Nigeria: Our Resource Curse - Dutch or Nigerian Disease?

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http://crowncapitalmngt.wordpress.com/ Nigerian sauntered into big resource wealth in the 1960s when oil was discovered in exploitable quantity. With huge revenues pouring in she looked poised to become an economic giant. Before the advent of oil, the country was not doing badly, with our growing solid mineral extractive sector and huge agriculture.

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Nigeria: Our Resource Curse - Dutch or Nigerian Disease? :

Nigeria: Our Resource Curse - Dutch or Nigerian Disease?

OPINION:

OPINION Nigerian sauntered into big resource wealth in the 1960s when oil was discovered in exploitable quantity. With huge revenues pouring in she looked poised to become an economic giant. Before the advent of oil, the country was not doing badly, with our growing solid mineral extractive sector and huge agriculture. Nigeria is a nation so vast and diverse. A walk through varying climatic conditions from South to the North offers diverse potential for any kind of agricultural endeavour. So are the natural resources so prevalent and diverse. Our endowments, in people, culture, climate and resources placed us on a pedestal to top all economic charts.

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Despite the hundreds of billions of dollars the country had grossed in oil revenues, our developmental experience has been disastrous. Our present economic statistics paints a graphic picture of the sorry state we found ourselves. While our average oil revenue per capita in the mid 1960s was US$33, our GDP per capita was US$245. In the 2000s, our oil revenue per capita had risen to US$325 but the GDP per capita had remained at the 60s level of US$245. What this mean is that the huge oil revenue since the 60s has not translated to any real economic development and improved standard of living. If you remember that 245dollars cannot do for you now what it could in 1965, standard of living had actually nose-dived.

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Economic scholars/analysts studying the trend in many resource rich countries have noticed a negative developmental pattern in most of them, what they have come to call the Resource Curse or the Dutch Disease. So infamously named after the Dutch experience, the Dutch disease is a syndrome where exploitation of abundant natural resource exerts a negative drag on long term economic growth. Call it the curse of oil in our case. While some nations are shinning exceptions and others showing growing resistance/immunity to the disease, we are witnessing a growth of deadly strain I can only call the Nigerian disease.

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The trend was first observed in the Netherlands in the 50s when abundant natural gas production brought rapid foreign revenue but declining local productive sector. There are exceptions as demonstrated by Norway, Australia, Chile, Canada and Botswana. Even though the phenomenon is prevalent in most resource rich countries the fact that countries like Norway and others successfully mitigated the curse reinforced the belief that the syndrome is only a result of poor institutions of government.

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The Dutch Disease manifests many symptoms, chief among which is the inability of local productive economy to compete as a result of bloated value of local currency helped by inflow of foreign currency. The high exchange rate means local goods and services are expensive, making them uncompetitive in international market and even encouraging import of cheaper alternatives. Other symptoms of the resource curse, some of which cannot be directly related to the Dutch experience, include weak institutions, official corruption, assertive resource nationalism,

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internal unrest and even external aggression from envious neighbours. Many of these factors are common in our system but the main effect of the syndrome- the high exchange rate that makes local products uncompetitive is not the case in Nigeria. Even countries that found themselves caught in this economic web are wriggling free, developing resistance to the resource curse. What then makes the Nigerian case so unique? This article is only x-raying those absurdities that make our case legendary.

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