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How should Nigeria’s windfall oil cash be managed?

July 9, 2008

nigeria_poverty_hawker.jpgNigeria’s revenues from oil exports have reached unprecedented levels as global crude prices rally, yet the majority of its 140 million population remain mired in poverty. Africa’s top oil producer set up an “excess crude account” five years ago to save windfall oil earnings and try to help promote long-term economic stability.

But infighting among the three tiers of government — federal, state and local — on how the revenues should be shared out has seen them squandered.

The country is starved of electricity, the roads in even its plushest suburbs are pitted with potholes, and nine out of 10 people live on less than $2 a day, according to U.N.statistics.

How should Nigeria’s oil revenues be managed? Why is the country’s infrastructure so dilapidated when its state budgets are so high? Should the country set up a sovereign wealth fund? Would it be any better managed than the existing arrangement?

Comments

Today in one of the Nigerian dailies – Guardian news – This same country with all these oil windfall just signed a U.S.70 million loan with the I.M.F. for infrastructure (road) rehabilitation in one of the states – Kaduna. NEED I SAY MORE.

Posted by lanre folarin | Report as abusive
 

The government should manage the oil money by investing it in the people through provision of power and good education especially for the poor masses. It’s that simple, education would build a more intelligent nation and power would provide jobs. I believe out of 140 million Nigerians it is possible to form a “non-corrupted” surveillance committee (for the 36 states & capital) to monitor these projects.

Posted by Ahaoma | Report as abusive
 

the rich will get more wealthy and the poor will get to inherit the earth, in small plots, same as it ever was.

Posted by dave | Report as abusive
 

Investments in education and health systems in third world countires are not logical. Educated people leave to improve their standards and health systems crack as capable persons are absent. Nigeria should rather focus on building the necessary infrastrucutre to accomodate business. Building roads, refineries, power facilities, ports, etc. Sustainable investments that will be the arteries of the future system. This would be managed on the federal level. In later stages of development you move on to state and local. Having a market of 140 million people becomes interesting to the international business community once that is accesible. Nigeria could be the transfer hub and/or the industrial production center of Afirca. Just need the right combination: Cheap power – Good Infrastructure – Central Location. Nigeria can have it.

Posted by Locus publicus | Report as abusive
 

The govt. should find some ethics and save millions of lives by basing their political model on Hugo Chavez’s Venezuela.

Posted by Shane | Report as abusive
 

I sure hope the world allows them (Nigerians) to figure that out for themselves. Good for them !

Posted by Jason | Report as abusive
 

As it seems is the case with all things related to U.S. Politics, Nigeria needs a regrouping effort to combat the very difficult times the country is facing. The U.S. (I am a U.S. Citizen by birth) as a “Great” system of government under 1 condition THAT THE MAJORITY OF PEOPLE ARE HONEST.

The U.S. system relies on this heavily and as Nigeria’s Government is based largely on that system it will not and cannot deal with the current money situation without some type of external injection of help. Until those who are in the government and are coming into this “New Money” find the stability they need they will not start to dole out funds properly.

The easiest way would be to set up a managing fund while also implementing a similar program as that in the State of Alaska which pays it’s citizens a small percentage each year (Yes, I realize with 140 mill. + people it maybe very small).
They need to consider a managing body of an organization like the world bank in which to lean on and set up a concrete plan that cannot be changed easily.

I feel for Nigeria and it’s problems, greed is dragging the world as a whole down and when dishonesty and corruption are factored in the good old U.S. system just falls apart. Americans are holding up the system and laws in the U.S. and should they ever start getting extra greedy paying someone to get something done “Faster” will be there to stay.

Posted by Greg | Report as abusive
 

Nigerians need a change, what we are experiencing now is what we have use to, therefore we need a change of government policies, let every state handle its resources, if a state cannot single out more than 2 resources in it states, then lets that state be merged with neighbouring state (just as it was done in the banking sector) that can boast of more enough resources in its state bcos such are states that are ripping from the fruit of labour of niger-delta land, Nigeria is the most blessed Country in this part of the world.

Before oil was discovered in Niger-Delta region the western state was feeding the entire Country thru its cocoa production and some farm produce, so why now that we ve discover many more mineral resources and we are unable to feed ourself.

To my best of knowledge, Nigeria should be IMF on it own, mathematically if we are exporting 2million barrels per day and a barrel is sell for $130per barrel that is the nation is getting $26,0000,000 ($26million usd) (N3billion)on exporting crude oil per day. Whooooooooooo, we need to think about it.

Posted by Tobie | Report as abusive
 

NIGERIA SHOULD CREATE A SOVEREIGN FUND.
When Senator Ewa-Henshaw proposed ‘’the Nigeria Investment Fund for Future Generations” he was fully aware that if he had asked that the country should operate a sovereign fund as is the case with most oil exporting countries, he would have been shouted down. He simply requested that 20% of surplus revenue as well as 50% of privatisation proceeds, penalties from gas flaring amongst others be kept for the future. The major funding source was to come from the excess oil revenue, which expectedly was the bane of opposition from many senators who never want to hear anything about ‘Nigeria’s future generation’ as far as they are concerned, today is what counts, as tomorrow may never well happen! (from yet-to-be-published book on OIL DEPLETION AND THE NIGER-DELTA TRAVESTY: Peak oil, Contestation & oil roguery).

Posted by Steve Madojemu | Report as abusive
 

The Federal Government of Nigeria should be sincere and practical about the management of the country. Before embarking on any project at all, there should be planning. There should be direct collaboration with multinational firms to set up their units in the country, such that government could use part of the excess oil revenues to acquire majority equities in the foreign firms, but the management should be left in the hand of the foreigners. This is important in order to achieve technological transfer as the case of the Nigeria LNG Limited which is currently yeilding huge profits for the country. Of course, these entities would provide the much desired employment. Government would gradually divested from the companies with time to allow the private sector to take full control. This is an easy way Nigeria can have the Toyota, BMW, Iron and Steel firms of this world to produce in Nigeria for the African market.

 

The FG should use the money to invest in companies that are willing to setup factories in the country.This the only way we can ensure technology transfer and jobs for millions of Nigerians that are willing to work but couldn’t find a job.Talents abound in the country that can man such factories.The government should leave the administration of such companies to partners and then sell their shares when the companies are afloat.Government should also provide amenities- good roads,communication-landline phones,cell phones,security, and tax incentives -that will attract investors.If 90% percent of the work-force can find jobs, robbery , thugery and anarchy will decrease.

Posted by Ade Bolaji | Report as abusive
 

Nigeria should invest in its electricity infrastructure so that more people can switch on their computers to answer this question.

Posted by Temitope Adesanya | Report as abusive
 

Some people who occasionally need a little extra cash get payday loans, but apparently, for some, that isn’t enough. Nigerians knows what is best for them. During this recession world wide, they should manage their oil export wisely to survive what we are experiencing now. Maintaining economic stability on this time of crisis is hard to do. On other issue that two Pennsylvania judges just ensured their removal from the bench by taking bribes, which isn’t something, a judge should do, to say the least. After the lobby scandals that rocked Congress for the last two years, this time it was the judiciary branch that hasn’t gotten the news that you can get payday loans if you’re in a financial bind. For their sakes, I hope they set aside some of that bribe money because they’ll need it for their lawyers. If they didn’t – they can get payday loans for their defense.

Posted by jessieF | Report as abusive
 

Great article about the Nigerian government,
I think the policies of the Nigerian Government is very graceful in employment sectors,And their planning is so better as compered to others developing countries.
The Nigerian Federal Government should be sincere and practical about the management of the country.They prepared day by day some remedies to the development of hos country.

 

i think they should do the following:
1. assemble an anti corruption force who are third party from overseas.
2. create roads and highways with help from chinese and chinese road machinery.
3. Sort out electricity, electrify @ least 3 states completely.
4. Lease a communications satellite whilst awaiting for chinese to fix their dud. Hence making faster brodabnd and telecoms.
5. Create waste plants for recycling and managing trash/sewage etc.
6. finally as ade bolaji said “invest in factories”.

Posted by jj | Report as abusive
 

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