After 61 years of oil, Nigeria still suffers extreme poverty

Nov 10, 2019 News

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Oil-rich Nigeria has been producing oil for more than three decades, yet the country still holds most of its population living in poverty.
The United Nations Development Programme (UNDP) report of July, 2019 stated that the ‘multi-dimensionally’ poor remained just over 50% over the past decade. What this means is, almost half of the country has been living in poor health, lack of education, inadequate living standards, disempowerment, poor quality of work, the threat of violence, and living in areas that are environmentally hazardous, among others for more than 10 years now.
This raises serious questions as to why the African nation ranked as the top producing country cannot eradicate poverty, despite receiving a royalty of 4%, which was deemed as low by Nigerians.
Furthermore, the UNDP report highlighted that the number of people who are multi-dimensionally poor increased from 86 million to 98 million over the same period.
Also, important to note from the report is that when compared to the national poverty line which measure income/consumption, a larger proportion of Nigerians (51%) are multi-dimensionally poor than those that are income poor (46%).
THE CAUSE OF POVERTY IN NIGERIA
The biggest oil exporter in Africa, according to the World Bank, has a growth that is too low to lift the bottom half of the population out of poverty. In its report just last month, the World Bank indicated that the reasons for the poverty include weakness of the agriculture sector.
It weakens prospects for the rural poor, while high food inflation adversely impacts the livelihoods of the urban poor, the instability in the North and the resulting displacement of people contribute to the high incidence of poverty in the North East.
It also stated that oil prices continue to influence Nigeria’s growth performance.
Just in May, the Nigerian Government was changed through elections. In hopes with change for the better, the World Bank reported that the new government has the opportunity to speed up structural reforms.
Such reforms must build an institutional and policy framework that is capable of managing the volatility of the oil sector and supporting the sustained growth of the non-oil economy.
On the other hand, Nigerian Extractive Industries Transparency Initiative (NEITI) did an investigation that revealed that the oil sector was contributing to losses in the country’s crude. Consequently, Nigeria loses 138,400 barrels per day of crude, around 7% of its total production, to theft, spills or shut-in production. In other words, Nigeria has lost more than 505M barrels of crude, and 4.2M litres of products, from 2009 to 2018, according to NEITI.
The cost to the country comes to US$40.06B and US $1.84B respectively, equivalent to US$11.47M per day for 10 years. These findings indicated that there was continuous lack of transparency in Nigeria’s oil sector.
The government relies on operators to provide data and there is no independent verification. The country launched a case in 2016 accusing companies of under declaring oil shipments and seeking US$12.7B in compensation.
To step down on this issue, Nigeria has tried a number of strategies to tackle its oil loss problems. Various laws have been passed in an attempt to stem the flow, including a 1975 Act sanctioning the death penalty for pipeline sabotage, although only on lines carrying products rather than crude.
At the other end of the scale, a 1984 law banning ships from unauthorised loading gives a penalty of just 100 naira (US$0.28) or six months in prison. However, the question lies in the enforcement of these laws, while many Nigerian academics as well as the NEITI indicated that regulations are essential.
Apart from losses in crude oil, the NEITI reported that in 2015 that the auditors revealed that Star Deep did not pay any royalties in 2012, even though it owed US$66.5M at the time.
Interestingly, there are several other alleged instances where the oil company has failed to remit royalties as well as revenues. In addition, the giant oil exporter lost from the oil industry whereby oil companies artificially inflate their costs. Therefore, it reduces any pre-tax profits from the oil ventures, which, in turn, reduces the royalties.
Besides, there is no surprise that corruption played a prominent role in Nigeria’s poverty even though the major oil producing nation was gaining revenue, profits and royalty from crude production. This problem resulted from political turbulences.
Therefore, it was the dignitaries who stashed away billions of dollars from national treasuries in foreign bank accounts. By some estimates close to US $400 billion was stolen between 1960 and 1999.
According to the United Nations Office on Drugs and Crime (UNODC), Sani Abacha alone is estimated to have stolen the equivalent of 3% of the country’s GDP for every year that he was President.
The UNODC report expressed, “That is a staggering – almost “astronomical” – amount of money because if you were to put 400 billion dollar bills end-to-end, you could make 75 round trips to the moon!
Concretely, those 400 billion dollars could have translated into millions of vaccinations for children; thousands of kilometres of roads; hundreds of schools, hospitals and water treatment facilities that never came to be.”
Nigeria is Africa’s biggest oil exporter, but its natural resources make it particularly vulnerable to corruption, the report stated. The oil-rich Niger Delta, it noted, is a case in point.
The UNODC further explained corruption deters much-needed foreign investment, which keeps countries mired in poverty and its people deprived. Huge revenues from oil or gas reserves mean low taxes, but also low accountability and a lack of transparency, as well as limited public services, the report stated.
However, Nigeria is moving forward in fighting corruption, according recent publications.
Guyana is projected to have oil production for almost 40 years or less. Will it improve its standard of living or gain the wealth of its oil resources or like Nigeria will it succumb to economic downfall?
The future of Guyana and its oil industry lies not only in the hands of the leaders, but also in the hands of Guyanese.

 

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