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No oil in the North? There’s a lesson for us! By
The news seemed to escape even the most attentive of our public commentators. A few days ago – on January 23rd to be precise – it was reported in the Nigerian press that the long commercial expedition to find oil in the northern part of Nigeria has come to an unrewarding end. The report was unsparing: it announced that "the curtain has been drawn on the prospect of crude oil production in the North, following the declaration by prospecting companies that there was no oil in that part of the country." Apparently the Nigerian oil majors – Shell, ExxonMobil, Agip, ChevronTexaco and TotalFinaElf – who had thronged to the Benue river basin back in 1994, in hopes of hacking to a deep oil deposit, have now come up short. Their seismic explorations have produced an equally seismic result: zilch. Despairing of the outcome, the outgoing CEO of ChevronTexaco, Mr. Ray Wilcox, conceded that it had all been a wasteful expedition which gulped "tens of millions of dollars." He said his company was pulling out of the venture and had returned its blocks in the Benue Trough to the federal government.
This seemingly innocuous piece of news sent me into a spin of speculation. Is there oil in the North, or is there not? If there is, why the subterfuge that there isn’t? Could this be merely a political stratagem to accelerate the depletion of oil reserves in the South? That would reverse the rhythms of oil politics in favour of the North, wouldn’t it? No, that does not make any sense at all, given the data on oil deposits in the Delta. A recent report by the Economist Intelligence Unit suggests that oil reserves in the area have been growing, rising from 20.8 billion barrels in 1994 to 27 billion barrels in 2000 and to a projected 30 billion barrels in 2003. Such a growth rate affords Nigeria up to 30 or more years of continuous oil output, even with a rising quotient of daily oil lift. So if there is oil in the North, can the political strategists there be planning that far out? I concluded that this was possible but not very likely.
This leaves us with the fatal possibility that perhaps there are no oil deposits in the North. I say "fatal" because I am mindful of the importance of this precious mineral in Nigerian politics. It is clear that the discovery of oil in the North would be a boon to the northern political establishment, particularly with the spiral of southern agitation for greater resource control. Infact back in 1994 when the oil companies began to prospect in the Benue basin, informed speculation had it that they were under compulsion from the military government which wanted to balance the pressure for resource control. If this analysis is correct, and we are now finding that the Benue basin is barren of oil bounties, then we face the spectre of a sustained northern opposition to southern clamours for resource control. In the event of this, political confrontation is likely to intensify, precisely when – due to the weakness of our democratic institutions – consensual politics should be the norm.
Few will dispute the fact that oil has been the bane of Nigerian politics. One may be forgiven to argue the contrary, given the suggestedly obvious benefits we’ve gained from oil production. Oil made possible the post-Civil War reconstruction programmes pursued by the central government. These crystallised in part in the welfarist expenditures on health, housing and culture made at the height of the oil boom. They also manifested in expenditures on education and infrastructure development, meant to provide a productive base for a rapidly ‘modernising’ economy. The government’s plans for infrastructure development were exceptionally important. They crystallised in the construction of roads, docks, telecoms facilities, airports, hydro-electric plants, bridges, dams, etc. The development of internal communication links, in particular, tended to speed up the regional and sectoral integration of the Nigerian economy.
The oil boom also produced a revolution of rising aspirations within the country’s policy circles. It gave impulse to the policy radicalism of the post-war military regimes, which manifested in the two elaborate programmes of indigenisation and state capitalism.
Those heady days of economic nationalism can not be forgotten. You may recall that back in the 1970s the Nigerian government, emboldened by the flush of oil funds flowing into the treasury, had embarked on an arguably audacious programme of indigenisation. This was designed to procure local equity control in the commanding sectors of the economy. Within the limits of its ambition, the indigenisation programme proved to be quite successful. It led to the emergence of a powerful bureaucratic class which, through the state, came to exert substantial control over the economy. Several companies were ‘nationalised’, forced as they were to accept a regime of local dominance in equity and management composition. The state also penetrated diverse sectors of the economy – from oil, petrochemicals and gas to iron and steel, banking, insurance, automobiles, construction, transportation, and what have you.
Paradoxically, however, it was for this same reason – of enabling the emergence of an expansive state – that oil came to imperil Nigerian politics. Since the government controlled the key areas of economic life, the capture of state power for economic aggrandizement became the paramount concern of our political leaders. Those already in power would not give it up; as seen in General Yakubu Gowon’s continual delay of democratic transition. Those outside, who in Gowon’s time were the civilian political class, clamoured for political access, principally to partake of the oil bounty.
This was made much worse by the military’s altering of the power structure in our federal system. Although nominally Nigeria operated a federal constitution, in reality the federal structure had come to mimic the military’s command structure which tended towards centralism. In the name of nation-building, the military had made the federal centre extremely powerful in relation to the state and local governments.
The result of such central tendency was to intensify the struggle for state power. This was especially so because control of state power implied control of the oil economy.
It might all have been different if successive governments had used our oil revenues to pursue a sustained programme of economic development. There had been enough rhetoric proclaiming that oil would spearhead the structural transformation of the Nigerian economy. All of our hallowed development plans adverted to this possibility. For instance, both the Third National Development Plan (1975-80) and the Fourth Plan (1981-85) declared that government would "utilise the resources from oil to develop the productive capacity of the economy and thus permanently improve the standard of living of the people."
The hypothesis of an oil-led transformation might have been sound, but alas, intention has proved to be much grander than action. Through the boom-bust cycle of our oil economy, we have failed to fully utilise the opportunities offered by oil wealth. The exuberant dreams of our development planners have remained elusive, and far from witnessing a positive transformation of the economy all we have are deep structural distortions. These distortions are evident for instance in our neglect of agriculture and manufacturing.
The massive flow of petro-dollar was to shift attention away from agriculture as the plank of Nigeria’s industrial development. You may recall that the First Development Plan (1962-68) and the Second Plan (1970-74) had advocated clearly agro-centric strategies. They both sought to secure a substantial share of aggregate investment for agriculture, in the hope that surpluses from that sector would then be transferred to industry. With oil however, the emphasis on agriculture has diminished, its role as a contributor of capital long forgotten.
Manufacturing, which became the centre piece of policy aspiration, has also seen no leaps of fortune. To be fair, oil revenues have boosted manufacturing in some important ways. For instance, the consumer goods sector performed incredibly well in the boom days, especially in the areas of textiles, beverages, detergents, household appliances, processed food, cosmetics and pharmaceuticals. Oil boom also galvanised the production of components and other intermediary goods. Heavier manufacturing ventures, such vehicle assembly, were also initiated – if with very little local value-added.
Still, manufacturing has remained in the doldrums. Today it accounts for only about 6% of GDP. The industry is beset with the problems of import dependency, high cost of capital and foreign exchange shortages. These have resulted from years of policy disorientation and the adverse changes in the world oil market. The structural adjustment programme, which was introduced as a corrective measure, has itself proved to be particularly challenging for industry. Currency devaluation and the continuing scarcity of foreign exchange mean sharp increases in the cost of imported materials. This, along with high interest rates, keeps the cost of manufacturing up-curve. And this leads to inflation which, with real incomes declining, has caused a dip in demand for manufactured goods. As a result, industrial production has fallen – to as low as 30%, according to some estimates.
I have made such a long detour to show that it may not be a bad thing that the search for oil in the North has yielded disappointing results. Oil has not been particularly beneficial to Nigeria. Whilst it has exerted some positive influence on policy making and given Nigeria a measure of international prestige, it has also bred corruption, policy inertia, structural disarticulations in the economy, and above all, political instability. On this last point, one might even argue that the discovery of oil in the North could lead to the final break-up of Nigeria. On the merits or otherwise of such an outcome, I defer to the many experts on this forum, although I proclaim myself a strong supporter of one Nigeria.
I would urge our policy makers to view this disappointing news from the North as a reminder that mineral oil is a finite resource. This ought to make them think seriously about economic diversification. This has always been part of our development planning, but the rentier orientation of successive administrations has precluded a vigorous pursuit of this ideal.
I recognise now that this may be all about to change. For, I have read recently that the Nigerian government is planning to institute new macro-economic measures in the 2002 Budget aimed at reducing the country’s fiscal dependence on oil. The intent, it seems, is to promote a new strategy of sectoral diversification in the economy, with particular emphasis placed on the development of agriculture, tourism and solid minerals. In addition, the National Assembly is apparently planning to increase the 2002 budgetary allocation for agriculture from N3.6 billion to N10.5 billion. Also I hear that in the House of Representatives a bill is in its final stages which seeks to establish a N30 billion revolving fund to be used in providing subsidies for the procurement of agricultural input.
All these are laudable, and are coming not a moment too soon. But in Nigeria good intent has often failed to translate into good deed. This administration too, like others before it, could soon plunge into the pit of policy inertia, reassured by the continuing flow of easy rent from oil. But if the news from the North offers any lesson, it is that we can not continue to depend on oil.
January 2002 |