Beyond Derivation and Resource Control

culled from GUARDIAN, June 26, 2005

Consistency has its benefits. One of them is that you can say something that might not seem politically correct but which fits snuggly into views you have expressed for thirty years and can be certain that people of reason will appreciate the basis of the comment.

I am going to draw on that in questioning conduct at the National Reforms Conference over the derivation question. My clear view, devoid of geographic location is that the more money from natural resources that enter the distributable pool the poorer Nigerians are likely to become. For me, therefore, 50 per cent derivation is the minimum reasonable outcome of this troubled discussion.

Not long ago a British newspaper correspondent visited for an interview as part of their coverage for the G8 Summit in Scotland. He asked a simple question that brought a rush of deja vu'. How come a country with so vast a natural resource endowment base is so poor..? I had been asked about the same question in the same room a decade earlier by the then Africa editor of the Economist, Richard Downden.

I talked about Dutch Disease, the Curse of Oil and how the nature of political leadership compounded the problem. Partly in jest and part seriously, I remarked that if the soldiers, (they were in power then) and their politician friends could be given all the Oil in Nigeria and they were in exchange for such generosity to agree to leave Nigeria to enjoy their booty somewhere else, Nigeria would be better off.

In his report in a 1996 edition of the Economist, Dowden recounted that statement and added the words: Fair Comment. I remain convinced that the reason Nigeria is poor is because it has created an elite whose purpose for being is to extort economic rent without creative production of value. It is not peculiar to our elite. So widespread is this problem that the World Bank commissioned a study published in 1995 which showed that natural resource, poor developing countries generally achieve greater economic advance than their more endowed counter parts. The paradox of plenty has almost mushroomed into an academic discipline.

Last year at an International conference on the "Curse of Oil" in Berlin one Professor from the American University in Paris actually called for the capping of oil wells. I thought he went too far, but I have actually relished the challenge of serious leadership emerging in non-oil producing states of Nigeria and proving this point by achieving faster growth then the oil producing ones with 100 per cent control of their resources.

Somehow I underestimated the level of lack of seriousness of many in Nigeria's political class to rise to such a challenge. The desperation at the National Political Reform Conference for more of those revenues from non-producing states makes the point. The NPRC must have most of the same people who are in this unfortunate mindset that has left Nigeria so poor inspite of savings oil would make available for investments and growth.

My view about how to save Nigeria from the Curse of Oil and its millions of poverty striken people from living as the wretched of the earth has been the hope that a portion of the elite can be weaned off dependence on contracts that create little value and from pillaging the treasury, turning therefore, to creative application of the mind to show the example that value creative through sustained entrepreneurial initiatives is what yields the kind of quality of life improvements that have been witnessed in resource poor South Korea, Singapore and elsewhere.

This has led me to the ideal position that our view of mineral wealth should be as in Texas. If it is found in our backyard it is ours. The state government can tax you as they see fit. But as the non oil producing states achieve higher growth rates, as expected, they will inspire better utilization of oil revenues in producing states and create a phenomenon of flying geese flocking together in a manner that "democratizes" prosperity through the region will make of Nigeria flourish.

So while 100 per cent derivation is in the best long term interest of all the people of Nigeria growing out of poverty I am realistic enough to realize the political bonding possibilities of a pool that first came out of the recommendations of Sydney Phillipson Financial secretary to the government of Nigeria in June 1946, becoming forerunner to Hicks Commission of 1950, in recommending a revenue allocation formula to the colonial administration, recommends differently. This is why I say the minimum that makes sense is 50 per cent.

Others may be motivated differently in emphasizing derivation but I suggest that beyond regional jingoism Nigeria's best interest is served by more than less derivation. While this might be counterintuitive I am convinced that if steady decent growth from the 1960s, with hardly any oil income, can be supplanted with 30 years of backward movement in a recursive economy we have had in recent times, that which is counterintuitive should get consideration. Business as usual has only intensified our misery index. Most of those who have caused a stalemate at the NPRC are sadly in the business as usual mode.

Professor Utomi is with the Lagos Business School