.
By: Gary Lai
Democracy and oil wealth do not go hand in hand in the world’s second most
populous continent. Promoting democracy in Africa would ensure that,
defying the resource curse, oil money will flow directly to the people
instead of the ruler. In that way, economic growth will have a greater
chance of being sustained in Africa.
Eight and a half years, Nigeria, the most populous African country with 140
million people, had its first democratic change of power since independence
in 1960. The world’s eighth largest oil producer, one of its top exporters,
and the only African member of OPEC, Nigeria became one of only a handful
of established democracies in the continent.
The United States supported Nigeria; the latter supplies 10% of the
former’s crude oil import, amounting to 1.1 million barrels a day. This
support is unrelated to the despotism that Olusegun Obasanjo upheld; the US
was mainly concerned with securing its oil supply. The country – riding on
almost a decade of record oil revenues in the 1990s – was peppered with
crumbling infrastructure, plagued by a lack of access to the medical and
educational system for its citizens, and suffered from lackluster economic
growth.
During Obasanjo’s eight years in government, Nigeria earned $223 billion,
two and a half times the amount earned over the previous eight years.
Kleptocracy and rampant grafting kept the money away from its intended
destinations, extending a streak of $400 billion in mismanaged funds since
1960. Nigerians who voted Obasanjo out of office finally asked why, despite
their country’s oil, their lives were so miserable.
This is symptomatic of the resource curse. Jean Herskovits, a historian,
observes that the “real obstacle to progress is not a lack of resources; it
is who controls them and how they are used.†For example, according to
Human Rights Watch, oil-producing Rivers State (population 5.1 million)’s
budget in 2006 was $1.3 billion, but little development occurred there and
the governor owned a private jet and invested heavily in South African real
estate. The EFCC, an anti-corruption agency, in 2006 investigated 31 of
Nigeria’s 36 governors for corruption.
Equatorial Guinea is the model of what not to do for governments in oil
producing states. It is an oil producer (1 billion barrels of oil in
reserves; 400,000 barrels produced per day since 1995) with rampant
corruption, an unwieldy and unaccountable government, and chronic
underdevelopment. This is sad for a country (population 700,000) with a per
capita GDP greater than Japan, France, and the United Kingdom.
Three-quarters of Equatorial Guineans live on less than $2 per day, and it
seems that those connected to the country’s president benefitted from the
oil.
Learning from Equatorial Guinea is vital for the rest of Africa. Oil is, of
course, not concentrated in a few African countries. In the next eight
years, 25 billion barrels of exportable oil worth trillions of dollars will
come from the East African Rift Valley and West Africa’s Gulf of Guinea.
They will bring in oil money to Ethiopia, Kenya, Malawi, Mauritius,
Tanzania, and Uganda in East Africa – and Gambia, Ghana, Liberia, Sao Tome
and Principe, Senegal, and Sierra Leone in the West. Some of the reserve
estimates are 0.5 billion barrels in Ethiopia, 3 billion barrels in Kenya
and Tanzania, and 3.5 billion barrels in Uganda. Countries that are already
oil producers – Angola, Chad, Gabon, Nigeria, South Sudan, and Sudan –
will
see more revenue. For example, Nigeria and Equatorial Guinea have been
exporting as much as three million barrels of oil a day from the Gulf of
Guinea for over four decades. Oil and gas will form most of a third or more
African countries’ total exports.
African oil producers, on average, are arguably more corrupt than their
oil-less counterparts in the continent. The World Bank’s Worldwide
Governance Indicators show that oil-producing African countries rank in the
bottom quintile globally in their ability to control corruption, formulate
and implement effective policies, regulate private sector development, and
enforce the rule of law. The UN Development Index also ranks those
countries in the bottom half in the world.
Until the late 1980s, Africa’s only functioning multiparty democracies were
Botswana, Senegal, Gambia, and Mauritius. The first three never managed to
produce a change in government. By 2000, however, a Freedom House survey
found 32 of 53 African countries were either democratic or at least
partially so. In June 1999 Thabo Mbeki succeeded Nelson Mandela, and
Obsanjo was elected to replace a military dictator in Nigeria. In March
2000, a month after Senegal’s High Court decided to prosecute him,
Senegal’s Abdou Diouf accepted defeat in a democratic election. In oil
producing Benin, Thomas Yayi Boni was elected in 2006, when he declared
that his cabinet would consist of technocrats from universities and
development banks. In Liberia, a former World Bank official, Ellen
Johnson-Sirleaf, was elected in 2006.
Perhaps because of democratic development in the continent, poverty is
declining: “since 1996, the average poverty rate in Sub-Saharan African
countries has fallen by about one percentage point a year, and between 2005
and 2008, the portion of Africans in the region living on less than $1.25 a
day fell for the first time, from 52 percent to 48 percent. If the region’s
stable countries continue growing at the average rates they have enjoyed
for the last decade, most of them will reach a per capita gross national
income of $1,000 by 2025, which the World Bank classifies as ‘middle
income.’â€
For Africa to help itself, it needs to promote democracy. The intermediary
benefit is to gain a stable oil supply by promoting peaceful countries with
stable government. With stability comes economic growth, whether it is
founded on the burgeoning industries like banking, Internet communication,
or high-productive and transformational financial services and
manufacturing industries. In any case, democracy in African oil states
helps both sustain its oil supply and ensure windfall from selling it goes
into economic development.
Oil and the Resource Curse in Africa
By: Gary Lai
Democracy and oil wealth do not go hand in hand in the world’s second most
populous continent. Promoting democracy in Africa would ensure that,
defying the resource curse, oil money will flow directly to the people
instead of the ruler. In that way, economic growth will have a greater
chance of being sustained in Africa.
Eight and a half years, Nigeria, the most populous African country with 140
million people, had its first democratic change of power since independence
in 1960. The world’s eighth largest oil producer, one of its top exporters,
and the only African member of OPEC, Nigeria became one of only a handful
of established democracies in the continent.
The United States supported Nigeria; the latter supplies 10% of the
former’s crude oil import, amounting to 1.1 million barrels a day. This
support is unrelated to the despotism that Olusegun Obasanjo upheld; the US
was mainly concerned with securing its oil supply. The country – riding on
almost a decade of record oil revenues in the 1990s – was peppered with
crumbling infrastructure, plagued by a lack of access to the medical and
educational system for its citizens, and suffered from lackluster economic
growth.
During Obasanjo’s eight years in government, Nigeria earned $223 billion,
two and a half times the amount earned over the previous eight years.
Kleptocracy and rampant grafting kept the money away from its intended
destinations, extending a streak of $400 billion in mismanaged funds since
1960. Nigerians who voted Obasanjo out of office finally asked why, despite
their country’s oil, their lives were so miserable.
This is symptomatic of the resource curse. Jean Herskovits, a historian,
observes that the “real obstacle to progress is not a lack of resources; it
is who controls them and how they are used.†For example, according to
Human Rights Watch, oil-producing Rivers State (population 5.1 million)’s
budget in 2006 was $1.3 billion, but little development occurred there and
the governor owned a private jet and invested heavily in South African real
estate. The EFCC, an anti-corruption agency, in 2006 investigated 31 of
Nigeria’s 36 governors for corruption.
Equatorial Guinea is the model of what not to do for governments in oil
producing states. It is an oil producer (1 billion barrels of oil in
reserves; 400,000 barrels produced per day since 1995) with rampant
corruption, an unwieldy and unaccountable government, and chronic
underdevelopment. This is sad for a country (population 700,000) with a per
capita GDP greater than Japan, France, and the United Kingdom.
Three-quarters of Equatorial Guineans live on less than $2 per day, and it
seems that those connected to the country’s president benefitted from the
oil.
Learning from Equatorial Guinea is vital for the rest of Africa. Oil is, of
course, not concentrated in a few African countries. In the next eight
years, 25 billion barrels of exportable oil worth trillions of dollars will
come from the East African Rift Valley and West Africa’s Gulf of Guinea.
They will bring in oil money to Ethiopia, Kenya, Malawi, Mauritius,
Tanzania, and Uganda in East Africa – and Gambia, Ghana, Liberia, Sao Tome
and Principe, Senegal, and Sierra Leone in the West. Some of the reserve
estimates are 0.5 billion barrels in Ethiopia, 3 billion barrels in Kenya
and Tanzania, and 3.5 billion barrels in Uganda. Countries that are already
oil producers – Angola, Chad, Gabon, Nigeria, South Sudan, and Sudan –
will
see more revenue. For example, Nigeria and Equatorial Guinea have been
exporting as much as three million barrels of oil a day from the Gulf of
Guinea for over four decades. Oil and gas will form most of a third or more
African countries’ total exports.
African oil producers, on average, are arguably more corrupt than their
oil-less counterparts in the continent. The World Bank’s Worldwide
Governance Indicators show that oil-producing African countries rank in the
bottom quintile globally in their ability to control corruption, formulate
and implement effective policies, regulate private sector development, and
enforce the rule of law. The UN Development Index also ranks those
countries in the bottom half in the world.
Until the late 1980s, Africa’s only functioning multiparty democracies were
Botswana, Senegal, Gambia, and Mauritius. The first three never managed to
produce a change in government. By 2000, however, a Freedom House survey
found 32 of 53 African countries were either democratic or at least
partially so. In June 1999 Thabo Mbeki succeeded Nelson Mandela, and
Obsanjo was elected to replace a military dictator in Nigeria. In March
2000, a month after Senegal’s High Court decided to prosecute him,
Senegal’s Abdou Diouf accepted defeat in a democratic election. In oil
producing Benin, Thomas Yayi Boni was elected in 2006, when he declared
that his cabinet would consist of technocrats from universities and
development banks. In Liberia, a former World Bank official, Ellen
Johnson-Sirleaf, was elected in 2006.
Perhaps because of democratic development in the continent, poverty is
declining: “since 1996, the average poverty rate in Sub-Saharan African
countries has fallen by about one percentage point a year, and between 2005
and 2008, the portion of Africans in the region living on less than $1.25 a
day fell for the first time, from 52 percent to 48 percent. If the region’s
stable countries continue growing at the average rates they have enjoyed
for the last decade, most of them will reach a per capita gross national
income of $1,000 by 2025, which the World Bank classifies as ‘middle
income.’â€
For Africa to help itself, it needs to promote democracy. The intermediary
benefit is to gain a stable oil supply by promoting peaceful countries with
stable government. With stability comes economic growth, whether it is
founded on the burgeoning industries like banking, Internet communication,
or high-productive and transformational financial services and
manufacturing industries. In any case, democracy in African oil states
helps both sustain its oil supply and ensure windfall from selling it goes
into economic development.