At a business breakfast on February 7, Doyin Salami pointed out the elephant in the living room of Nigeria’s economy. The country is not oil rich; rather it is oil dependent. He asked attendees to acknowledge this distinction.
Dr. Salami did the math. He estimated that Nigeria could produce 800 million barrels of oil per year, which means that for every one of the Nigeria’s roughly 200 million people, the country produces four barrels of oil. He also estimated a population of 200 million. That meant four barrels of oil per year per Nigerian. Filling in the blanks with some of my own math, at $45 per barrel, that equates to about $180 per person per year. He then turned to Saudi Arabia. He estimated that it would produce 4 billion barrels each year, but with a population of only 30 million, the kingdom would produce $6,000 for every one Saudi person, or over 130 barrels per person per year.
This sentiment is not new. Former finance minister and foreign minister Ngozi Okonjo-Iweala has made the same point in the past, as have many others. The reality is that Nigeria remains a very poor country, despite a handful of very rich Nigerians. As successive government have urged, the country must diversify its economy if it is to break out of the poverty trap.
Nigeria remains "Exhibit A" of the so-called resource curse. At the time of independence in 1960, Nigeria exported food to West Africa, but now, it is now a net importer. In 1960, Nigeria had a significant manufacturing sector, especially in textiles, furniture, and other goods. With the coming of oil, which began in earnest in the 1970s, fiscal and economic policy were distorted, and oil sucked-up domestic and foreign investment at the expense of other sectors of the economy.
Government borrowing when oil prices were low led to debt. Military governments punctuated by coups resulted in policy instability and uncertainty and facilitated whole-sale looting of the state. Government revenue increasingly came from oil. With the coming of civilian government in 1999, there has been some recovery, but government revenue remains hostage to fluctuating oil prices. Corruption, if less chaotic and rampant now than under the military, has become institutionalized at almost every level of government. The bright spot, if small now, has been a proliferation of good governance presidential candidates and other Nigerians who are challenging king oil, politics as usual, and are shining a light on systemic government corruption. Foreign friends of Nigeria should support their efforts.