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Kolmani Oil Field: Can Nigeria Avoid Another ‘Resource Curse’

Austyn Ogannah

It will not be out of line to use Nigeria, as a country, to theorise the concept of “Resource Curse”. Indeed, the supposed powerhouse of Africa is a ready-made example that consistently ticks all the boxes and provides justification for the viability of the theory.

As soon as one is conversant with the distinct characteristics of the concept, it becomes abundantly obvious why this is the case.

The paradoxical circumstance in which a nation performs poorly economically, despite having access to valuable natural resources, is known as the “resource curse.”

Richard M. Auty is credited with coining the phrase, which he discussed in his 1993 book entitled, ‘Sustaining Development in the Mineral Economies: The Resource Curse Thesis’ and the first econometric work on the subject was published in 1995 by economists, Jeffrey Sachs and Andrew Warner.

A resource curse typically results from an over concentration of the nation’s capital and workforce in a small number of resource-dependent industries. Countries might become sensitive to drops in commodity prices by failing to make sufficient investments in other areas, which can result in long-term economic underperformance.

A resource curse may emerge for a number of reasons, but the main one is when the nation starts to concentrate all of its production resources on a single industry, such as mining or oil production, and neglects investment in other critical industries.

This resource curse is also known as the paradox of plenty and it could be the outcome of corruption. With the significant portion of the nation’s wealth concentrated in a small number of industries, the government often may abuse its regulatory authority by, for example, providing lucrative contracts in exchange for bribery.

A surplus of labour and capital that goes to just a few industries tends to damage the rest of the economy and hurt the progress of the whole nation. This kind of issue is frequently seen in emerging economies that find significant natural resource deposits, the commercialisation of which births an entire industry.

The industry tends to attract available investment capital once a natural resource is discovered and material and natural resources are focused heavily on that industry. Local and foreign investments will also indiscriminately gravitate in that direction.

Petroleum is one natural resource in particular where the resource curse is quite apparent. Petroleum-rich nations such as Nigeria, indeed, suffer from a resource curse, according to studies examining the relationship between natural resource riches and politics.

Three negative (and mainly unresolved) impacts are clearly present in these nations. First, it promoted authoritarian regimes. Next, it increased corruption. Finally, it sparked conflict in low- and middle-income countries. It proved the irrefutable reality that a nation’s economy can suffer severely and negatively if it depends too heavily on one or two resources.

The discovery of oil in commercial quantities in Oloibiri in the Niger Delta in 1955 marked a turning point in Nigeria’s economic history. Agriculture used to be the primary source of government income prior to the discovery of oil resources. But as time went on, the economy’s main source of income was from oil exports.

The only source of funding for the annual budget, which guides the nation’s economic path, is crude oil earnings. This predicament is comparable to putting all of one’s eggs in one basket. And, it is precisely this circumstance that has given rise to the majority of the agitation for resource control—or, to put it another way, fiscal federalism—among Nigeria’s oil-producing regions.

Without equivocation, it is obvious that these oil exploration activities wreaked havoc on the environment in the Niger Delta region of the country.

As a consequence, environmentalists, human rights defenders, and proponents of fair trade from all over the world turned their focus on the Niger Delta. Environmentalist Ken Saro-Wiwa and eight other Ogoni ethnic minority leaders were tried and executed by the repressive General Sani Abacha regime, gained international attention. Large oil companies like Mobil, Chevron, Shell, Elf and Agip, among others, who were gaining from the region’s oil, came under fire and scrutiny as their operations made headlines. Yet, business in the region continued.

In a bid to profit from the fossil fuels in the region, western governments and oil companies supported and maintained a number of oppressive and corrupt governments in Nigeria. In the Niger Delta, there has been a battle between the people and multinational oil companies over oil, leading to extreme poverty and environmental destruction.

The Niger Delta’s Ogoni, Ijaw, and other natives—those who have suffered the most harm for decades—have been working to defend their own interests, the environment and their fundamental human and economic rights. In response, the Nigerian Government and the oil firms have violently repressed protesters.

Shell, for instance, came under fire at different times for attempting to rift communities by paying off some residents to quash peaceful rallies. Multinational oil companies are involved in the abuses carried out by the Nigerian military and police, as Human Rights Watch have previously reported.

Still, the oil of the Niger Delta, which should have been a blessing to the region and the country, poses a major threat to the local population. Farming and fishing have become impossible or very difficult in oil-affected areas due to the numerous environmental pollution-related effects of oil that are visible across the area. Even drinking water has become scarce. Malnutrition and illness are widespread.

Additional negative repercussions of the presence of multinational oil firms on the local economy and society include property loss, price inflation, prostitution, and the negligent fathering of children by foreign oil workers.

Military persecution frequently meets with organised resistance and action by impacted populations, occasionally leading to fatalities. One cannot forget the disturbed history of armed resistance of the Niger Delta militants, who threatened oil installations and kidnapped expatriates to address their grievances until the Amnesty Programme of late President Umaru Musa Yar’Adua.

Most of these militants were products of a society torn apart by the resource curse.

These were the thoughts that coursed through my mind as I reflected on the fanfare that attended the commencement of another oil drilling campaign, this time in northern Nigeria, following the presidential flag-off of the Kolmani Field Integrated Development Project straddling Bauchi and Gombe States.

The Kolmani River Field, which is situated in the Upper Benue trough, is estimated to hold a reserve of 500 billion cubic feet of gas and around a billion barrels of crude oil. The Kolmani Integrated Development Project also includes a 120,000- barrels per day refinery, a 500 million standard cubic feet per day gas processing plant, a 300-megawatt capacity power plant, and a 2,500 tonne per day fertiliser plant.

It is reported that the project has already attracted about $3 billion in foreign direct investment (FDI). The Northern Nigeria Development Company Limited (NNDC), a business controlled by the 19 northern states, and Sterling Global, a Nigerian branch of the Indian Sandesara Group, are working together with NNPC to develop the field.

While it is a positive development for Nigeria on paper, it cannot be taken for granted that there are concerns, especially with Nigeria’s experience and history of association with the resource curse, as I have belaboured to outline thus far. What makes it even more disturbingly worrisome is the status quo ante of the North.

The National Bureau of Statistics (NBS) revealed last month that 133 million Nigerians experience multidimensional poverty. It stated that 63 per cent of Nigerians were poor due to a lack of access to health, education, living standards, employment and security in its most recent National Multidimensional Poverty Index study.

The Multidimensional Poverty Index provides a multivariate method of assessing poverty by highlighting deprivations in the areas of health, education, living conditions, employment and shocks.

Semiu Adeniran, the CEO of the NBS and the Federation’s Statistician-General, stated that this was the organisation’s first attempt to undertake an international multidimensional poverty survey in Nigeria.

What it revealed about the North confirmed previous studies on impoverishment indices in the region. According to the NBS research, Sokoto, Bayelsa, Gombe, Jigawa, and Plateau were the worst states in 2022. With 90.5 per cent of the state’s population living in poverty, Sokoto was the poorest state in the country. It is followed by Bayelsa, with 88.5 per cent of its population living in poverty, then Gombe, with 86.2 per cent, Jigawa, with 84.3 per cent and Plateau, with 84.4 per cent.

At the other end of the list, Ondo had the lowest poverty rate with 27.2 per cent of the population living in poverty, followed by Lagos with 29.4 per cent, Abia with 29.8 per cent, Edo with 31 per cent and Anambra with 32.1 per cent. According to the survey, 86 million of Nigeria’s poor people live in the North, compared to 37 million in the South.

This is just one angle of the level of decline that is the contemporary reality in the North with low levels of education, lack of access for most women and the widespread statistics of unemployed men which has been inexorably linked to the increase in the population of terrorists who recruit from this number.

Is it into this conundrum that the country wants to add the resource curse to? What happens when their livelihoods are affected? When their farmlands are devastated? When the trajectory of their lives is impacted by the influx of expatriates and their ecosystem is hampered by the activities of oil mining and production? Are we looking at Niger Delta 2.0?

It is my sincere recommendation that the lessons of the Niger Delta be front and centre as the country enters a new phase of oil promise. It is early days and there is time to ensure that we do not put ourselves and already strained Northern Nigerians through the deleterious experience that have desolated the land and waters of the Niger Delta and left them with the worst effects of climate change, including soot pollution and acid rains.

We can do better than that and it is the responsibility of the government and all of us to make sure history does not repeat itself in the oil story of the North because, if we make the same mistake, as we have seen from the Niger Delta and the worst case scenario of the terrorists in the North, we will all be equally culpable and become victims of the fallout.