Cons and pros of Nigeria’s oil

Oil provides 70 per cent of booming Nigeria’s government revenues and without that, since tax collection is so poor, Nigeria would be a country without much in the way of education, health facilities, infrastructure building and urban renewal.

People talk suggestively about a corrupt elite creaming off oil money. Although true, it is only the cream. The milk itself goes to the state, hence the government’s preoccupation with oil theft, which happens now on an enormous scale, organised by corrupt businessmen, officials and politicians.

Before that it was the insurgency in the Niger Delta where youthful, well-armed, guerrillas sabotaged the pipelines for well over a decade until a peace agreement (a buyout) was negotiated by the underestimated president, Umar Yar A’dua, president Goodluck Jonathan’s predecessor who died on the job.

The proportion of the economy made up by oil is now found to be much smaller than thought.

Nigeria has just revised its national income figures. (The International Monetary Fund supports this.) It has handsomely overtaken South Africa to become the continent’s largest economy.

The economy of Lagos is one and a half times the whole of Kenya’s. Nigeria has become the 16th largest economy in the world. Some say within 10 years it could be in the top five.

However, the statistical revision shows that the share of the oil and gas industry in the economy is not 32 per cent but 14 per cent. Nigeria has diversified much more than was ever expected.

Today, services are the main engine of the economy, contributing half of national income. Telecoms, which were before estimated at 0.8 per cent, are now reckoned to be 6 per cent. The film industry, Nollywood, an equally fast growing sector, is 1.4 per cent. Manufacturing has also increased.

Despite the many articles about the northern Muslim half of the country being very poor, in reality it varies sharply from state to state, being particularly bad in the northeast where Boko Haram mainly operates. In contrast, Kano, the north’s capital, has an economy that rivals the whole of Ghana, one of Africa’s more prosperous countries.

Earlier statistics underestimated the size of the country’s opportunity and potential. The new ones lower Nigeria’s already healthy debt-to-GDP ratio. The country will now, if it wants, be able to borrow more and grow faster. Foreign investment, already fast increasing, will increase faster.

Still, if oil does provide the bulk of the government’s revenues, it is fair to ask where the money goes.

Yes, one can see the tarred roads and new bridges, the new railway line from Lagos on the coast to Kano, a more efficient airport at Lagos, a relatively new airport in the capital, Abuja.

Light railways are linking the commuter towns with the city of Abuja. But 50km from Abuja, one can find villages close to the main road with health centres stocking hardly any drugs and ramshackle schools, and the road itself scarred with potholes.

Electricity consumption is well below the African average. Income distribution is worsening.

In the insurgency-torn northeast, the poverty rate is 60 per cent in comparison to Lagos’ 30 per cent and Calabar’s mere 10 per cent. (The latter is an exceptionally well-run city by any standard and those who worry about the havoc wreaked on it by Boko Haram should pay it a visit to see the other side of life in Nigeria.)

The northeast’s unemployment rate is a quarter of the total workforce.

Agriculture does not get the attention it deserves — the number of extension advisory agents is miserably low and few are women, even though much of the farming is done by women.

If the country is incapable of helping the poor with sufficient facilities, it should consider deploying cash payments. These should be sent regularly by phone, as is now possible thanks to Kenya’s pioneering work. (Africa as a whole has 800 million mobile phone subscriptions and in Nigeria there will be soon almost universal ownership.)

Mexico, Brazil and now India are doing this.

Receiving real cash direct to their phone, families can pay for private schools and health clinics that would shoot out of the ground, as they have already in many urban areas, even in the relatively poor parts.

Families would be able to afford to buy drugs, fertilisers and motorbikes (useful for transporting goods to market).

Cash payments avoid an inefficient, lazy and sometimes corrupt bureaucracy, as well as all the middlemen. Through it, oil money would go where it is meant to go. And if money reaches the homes of the northeast, Boko Haram would garner less support.

Oil, if less important than it was, is still the black gold of the country, and if used well, it could transform the territory Boko Haram thrives in.