Resource Control And The Wealth Of The States

By 

Matthew Omofoma And Funsho Ojebuoboh

WE have been following the controversy over Resource Control in Nigeria with interest, and have observed that most of the national debate is framed in political terms. While we believe that political solutions may be needed, the arguments, however, need not necessarily be political but about economics and the comparative advantage of the states. The reason, of course, is that politics tends to be divisive, and as we see in this case, it has pitched the North against the South, oil-producing states against others, the South South against the rest of the South. Anarchists and demagogues would have us believe that it is a North versus South political issue. The truth, on the other hand, is that absence of proper control of resources or their allocation invariably denies opportunity for all our peoples. It is not surprising, therefore, that this issue has landed on the lap of the Supreme Court. However, beyond making winners and losers for the benefit of state houses and lawyers, the court has a golden opportunity to offer our community of states and its people ample reflection on the meaning of wealth in our country.

Back to comparative advantage and its principle. It is well known and generally well accepted that trade makes it possible for nations to specialise in goods and services they can produce with the greatest efficiency. In similar fashion, we believe the various states of the federation need to exploit their comparative advantage with a national objective of increased productivity of their resources. Comparative advantage embodies not just natural resources, but a region's endowment of factors of production, level of technological development and other variables. This should form the basis of trade among the states, and we believe the role of the Federal Government should be to facilitate and provide a suitable environment, i.e. basic infrastructure, and necessary regulations.

It stands to reason for Bayelsa or Lagos or Zamfara to exploit the resources and skills from which each gains a comparative advantage over the others. The states or collection of states, and the Federal Government then have specific roles with a win-win objective. The Supreme Court's deliberations and decision could truly prosper our communities if it uses this case to (begin a pattern to) delineate the role of the Federal Government.

Nigeria is blessed with large deposits of natural resources. We have solid mineral deposits in various parts of the country; with preponderance in the North of the country of solid minerals, and oil and natural gas deposits in the South. Agricultural production is possible in areas where there are no fuel or solid mineral deposits. Obviously, the distribution of natural resources is not uniform among states or regions. Even if it were, the economics of production or development may favour certain states or regions over others. Our point is, rather than frame the resource-control debate in political terms, i.e., North versus South; it behoves us to conduct the national debate in economic terms. We should be thinking of the need for specialisation of skills and production factors for comparative advantage. This latter set of resources has not generally been recognised in our domestic production; in fact, our domestic production has recently been nearly equivalent to barrels of oil lifted under our feet or across the bay. The world and history are replete with poor people blessed with large deposits of natural resources. We feel compelled to mention a few cases at a later point.

Comparative advantage, which is the basis for specialisation, will serve as incentive for rapid economic growth of the various states or regions of Nigeria. It is no surprise that over the past several years, no attempt was made by the states to develop the mineral and agricultural resources in their regions because of over-dependence on oil revenue. Nigerians over the age of 35 years may recall school lessons on crops produced by farmers for local consumption and markets as well as those for export. Resource control, or its absence, up to now, has distorted the incentives for developing those skills necessary for comparative advantage amongst the states. In some cases, communities that have developed appropriate or special resources and capabilities have not found it rewarding because of the current structure. In other cases, it is clear there are disincentives to such development. Since our democratic system is modelled after that of the United States, maybe we should look at resource control in the U.S.

In the United States, for example, most of the oil industries are located in Texas, Louisiana, and Oklahoma. The agricultural industries are located predominantly in the Midwest and Western regions. The states of Iowa and Idaho (two states with which the authors are particularly familiar) are respectively well known for the production of grains and potato. Nebraska, the cornhuskers, is well known for corn; California and Florida, noted for quite a few other things, produce various fruits and vegetables. These states take pride in their products. But more importantly, these states exploit the comparative advantage that climate, geography and capabilities of their peoples offer. The various produce or products from the different regions are efficiently distributed to the rest of the country through inter-state commerce. However, there are federal and state laws and regulations for conducting intra-national trade (conducive environment). The roles of each governmental institution are very clear and often precise; they seldom involve control or ownership of natural resources.

Let's take the principle of comparative advantage and the issue of "resource control" a bit further to our educational system. This extension is by no means specious. Most, if not all, participants in the resource control debate will agree that an educated labour pool is a necessary requirement in comparative advantage. There seems to be the proliferation of universities in the country, most of which offer essentially the same types of courses. If what we hear via the news media about the status of Nigeria's university education and the education in the country, is true and we believe that to be the case, why don't we consider consolidating some of these programmes? Resources are clearly limited, and some university communities and school districts have an affinity for specific disciplines and skills over others. Even if it were possible for all the universities in the country to have a degree course in Petroleum Engineering, even in the best of time, a few will do much better than others. In line with comparative advantage, the authors contend that a few of the others are likely to offer the best degree courses in international relations or some other courses.

On the "ownership" and "control" of natural resources, it is important to note that blessings of natural resources do not make wealth. If it did, Nigeria, Indonesia, Venezuela would be rich, and Japan, Taiwan; Belgium would be poor, debtor-nations. We return to the U.S. to make the argument more appropriate to states within a country. Plaintiff states in the current court case will do well to recognise that the states of Louisiana, Oklahoma and Texas are not comparatively richer than non-oil states nor are they rich because they control oil deposits.

Finally, we believe resource control will improve the pace of economic development of Nigeria as a whole. It is the right thing to do at this time because it sets our community of states on a path towards identifying those comparative advantages which best serves the country as a whole and the citizens of a state in particular. We must emphasise, however, that we do not advocate state ownership of the means of production. That's another debate, for another time.

Omofoma and Ojebuoboh are practising metallurgical Engineers in the United States.