Africa battles ‘oil curse’

Published May 29, 2006

PARIS: Experts call it the ‘oil curse’. In Africa’s oil exporting countries, only a tiny fraction of revenues is used to fight poverty, and in many cases black gold has actually become a hurdle to development.

Oil in Africa — from the Gulf of Guinea to northwestern Sudan — lies at the heart of questions of good governance and development, as oil prices and revenues soar but fail to bring better living standards for millions of poor.

Across the continent, ‘oil money evaporates into the savannah’, Jean-Marie Chevalier, a professor at Paris-Dauphine University and director of Cambridge Energy Research Associates (CERA), told a conference in Paris last week.

Not only does oil wealth fail to translate into economic development, but in many cases it distorts the country’s economy and holds back the development of other export industries, he said.

Almost everywhere in Africa, oil has fostered corruption and bureaucracy — without benefiting the poor, according to speakers at the conference, organised by the French Agency for Development.

Africa accounts for 11.4 per cent of global oil production, holding 9.4 per cent of the world’s reserves.

The continent’s output has surged by 40 per cent since 1990 to 10 million barrels per day (bpd), fuelled by demand from importers such as the United States and China looking to diversify their supply outside the Middle East.

Established exporters such as Nigeria, Gabon, the Republic of Congo and Cameroon have been joined by newcomers Chad, Equatorial Guinea, Sudan, Sao Tome and most recently Mauritania.

Yet despite the flow of oil revenues, African producers fare no better than importers in terms of development, according to Chevalier.

Nigeria — Africa’s most populous nation and its largest exporter with 2.5 million bpd — is a prime example of the ‘oil curse’, according to Philippe Sebille-Lopez, of the French Institute of Geopolitics.

“The evolution is catastrophic and the country is regressing in terms of human development,” he said.

Between 2004 and 2005, Nigeria lost seven places on the UN scale of human development, sliding from 151st to 158th out of 177 countries monitored.

More than 70 per cent of Nigeria’s 130 million inhabitants survive on less than a dollar a day, and social unrest has gripped the oil-rich south as local communities rise up to claim a share of revenues.

Another case in point is Chad, which has been exporting crude oil since 2003, reaching a current rate of 200,000 barrels per day.

“Chadians don’t understand why oil prices are rising but not their living standards,” said Geraud Magrin, a leading researcher in the field.

Under a World Bank scheme, imposed in part because of endemic corruption, Chad agreed in 1999 for its oil to be extracted by a US-Malaysian consortium and for the revenues to be funnelled into development programmes.

“The idea was to use oil for sustainable development,” said Magrin. Ten per cent of oil revenues were to be set aside for future generations, and 85 per cent used for poverty reduction and development projects.

But the benefits have failed so far to reach the poor, with almost 80 per cent of the population still without access to drinking water and one in four children dying before the age of 10.

Since oil revenues started to flow in 2004, Chad has slid down 15 places on the Transparency International corruption index, and is now rated the world’s most corrupt country.

Meanwhile, the regime of President Idriss Deby Itno, facing cash shortages and threatened by armed rebellions, has already questioned the system, provoking a stand-off with the World Bank.

Experts from Mauritania, which recently joined the club of oil exporting nations, ‘came to ask us what can be done to avoid the oil curse’, said Jean-Marie Chevalier.

According to Oxford University economist Paul Collier the only way to ensure African oil wealth transforms into growth is for ‘rich countries to apply pressure to ensure that checks and balance are put in place’.

Currently, this job is largely being carried out by non-governmental organisations and international donors — as in the case of Chad.

But in the long term, argued economic consultant Christine Rosellini, African producers will only be able to fight corruption, improve governance and create sustainable development by reducing their dependency on oil.—AFP



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