Source: Premium Times
It was with
mixed feelings that I welcomed the news of Lagos becoming an official oil
producing state. According to the news report which was widely published across
Nigeria’s print media, the new find in Lagos will enable contribution of at
least 12,000 barrels per day to the country’s current more than 1million
barrels per day output level (having given allowance for expected and
unexpected decline in production) resulting in about 1% of crude oil that will
be made available for sale to refineries within and outside Nigeria. Being
aware of the total installed capacity of our four refineries, which is 445,000
barrel per day, one is left to reason that most of the oil extracted will end
up outside the reach of this country.
One thing is
however certain with the exportation of crude oil outside the shores of the
country, and that is the receipt of petrodollars. It will be important to ask
the question - how will Lagos fare in the event of securing access to
petrodollars, be it in state allocation from federation accounts or direct
payments? There is certainly an obvious answer to this question. Of course,
Lagos will have increased income and as we always say, available funds to
embark on development projects. If we however, consider the question based on hindsight
from Nigeria’s experience with petrodollars since oil was discovered in
Oloibiri in 1956, the more likely response to question will be contrary to the
readily conceivable reply.
Associated with
petrodollars is also the dreadful resource curse. The resource curse theory posits
that countries that collect rents from exploration and sale of natural resources
do not fare well in terms of real economic growth unlike other countries
without natural resources. Again, of course there are examples of countries
that have escaped the resource curse. Norway is a shining star of what a
country can derive from accrued oil rents and the United Arab Emirates is
another fledgling example. A key characteristic of an oil-based economy, and
one of the factors that lead to the resource curse, is the dwindling cognizance
of residents living within the oil producing jurisdiction. With the land laws
awarding supremacy to governments; manning of oil production by transnational
corporations and; receipt of petrodollars by governments, what use then will be
of citizens, who, combined together might have annual earnings representing a minuscule
fraction of government’s monthly petrodollars? What use will there be to
institute a working tax system and invest in human and material capital
necessary to make it efficient? This is the bane of oil dependence.
Petrodollars has the likelihood of breeding a government that has no need of
its people.
The question can
be posed again, how will Lagos fare? If we decide to consider this from the
perspective of the people of Lagos and not the account books of Lagos, we can
know that there is danger looming. However, from the examples of countries that
have escaped the resource curse, we also know that the danger is not imminent,
but can be averted. What can the government and good people of Lagos do to
prevent heading in the direction of slow economic growth like that of other
Nigerian oil-producing states?
Firstly, it
needs to strengthen its tax collection apparatus. This step will aid a
rights-based approach to development of the state by ensuring residents feel
connected to the state’s spending and will not feel out of place to demand
their rights. Secondly, residents need to ‘follow the money’ and keep the
government on its toes. Withdrawals and expenditures should be duly accounted
for and funds earmarked for capital expenditures should be expended on the said
projects. Thirdly, the government needs to prevent an attitude of rent-seeking (a.k.a
sharing the state cake) that may lead to businessmen and women abandoning their
thriving ventures. Finally, the government must invest heavily in development capacity
of Lagosians in oil extraction and other attendant disciplines. It should also
set a timeline for achieving technological expertise in oil exploration and
refinery.
To end this
article, I will draw from a Yoruba saying that, in a way describes what happens
in an oil dependent economy that receive rents and is heavily reliant on
transnational corporations for oil extraction - owo ti a s’ise fun ni a ma na
n'ina kuna – i.e. it is the money we have not worked for that we spend anyhow.
Let the government and good people of Lagos therefore not desist from working
in order to make earnings and if Lagos state is to fare well from oil earnings, it
needs to ensure that the people engaged in oil-related jobs within the state, are dominantly
Lagosians.
