An African Paradox of Plenty?
We are in part to blame, but this is the curse of being born with a copper spoon in our mouths. — Kenneth Kaunda, President of Zambia
This piece centres around unpacking the “Paradox of Plenty” theory, more commonly known as the ‘resource curse’ and in particular, focusses on the extent that this theory accounts for the determinant characters of both domestic processes and global processes in resource-rich countries in Africa and in particular using the case study of Nigeria.
The resource curse is defined as “the failure of many resource-rich countries to benefit fully from their natural resource wealth, and for governments in these countries to respond effectively to public welfare needs” (Tsui, 2010) and ultimately relates to the political economy of natural resources. The resource curse has emerged in the relationship between development and natural resource wealth and argues a negative correlation between resources producing countries and economic prosperity. The resource curse is closely linked to the Dutch disease, a direct correlation between a boom in resource exports leading to economic stagnation as it brings about stagnation in other sectors of the economy. The resource curse is prefaced by a general understanding that countries rich in natural resources could use this wealth to develop their own countries in order to build inclusive governance, but due to Africa’s history of imperial rape, political instability still runs rampant in the continent and works counter to fully exploiting natural resource wealth for the benefit of its own people.
There are many economic, social and political explanations for the Paradox of plenty theory, but they all centre around the volatility of international markets and the longstanding effects of imperialism that led to underdevelopment in the global south. Underdeveloped countries fortunate enough to possess natural resource wealth, look to play catch up to the markets of developed countries and fall into the trap of bolstering their primary sectors. Largely becoming single commodity markets focussed solely on exporting not manufacturing, but this ideology of catch-up is directly related to the colonial implication of the “scramble for Africa” which was subsequently a scramble for resources by colonial powers. The Berlin conference effectively divided Africa up for the exploitation of Western powers. The importance of Africa to these colonial powers was due her resource wealth and their overreliance on natural resources for energy production to ensure energy security as this in turn ensures state survival.
Focussing on the primary export sector to the extent of developing a single commodity market is one of the key components of the negative correlation between resource wealth and economic stagnation. Without market diversification, states who rely on the exporting of a natural resource to substantiate their economies, are left exposed to the hostility of fluctuating global commodity markets and high foreign exchange rates. The socio-political consequences linked to the resource curse are that it undermines the capacity of the government. “Developing countries blessed with energy reserves must be wary of the resource curse’ as it is associated with autocratic rule, large gaps in the distribution of income and wealth, and a failure to move towards a more diversified set of economic activities.” (Ross, 1999) The argument is that rentier states, who gain large sums of their revenues from foreign aid, resource rent or other external sources, become complacent in effectively governing their citizens as they are less reliant on the need to levy domestic taxes. Resource rich countries are also rife with political insurgency, due to the uprising of guerrilla movements aimed at righting the injustices of authoritarian governments who have sold their countries out. These guerrilla movements translate into civil wars, terrorism and insurgency and further decrease the country’s economic growth. These insurgent groups are further spurred on by western powers looking to exploit the instability in order to negotiate cheaper exports. If governance is the key to African development, the resource curse may be caused by poor management of resource wealth more so than by the mere possession of that wealth. “Resource dependence may affect economic performance indirectly — with resources contributing to bad governance, and bad governance in turn harming economic outcomes.” (Alence, 2005) The resource curse is not limited to African countries. Middle East and South American countries rich in resources also fall prey, but the “scramble for Africa” left Africa exposed and the resource curse has been most proliferated in these already exposed African countries.
The resource curse is a systemically ingrained issue as Bretton woods institutions like OPEC (Organization of the Petroleum Exporting Countries) and the WTO (World Trade Organisation) are in charge of regulating and standardising the price of raw and trade exports, but these institutions were built on the foundations of colonial conceptions and ideologies with most oil producing African countries only being added in the 2000s. OPEC is premised as a globally equal institution with all members having a vote, but due to the dispersion of oil reserves, countries with larger reserves have greater sway. For instance Saudi Arabia, with the largest reserves and exporting capabilities has become the institutions de facto leader.
Considering the resource curse in relation to a particular African country, for example Nigeria allows us to unpack the socio-economic and political effects of the paradox of plenty and gives us a better understanding of its detrimental effects it has to both domestic and global processes in resource-rich countries in Africa. Nigeria asides from Libya has the most proven oil reserves of any other African country, and also produces the most oil of any other African country. Nigeria has about one third of Kuwait’s proven oil reserves but produces two thirds more than Kuwait. Kuwait’s GDP (gross domestic production) in 2019 was about 300 billion US dollars per its just over 4 million population, whilst Nigeria in 2019 had a GDP of almost 600 billion US dollars per its almost 200 million population. Nigeria is the richest African country but more than 40% of Nigerians live in poverty, whilst at the same time 0% of Kuwait’s population is below the poverty line. (Campbell, 2019) These statistics and facts when weighted up against each other lay out exactly what the resource curse is. Nigeria’s petroleum exporting started in the late 1950s and has continued ever since. In the 1960s at the time of its independence, the country was far from being a single commodity country, rich in textiles, furniture, manufacturing’s and other goods, but the absorption of fiscal and monetary policies into the resource production sector in order to catch up to the global north and keep up with demand subsequently led to borrowing when oil prices where low and military governments that have been plagued by coupes, shifting the country from being oil rich to becoming oil dependent. “Government revenue remains hostage to fluctuating oil prices. Corruption, if less chaotic and rampant now than under the military, has become institutionalized at almost every level of government.” (Campbell, 2019) Kuwait a much smaller, relatively more stable country with powerful allies and a long-standing autocratic government has focussed their efforts on diversifying their economy in order to create long-term sustainable growth. Undoubtably, corruption and injustice still occurs, but the country has been much slower in pulling oil out of the ground, even though it is one of the top 5 most oil abundant countries in the world, and this has reflected in their sustained economic prosperity and stability.
Nigeria is ultimately in a poverty trap, with oil production being held hostage by elites creating a rich get richer scenario. With oil reserves set to dry up in the next 30 years, Nigeria faces a serious crisis in needing to diversify its economy very quickly in order to save its country from economic suicide. Perhaps the resource curse is a colonial curse that has effected Africa the most, but the resource curse is ultimately about the ineffectiveness of governments to protect and project the interest of their citizens over their own national interest and that certainly isn’t only a problem in African governments. It is a global problem that has been proliferated more strongly by other issues that the African continent faces.
Futher reading
Alence, R., 2005. Evading the ‘Resource curse’ in Africa: Economics, Governance, and Natural Resources. Global Insight, (52).
Campbell, J., 2019. Nigeria Is Oil Dependent, Not Oil Rich. [online] Council on Foreign Relations. Available at: <https://www.cfr.org/blog/nigeria-oil-dependent-not-oil-rich> [Accessed 28 August 2020].
Tsui, K., 2010. RESOURCE CURSE, POLITICAL ENTRY, AND DEADWEIGHT COSTS. Economics & Politics, 22(3), pp.471–497.
Ross, M., 1999. The Political Economy of the Resource Curse. World Politics, 51(2), pp.297–322.
