Reuters, 08.01.03, 6:45 AM ET
By David Chance
LONDON, Aug 1 (Reuters) - Oil-rich Nigeria would be better off if it distributed its mineral wealth directly to the people rather than continue with a system which has seen poverty double in the last 20 years, according to a paper published by the IMF.
The working paper, which does not represent official International Monetary Fund policy but is aimed at stimulating debate, said each Nigerian adult be better off by about $760, the country's economy could be rejuvenated and debt relief would be possible as opportunities for corruption were reduced.
"We propose a solution for addressing this resource curse which involves distributing the oil revenues to the public," said Columbia University economics professor Xavier Sala-i-Martin and IMF research department advisor Arvind Subramanian.
"Even with all the difficulties that will no doubt plague its actual implementation, our proposal will, at least, be vastly superior to the status quo," the authors wrote.
Between 1970 and 2000, the number of Nigerians living in poverty -- less than a dollar a day -- has risen to 70 percent from 36 percent and per capita gross domestic product has fallen to $1,084 from $1,113 in purchasing power parity terms.
At the same time oil revenues have boomed. Since 1965, oil has generated about $350 billion in 1995 dollars for the west African nation of 120 million people.
The authors calculate that under their proposals to share revenues equally among the population, each household would get about $140, which would amount to $425 in purchasing power parity terms, roughly $760 per adult.
With the full exploitation of natural gas, this would rise to $750 per household in purchasing power parity terms or $1,330 per adult.
The resultant changes and lack of opportunities for misuse of funds by government officials could also open the path to debt relief from creditors who are reluctant to see their money frittered away by corruption. This could generate a further $100 per person.
OIL HAS ACTUALLY DAMAGED NIGERIA
Oil has been blamed for the ills of many developing nations, including corruption, exposing the budget to price volatility and a tendency to an overvalued currency which destroys domestic industry and fuels imports.
Nigeria provides some of the most egregious examples of rent-seeking and corruption and the use of oil wealth by government officials has produced little for the country, the paper's authors said.
"Worse, however, it could actually have contributed to a decline in the standard of living," the paper said.
They cite wasteful projects funded by oil such as the multi-billion dollar Ajaokuta steel project, in theory Africa's largest plant, which has not produced a single ton of steel.
Overvaluation of the naira currency has caused the collapse of Nigeria's agriculture, especially the export sector.
TAKE THE OIL MONEY OUT OF THE HANDS OF GOVERNMENT
To stand any chance of developing, oil revenues need to be taken out of the hands of government so that the state starts to function more like an economy with no oil, which would undermine "the corroding process engendered by rents".
"These resources should be distributed directly to the Nigerian citizens, ultimately their true and legitimate owners. This would replicate or simulate a situation in which the government has no easy access to natural resource revenue, just as governments in countries without natural resources," the report said.
The Nigerian authorities would then be left with no direct oil revenues, which were forecast in November to provide two thirds of federally collected revenues for 2003.
That would leave the authorities to collect taxes, which are much more difficult to mismanage, and for which in a democracy they could be held accountable.
The authors note however that the likely future commercial exploitation of Nigeria's natural gas reserves is likely to lead to more of the same corruption which has tarnished almost 30 years of oil development.
"Sadly, we feel that natural gas may only aggravate and prolong the 'curse'," Sala-i-Martin and Subramanian said.
Copyright 2003, Reuters News Service