Thursday, January 14, 2010

Escaping the natural resource curse?

From the The Financial Times, an article about a new plan for Nigeria and other resource-rich countries to distribute revenues more equitably:

(W)hile petroleum has made Alaskans among the wealthiest people in the
world's wealthiest country, Nigeria's oil province - on which the US depends for
nearly one in every 10 barrels of crude it imports - has known little but
conflict, corruption and misery in the half-century since the first barrel was
shipped. Yet Nigeria's rulers are hoping a new policy to deliver the benefits of
oil to the local population - as Alaska does with its pioneering approach of
distributing petrodollars in cash to citizens - might help placate an insurgency
that has cut production by as much as 40 per cent...

Under government proposals... the state would hand over 10 per cent stakes
in the joint ventures that run Nigeria's biggest energy industry to "host

Sounds like a good idea, but:

Nigeria's eight oil producing states already receive an extra slice of oil
proceeds - but much of the money vanishes... Whether the new scheme can avoid
such problems is critical to its success. "It will not be like the Alaskan case,
when each individual gets his money," Mr Egbogah says. The intended option is a
system of trust funds administered at the behest of each community - bypassing
the delta's state and local governments. By receiving a share in the
proceeds of an oil industry they have long resented, delta dwellers would have
an incentive to facilitate production, Mr Egbogah reasons. But even so, critics
warn that trusts risk replicating what they say is oil companies' practice of
allocating funds to some communities in order to safeguard their own facilities,
generating resentment in less favoured settlements.

I am very skeptical. Even more so than the potential for resentments between more and less favored communities, I would worry that "communities" are often far from harmonious, with their own internal divisions, power structures, and competing interests. There are bound to be winners and losers in the process of how these communities allocate their oil revenues. To the extent that the tensions and social fault lines are already there, something like this could make things worse rather than better.

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