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Norway, Nigeria, and the Lessons of Oil

Author: John Campbell, Ralph Bunche Senior Fellow for Africa Policy Studies
May 27, 2011
Bloomberg.com

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When I was serving in Nigeria as U.S. ambassador, I once asked a Norwegian diplomat a seemingly simple question: Who became rich from oil in his country? He replied, "Nobody and everybody."

He then described how Norwegians use oil revenue to lift all boats over the long term. I asked him where rich Norwegians actually made their money. He replied, "Oh, shipping, banking and timber -- you know, the modern economy."

Norway developed prudent strategies and institutions to avoid injecting oil revenue directly into its economy. And, apropos of this week's discussion on the Echoes blog, they offer some economic lessons that the Arab Spring countries might heed as they transition toward democracy.

Norway, like most Middle Eastern countries, has a sovereign wealth fund, called the Government Pension Fund of Norway. Unlike some other sovereign funds, Norway's is characterized by a high degree of transparency and its managers are directly accountable to democratic institutions. Norway has also led the global effort to increase transparency in natural-resource economies. In 2010, it became the first country in the Organization for Economic Cooperation and Development to publish its oil-revenue figures as part of the Extractive Industries Transparency Initiative, a coalition of governments, companies and civil groups that aims to strengthen governance in the natural-resources industry.

This success has been underpinned by political will, the rule of law and developed democratic institutions. As a result, Norway has climbed to the top of the human-development indexes -- and avoided the "Dutch disease" at the same time.

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