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Developing countries have different challenges facing them to get developed. In this assignment,
one single challenge facing Nigeria is oil wealth. This will be discussed on the first part of the
assignment. The second part of the assignment will look at the sort of intervention necessary to
change oil wealth for the good of the people and the implications will be outlined.

Oil has become the source of energy to the increasingly global economy since the beginning of
the Nineteenth Century. Nigeria is one of the few fortunate countries that produce oil and is a
member country of the Organization of Petroleum Exporting Countries (OPEC). Generation of
revenues from natural resources usually translates into economic growth and development but it
has become some sort of paradox in this context. An account of how oil has created plethora
conflicts, instability and become a challenge to development in Nigeria is here being discussed.

Oil politics in Nigeria began with alliances formed by the British and American after World War
11 with the view to gaining direct and unparalleled access to oil in the Nigeria. There has been a
cozy relationship between US government and that of Nigeria since then warranting the Western
governments to renew their energies to draw closer to the region (Neuwirth, 2006).

“Petrodollars” or oil money has exacerbated corrupt governments, nepotism, revolutions,

coups/counter coups, and civil unrests. Other problems include assassinations, kidnappings,
hostage drammers, terrorism, arms proliferations, irredentism, and wars. Former US Secretary of
State, Colin Powel in trying to address these problems in a conference in Capitol Hill in 2004 was
quoted as predicting that Nigeria will

fall victim to the pattern of resource-rich developing nations, corruption will deepen, wealth will be squandered,
competition for oil wealth will aggravate internal stability and cross-border violence, and the health, environmental
conditions and life chances of the region’s …citizens will remain stalled (Gedda, 2006).

True to the above statement, Wealth is distributed disproportionately among few elites and to
section of the population that supports the oil-exporting governments while security and military
tools are built to quash those people seen as oppositions (Looney, 2006) The highly capital
intensive nature of oil business and the extraordinary profits that it yields has meant no other
resources tend to concentrate power and money into the hands of few as oil does. As a result of
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this, patronage politics is the order of the day with political posts depending on the clique one
belongs to rather than power of the ballots. Similarly, getting a good job in public service
depends on connections/contacts rather than qualifications and skills. States have been turned
into a “rentier states” whereby it is earning income according to the level of people in
government one knows or how connected and not how qualified or how hardworking.

Juan Pablo Perez Alfonso, a former Venezuelan oil minister in his famous book described oil as
“devil’s excrement” (Rao, 2006). He maintained that oil will ruin the World with most countries
producing oil experiencing conflicts, economic troubles and authoritarian rules. Unarguably, the
only country that has natural resources without experiencing conflicts as mentioned above is
Norway as others do not practice democracy and little is done to uphold the rule of law.

One other negative impact of petrodollars according to the then oil minister is “The Dutch
Disease Effect” (Gedda, 2006) whereby effort is concentrated on producing oil at the detriment of
other aspects of the country’s economy due to the relative ease with which foreign exchange is
generated from oil revenue. There is tendency to acquire more foreign exchange when the oil
price is high. However, the case is the opposite when oil price falls leading to cuts in budgets for
social sectors. Only defense and administration take a larger part of the budget irrespective of the
price of oil (Looney, 2006). More so, a surge in export revenue from oil can lead to surplus in a
nation’s balance of payment which, results in a stronger domestic currency. Appreciation of this
currency means loss of competition from other aspects of the economy with importation of goods
becoming very cheap and exports very expensive (Looney, 2006).

Mention must be made about mass urbanisation from rural areas for people searching for greener
pastures in these oil producing cities and at a time when oil is at a low price and revenue
mismanaged, economic pressures on government and individuals are usually on the increase with
much people fighting over limited resources. Consequently, the masses have the tendency to
engage in civil uprising against the government and among themselves as a result of ethno-
centric views and prejudice. Groups blaming one another for cause of hardship, unemployment
and poverty in the society and frustrations become inevitably visible among the entire population.
The aggrieved general population with the feeling of deprivation revolt and join oppositional
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movement to cause a revolution (Skocpol, 1994). It is a general consensus that “discontent and
exasperation directed towards the existing situation with the aim of establishing another different
situation lie in at the root of every revolution” (Motahari, 1995). When civilians are in power,
this discontent gives the military enough excuse to strike and take over power. Since
independence from 1960, civilians have stayed in power for just 12 years.

The international image of oil in terms of developing the producing countries is a stark contrast to
what is obtainable in the region. Oil companies have become mechanisms of underdevelopment
in the region through lack of investment proper. Investments where possible are done in isolated
enclaves just to expand their operations and export oil to Western (colonial) countries without
really developing the local economies of the host countries. Their activities generate less
employment per dollar invested and to compound issues, the top officials of the oil
conglomerates collude with the ruling government to loot and siphon State funds to foreign bank
accounts. These funds are in turn loaned to developing countries with high interest repayment
rates (Graaff, 2003)

Furthermore, the environmental degradation and pollution caused by the exploration and spillage
of oil and gas in Nigeria are very noticeable. Oil explosions either by accident or purposely
caused has resulted in loss of lives on many occasions. Issue of sovereignty when it comes to oil
exploration and its effects on the environment is still unresolved. These oil companies are only
interested in making profits because those rich industrialised countries pioneering them are not
willing to commit to the course of fine and pure environment even with warnings on global
warming. A country like US has continued not to be a party or ratify agreements of the Kyoto
Protocol which recommends better management of industrial and oil-related pollution worldwide.
All the so called Agenda 2 of Rio Summit in Rio de Janeiro has not made any impact hitherto.
This agenda was carved out to put pressure on governments to do more to enhance a cleaner
environment but so far, it has been debates and talks without any action taking place (Victor,
2006).

What then is the solution/intervention to this mess created by oil thereby hampering
development? Good governance grounded on transparency and accountability with impartial and
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independent judiciary in place is the solution (Fantu, 2002). This intervention will ensure that all
the good aspects of oil are benefited by the country to boost development in every facet of the
economy and lives of the people.

It is usually pronounced that wealth is power. Successive Nigeria governments will use oil as a
bargaining tool in international arena and diplomatic circles to strengthen their positions on
World issues. The growing of oil exports in this country will significantly enhance her global
position as no opposing opinions will be made against the country without taking into account
what the resultant effect will be on the world’s economy if oil is pushed up (Dickey, 2006 and
Neuwirth 2006). This leverage from abundance of natural resources acts as a deterrence to the
world powers to a limited extent at least in determining what type of treatment is melted out to
countries from that have oil. Some of these countries have often in the past withheld supply of oil
to any county perceived not been friendly to them or does not have their interest in their foreign
policies.

With oil prices likely to remain firm or even increase the more, large fiscal and current account
surpluses would mean low inflation for Nigeria as long as all the International Monetary Fund
(IMF’s) prescribed Structural Adjustment Program (SAP) policies are continually adopted.

Furthermore, real estate business will be on the boom with construction of exquisite properties
such as luxurious estates, town houses, 7-star hotels and condomium in various places of the
country. These edifices will offer investment opportunities for foreign investors thereby raising
the country’s Direct Foreign Investment (DFI) as celebrities all over the world will buying
properties in these areas. Relatively, the region will also attract tourists with all these things in
place.

More importantly, apart from the oil-related social improvement in the region such as job
creations, improved health care systems, good road constructions, and other social amenities that
oil revenue will bring, the country will be in position to offer free education to her citizens and
reduce the high rate of illiteracy in the country.
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In conclusion, different arguments have been adduced in this essay to show that generation of
revenues from natural resources such as oil usually translates into economic growth and
development. Nonetheless, it has also been a source of conflict in Nigeria with the problems
caused by oil revenues outweighing its benefits. The benefits of oil would be felt throughout the
country and beyond if there will be greater stability, wise investment, improve in governance and
respect for rule of law. Oil is a necessary evil which must be judiciously harnessed for the good
of mankind and it has become unavoidably imperative that efforts must be made to reduce
tensions worldwide the by reduction of oil price by the oil producing countries.

Reference:

Dickey, C., “Pointing the Finger” in Newsweek, New York, 20 February 2006.

Fantu, C. 2002. Africa and the Globalisation Challenge” in Fantu, C. African Renaissance. Road-Maps to the Challege of
Globalisation. Zed Books: London and New York.

Gedda, G., African oil boom: Blessing or curse, http://www.mg.co.za/article.aspx?article, 27 February 2006.

Graaff, J.: Introduction to Sociology: Poverty and Development, Oxford University Press, Cape Town, 2003.

Hudson, R.A. “The Sociology and Psychology of Terrorism: Who becomes a terrorist and why?” in A report prepared under an
interagency agreement by the Federal Research Division, Library of Congress. http://www.loc.gov/rr/frd/pdf-files/Soc Psych of
Terrorism.pdf, 1999.

Looney, R., Iraqi Oil: A Blessing or Devil’s Excrement?, http://www.ccc.nps.navy.mil/rsepResources, 28 February 2006.
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Motahari, M. “The nature of the Islamic Revolution” in Afshar, H. (ed): Iran: A Revolution in Turmoil, Macmillan, London,
1995.

Neuwirth, R., Oil-From Blessing to Curse, http://www.michnews.com/cgi-bin/atman/exec/view.cgi, 28 February 2006.

Rao, S., Blessing or Curse?: The paradox of oil, http:/www.forbes.com/markets/newswire, 28 February 2006.

Skocpol, T.: Social revolution in modern world, Cambridge University Press, UK, 1994.

Victor, G. D., “Recovering Sustainable Development” in Foreign Affairs, New York, January/February, 2006.