Professor Richard Auty coined the concept of the resource curse in economics in 1993 in his seminal work. The resource curse, or “paradox of abundance,” is associated with the inability of citizens of many resource-rich countries, such as Nigeria, to benefit from natural resources. The government has failed to respond effectively to provide the welfare needs of its people. However, the resource-based view can be linked to the work of Edith Penrose in 1959, which is related to the resource-based view of the enterprise. In other words, the resource curse theory by Richard Auty is based on the realization that countries like Nigeria are unable to improve the welfare situation of their citizens and utilize their resources to realize their potential for a prosperous life. This is an expansion to other countries at the time.
Over time, it has become clear that a combination of poor governance in resource management and dysfunctional institutions is promoting poverty rather than wealth in the country. In the case of Nigeria, when we talk about resources, it cuts across human resources and non-human or material resources. Fortunately for individuals, and unfortunately for nations, talent is highly mobile. People who cannot keep wasting their talents and energy are moving to countries that appreciate the benefits of their skills and resources. Nigeria’s material resources have been deliberately turned into weapons of hardship and poverty in the hands of our government. The main contender in this war for survival is crude oil. The password seems to be “oil4death”. Those who cannot live should die.
It is no surprise that countries around the world focus on inflation targeting in order to run a growth-friendly economy. Even the current monetary policy framework of the Central Bank of Nigeria has an inflation target that was adopted in 2012 but was only officially launched in 2014. Adopting an inflation targeting framework means that the country wants to maintain a single-digit inflation rate. Over the past six years, Nigeria’s inflation rate has trended further north. Inflation has remained above 30% since this government took office almost 18 months ago, largely due to policy. Even the CBN, which has inflation targeting as its mainstay, continues to raise monetary policy rates, making borrowing costs continually more expensive.
Why is inflation management important?Price stability is central to achieving other macroeconomic objectives. These goals are full employment of resources, economic growth, price stability, balanced balance of payments, fair distribution of income, and sustainable development. The final goal is for me to join as a citizen of a developing country. Economic growth cannot be achieved without price stability, and growth fosters employment of both human and material resources.
High domestic prices make it more expensive to produce domestic goods for home consumption and export. Inflation makes our exports uncompetitive internationally, and importers of those products look elsewhere for the same products. Potential inflows of foreign direct investment will also be halted. It is therefore no surprise that FDI in the second quarter of 2024 declined significantly to $29.83 million, as reported by the Nigerian Bureau of Statistics last week. This was a decrease of 65.33% compared to the same period last year. The financial implication is that the president has squandered our money all over the world on overseas investments. Of course he has to refund our money. The economic impact is that we are far from achieving balance of payments equilibrium. Which macroeconomic goals did we actually achieve?
When inflation occurs, the poor suffer even more because they have little savings, while the wealthy rely on their savings to cushion the impact of rising prices. This means that the gap between the rich and the poor will widen. In other words, this country has not achieved a fair distribution of income. Finally, achieving sustainable development requires sustained economic growth. Understanding the destructive nature of inflation, governments seek to control other prices, such as energy prices, transportation, and staple foods, through policy. All governments, including the capitalists we are trying to emulate, provide energy subsidies.
Oil, which has been a source of joy and development for some countries, has turned out to be a curse for Nigeria. Ever since oil replaced agriculture as the main source of income, Nigeria’s leaders have turned their backs on good governance but embraced the devil’s word. They transformed a highly productive agricultural economy into a rental economy dependent on rents from multinational oil companies. Even when the NNPC was established, it was not to engage in oil exploration but to collect rents from these multinational companies. Such policies breed corruption and have been a feature of governance for many years.
When refineries were built, managers could not manage them as businesses, but as means of personal expansion. The oil sector has served as a source of illicit wealth for political actors, past and present, just as it has been a source of nightmares for citizens. The current government is using oil as a weapon of mass destruction for the economy and its people. What does it mean?
Given the inefficiencies in electricity production and distribution, gasoline and diesel are currently the main energy sources for domestic and industrial use. Even the electricity sector relies on gas, a petroleum product. In less than 18 months since President Bola Tinubu’s government took office, petrol prices have increased by more than 400%. So from less than N300 to more than N1000 per liter at last count. Every time fuel prices fluctuate, so do production costs, product distribution costs, the cost of the product itself, other business operating costs, facility maintenance costs, and even the cost of living in the same location. direction.
It’s as if this government was voted in to punish us. Thinking that producing fuel locally would bring down the price and increase supply, the government intervened with NNPCL through coercive measures, reducing the supply and price of the product so that the company could earn extra profits and increase taxes. I gave instructions. For governments whose income depends on rent rather than production. How much does it cost to produce 1 liter of fuel using domestic resources? An energy expert should help us.
The resulting high production costs have devastated some businesses due to reduced demand and subsequent job losses for workers, as well as loss of government revenue. It directly and indirectly reduces productivity. In order to survive, workers individually shop around for additional sources of compensation without committing to giving 100% to any job. Workers, especially those in the public sector who are usually paid low wages, collectively organize group attendance at the workplace. In this case, some workers would come to work up to three days a week and spend the remaining three days working in stores or in “other” jobs that bring in additional income.
Socially, unemployment causes social unrest, increases the number of children out of school, leads to divorce, separation and abandonment in marriages, and loss of family values. Some of these promote banditry, kidnapping, armed robbery, psychiatry, suicide, and similar vices. Over the past 12 months, these types of social vices have increased, resulting in more funding being spent on security at the expense of providing for social sectors such as health and education.
What have we actually gotten from this government? The quality of education and health services is declining. The country is far from achieving the simplest Sustainable Development Goals, targeted for 2030. What inherited road infrastructure has this government completed, but continues to borrow on the long-term market for future generations to pay for? Within 16 months, the federal government borrowed $6.45 billion from the World Bank. It’s just a source of information. NNPCL sold our oil on advance payment, which is another form of financing. We don’t know why, and we never will.
There is no question that we are in a state of deliberate government-induced suffering. The resource curse is real. At least we’re all witnesses to that. Various recommendations on how to move the economy forward are not supported by the government. We don’t think the same way. I hope the government isn’t trying to self-immolate.