it is possible that the country may have more than these barrels, these are the known ones. Accordingly, they are the ones that will be considered in this research paper. In term of extraction, the table at the appendix provides more details. This table demonstrates that the country’s daily production rate now stands at 2.32M. Over the last one year, the rate has dropped by 4.92 percent. This gives an indication that the oil deposits could be on the decline as it is expected of it. The following chart summarizes the data at the appendix for the last year.
Discussion
In relation to the above results, there are strong indications that Nigerian government could be making a notable mistake in managing its oil deposits. A look at historical records indicates that the government had for a long time neglected taking initiatives in regulating oil deposits in the country. This is in relation to the fact that since oil extraction exercise started in the country, the government took long before developing a mechanism of regulating the oil sector. Furthermore, even when the government developed such a mechanism, it did not develop a good mechanism. Accordingly, the oil sector continues to experience management-related challenges. There are indications that these challenges are far from being over because local communities do not trust the way the government manages this resource (Ogiri et al., 2013).
In comparison to developed countries that manage their resources appropriately, it appears that developed countries such as USA have learnt their lessons and they have invested heavily in mining education. Furthermore, it appears that these countries have developed efficient legal frameworks for managing their resources. On the contrary, it appears that Nigerian government has not done either of these, and if it has done, it has not done it in the right way. Indeed, studies have shown that the legal framework that governs natural resources in Nigeria is fragmented thereby it does not help in fighting pollution (Ako-Nai, & Ayoola, 2013). Furthermore, there are indications that Nigerian government has not invested heavily in mining education. Accordingly, one does not expect Nigeria to manage natural resources efficiently.
If Nigeria is serious about managing its natural resources, literature suggests that Nigerian government should learn from developed countries that manage their resources efficiently. With regard to this issue, Nigeria has a lot to learn from US case study. Based on the case study, Nigerian government needs to develop corruption-free institutions that will not lead to more corruption incidences as more oil reserves are discovered. The government should understand that informal rules that do not target anything substantial cannot lead to long-term investment in the mining sector (Van Der Ploeg, 2011). For this reason, the government should aim at developing formal rules that will boost mining in the country.
As for the national debt that continues to accumulate, Ako-Nai and Ayoola demonstrates that even if the falling oil prices of 1982 could have led to the debt crisis, the government contributes to the crisis by mismanaging its natural resources. In addition, the authors have demonstrated that the government contributes to the crisis by failing to repay the loan as per the repayment schedule (Ako-Nai, & Ayoola, 2013). This indicates that even if the country could be earning a lot of foreign income from oil deposits, the government could be mismanaging a lot of its resources. In relation to this fact, it could be claimed that oil revenue in the country does not contribute to significant economic growth given that the country has huge loan burdens to repay.
On the other hand, it is rather unfortunate that in spite of the fact that oil accounts for over 90 percent of the country’s export, the Niger region, which produces oil in plenty, is still among the least developed regions in the country. Although this does not mean that all the money earned from oil exports should be used to develop the Niger region only, it means that the region should at least benefit from that money. In fact, the government ought to set aside some money to develop the region because oil resources will deplete at one given time. Furthermore, the government should have a well-elaborated development programme for the entire country so that its citizens can benefit significant from the oil reserves. In contrast to this expectation, past studies indicate that the government does not invest its resources wisely because of the high corruption level in the country. According to Ajayi (2012), the high corruption level in the country hampers economic development. Apart from this study, a survey that was conducted in 2004 by Transparent International cited Nigeria to be among the most corrupt countries that produce oil. The survey in particular stated that billions of money was lost in public purchasing. As a result, majority of oil-rich country including Nigeria do not experience economic growth from oil revenue, and if they do, the growth is insignificant as indicated by one digit economic growth in Nigeria. Indeed, there are suggestions that Nigerian government is not doing enough to fight corruption, and if possible eliminating it. This is in relation to the fact that the country continues to feature prominently among the most corrupt countries in the world. Last year, the country was still among the most corrupt countries. This indicates that government’s measures of curbing corruption do not have significant effect on oil sector.
With regard to environmental sustainability, the results indicate that the government does not reassure local communities living in oil-rich region that it is doing enough to protect the environment. Furthermore, the government does assure other agencies in the region that it is doing enough to protect the environment. To a great extent, this distrust is linked to the legal framework the government has put in place since oil extraction exercise started in the region. This is an indication that the government is not doing enough to safeguard the interest of its citizens. Furthermore, it is an indication that the government is not taking the right steps towards ensuring that oil extraction will not have detrimental effects on the environment (Tietenberg, & Lewis, 2012). Given that oil is a non-renewable resource that is expected to deplete at one given time, the communities that live in the Niger Delta are likely to suffer significantly once extraction exercise is over. In order to address this problem, the government should develop a legal framework aimed at protecting the environment. At the same time, the government should safeguard the interests of its citizens by developing the region if it is to maintain a sustainable environment.
Limitations
In terms of limitations, the study has not been able to evaluate as many studies as possible because some of these studies were not accessible online. However, this has not affected the results of the study significantly because the researcher has tried as much as possible to address this issue from a broad perspective.
Conclusion
The focus of this research paper has been on what the Nigerian government is doing to ensure that by the time its oil deposits deplete sustainable development will have been achieved so that its oil resource can be a blessing rather than a curse. The research paper has established that despite the fact that the government has done something about the issue, it has not done enough to ensure that there will be sustainable development in the country by the time the resource will deplete. In particular, the research paper has established that the government does not stimulate economic growth in the country from huge revenue acquired from oil deposits. This is in relation to the fact that even if the country earns a lot of foreign income from its oil deposits, the earning is not reflected in economic growth due to high corruption levels in the country. The paper has established that a lot of the money could be lost in corrupt deals thereby the citizens do not benefit significantly from oil revenue. The research paper has also established that the government has not done enough to develop an efficient legal framework for enhancing environmental sustainability in the country. This finding is linked to a fragmented legal framework that does not reduce pollution levels in the Niger Delta.
References
Abdulkabir, A. et al. (2015). Relationship among local content policy, indigenous oil firms’ participation and job creation in Nigeria: a theoretical concept. The journal of developing areas, 49(4); 425-437.
Ajayi, O. (2012). Oil trade, people and power relationship: exploring a possible point of convergence for Nigeria. Journal of strategic innovation and sustainability, 8(2); 66-79.
Ako-Nai, R., & Ayoola, A. (2013). Oil and debt management in Nigeria. Journal of politics and law, 6(2); 178-184.
Emoyan, O., Akpoborie, I., & Akporhonor, E. (2008). The oil and gas industry and the Niger Delta: implications for the environment. J appli. Sci. environ. Manage. 12(3); 29-37.
Idemudia, U. (2009). Oil extraction and poverty reduction in the Niger Delta: a critical examination of partnership initiatives. Journal of business ethics, 90; 91-116.
Iwilade, A. (2014). Networks of violence and becoming: youth and the politics of patronage in Nigeria’s oil-rich Delta. J of modern African studies, 52(4); 571-595.
Kisswani, K. (2014). OPEC and political considerations when deciding on oil extraction. J econ finan, 38; 96-118.
Ogiri, I. et al. (2013). Oil price stock market performance in Nigeria: an empirical analysis. American journal of social and management sciences, 4(1); 20-41.
Tietenberg, T., & Lewis, L. (2012). Environmental & Natural Resource Economics. Boston: Pearson.
Ugbomeh, B., & Atubi, A. (2010). The role of the oil industry and the Nigerian state in defining the future of the Niger delta region of Nigeria. African research review, 4(2); 103-112.
Van Der Ploeg, F. (2011). Natural resources: curse or blessing? Journal of economic literature, 49(2); 366-420.
Appendix
Nov. 30, 2015
2.32M
Oct. 31, 2015
2.37M
Sept. 30, 2015
2.32M
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