My Beauty Best Teacher

In PSD Blog:

Recent work suggests another explanation of the resource curse – the Nigerian Disease. That is, an abundance of natural resources leads to poorer governance and conflicts. It gives rise to governments that are less accountable to the people, have little incentive for institution-building, and fail to implement growth enhancing reforms. Higher corruption, more rent-seeking activity, greater civil conflict, and erosion of social capital are some of the outcomes associated with the Nigerian Disease (see, for example, Rosser 2006). While it too early to draw any definitive conclusion on the relevance of the Nigerian Disease, the early results do suggest a possible way out of the resource curse - greater emphasis on institution-building and government accountability...[continue reading]

The [African] blog wars writes about the 'Resource Curse':

It is widely suspected that the ‘curse’ is largely caused by the effects of over-dependence on resources. Governments, perhaps believing resources will never run dry (in their time), fail to wean economies off these commodities. One of the consequences of this is that in times of high prices, the real exchange rate rises making local industries less competitive, while encouraging borrowing as it becomes relatively cheaper to do so.
The danger though is when prices fall, exchange rates fall and debt repayments soar, and this is after industries have contracted, which dramatically decreases tax revenues. Sure, taxes could be pushed up to compensate, but this wouldn't do much for competitiveness.
Over-dependence is the big issue though. Botswana still gets 70 percent of its export revenues from diamonds, while Burundi, Rwanda and Uganda all earn more than 50 of their export earnings from coffee. Looking west to cotton producing nations, the picture isn’t really any better. And, then, of course, there’s oil, which earns Nigeria 95 percent of its export income. Perhaps part of Chad’s defection to China was because the Asian giant is more likely to be able to buy all of Chad’s oil than Taiwan is.

In a paper Leonard Wantchekon & Nathan Jensen

...present empirical evidence suggesting a robust and negative correlation between the presence of a sizeable natural resource sector and the level of democracy in Africa. We argue that not only is resource abundance is an important determinant of democratic transition, but also partially determines the success of democratic consolidation in Africa. The results illuminate the fact that post-cold war democratic reforms have been successful only in resource poor countries such as Benin, Mali, and Madagascar. We argue that resource-rich countries such as Nigeria and Gabon can become democratic only if they introduce strong mechanisms of vertical and horizontal accountability within the state.

Suman Bery writing in the Economist:

With the two exceptions of Malaysia and Indonesia these countries did not enjoy rents from significant mineral resources. As such they were not subjected to the so-called “resource curse” of a struggle for control of these rents, the problems of an appreciated real exchange rate, and lack of competitiveness of the tradables sector. Also, at the time of their fast growth episodes, most of the Asian countries were well into their demographic transition, with the dependency ratio declining as the labour force expanded. This led to a rise in their saving rates, complemented in many cases by significant foreign aid.
As Angus Maddison pointed out a decade ago (in his "The World Economy: A Millennial Perspective") Africa’s underlying circumstances are much less favourable. (His discussion includes Mediterranean Africa, while I will restrict myself to sub-Saharan Africa.) Several of its major economies enjoy enormous mineral riches, which the world over pose tremendous problems for economic management. The prices for these minerals fluctuate violently in global markets causing volatility in revenues; the easy availability of mineral revenues inhibits the growth of a domestic taxation culture essential for the development of accountability to the citizenry; the struggle for illegal control of the mineral resources has been a source of fierce conflict and corruption; while the easy foreign exchange revenues the mineral exports make available boost the real exchange rate. This inhibits the growth of labour-intensive manufacture, which was the source of Asia’s growth.

Paul Collier writes in ANSA:

...as the radically different trajectories of Botswana and Sierra Leone illustrate, growth based on resource exports is critically dependent upon the quality of public choices. A long chain of decisions has to be got right, not just once but repeatedly for a generation. The upstream part of the decision chain involves reconciling strong incentives for prospecting with capturing as much as possible of the resource rents for society. This requires overcoming acute problems of agency, of time-inconsistency, and of asymmetric information. As the Niger Delta and the Gulf of Mexico demonstrate, it also requires the effective restraint of environmental damage.
The downstream part of the decision chain is about harnessing revenues for sustainable growth. Resource revenues need to be treated distinctively: they come from the depletion of a natural asset and should be substantially offset by the accumulation of other assets. The only European model of prudent use of resource revenues is Norway, but the Norwegian model is inapplicable for Africa. Norway has more invested capital per member of the labour force than anywhere else on earth, whereas Africa has less. Hence, whereas it is appropriate for Norway to accumulate foreign financial assets, Africa needs to invest domestically

John Ghazvinian focuses on the Nigerian version of the resource curse:

The problem, in a nutshell, is that for fifty years, foreign oil companies have conducted some of the world’s most sophisticated exploration and production operations, using millions of dollars’ worth of imported ultramodern equipment, against a backdrop of Stone Age squalor. They have extracted hundreds of millions of barrels of oil, which have sold on the international market for hundreds of billions of dollars, but the people of the Niger Delta have seen virtually none of the benefits. While successive military regimes have used oil proceeds to buy mansions in Mayfair or build castles in the sand in the faraway capital of Abuja, many in the Delta live as their ancestors would have done hundreds, even thousands of years ago—in hand-built huts of mud and straw. And though the Delta produces 100 percent of the nation’s oil and gas, its people survive with no electricity or clean running water. Seeing a doctor can mean traveling for hours by boat through the creeks.

Moeletsi Mbeki writes in the New Statesman:

At least a quarter of the South African population receives social grants that would not be possible if South Africa were not mineral-rich. Without mineral wealth to redistribute, the government would have to work harder and be more creative to find solutions to unemployment and poverty.Resource wealth makes it possible for the government not to have to put an effort into redeveloping the economy to create more jobs, and instead it sustains the unemployed and their dependants with social grants.

At last count Nigeria was listed as having 36 states within its Federal Structure. Unsurprisingly the great bulk of them(33 we now hear) are fiscally unable to sustain themselves.So there we have it, "resource curse" Nigeria incubates unsustainable states (every now and then) that bring new meaning to the phrase Intra-Country clientelism. 'State Governors' have no other role but to sink their snouts in a trough and thieve the handouts, while they apply no effort whatsoever to generating state revenues or creating wealth. If there is a better example of multi-layered governmental,knavery ,welfarism and indolence we are keen to know where?
What is the point of having administrative structures that have no financial viability? The 'Leaders ' of these synthetic constructs are actually administering imaginary territories...The emperors truly have no clothes!
I would bet that the 3 sustainable states include Lagos and Kano. What do you think?

Khadija Sharife in FPIF writes:

The portrayal of Africa's strong-arm leaders as lone rangers obscures the system underpinning the dictatorships and delinks dictators from their primary source of sustenance. The rhetoric of French-controlled development endorsed by Bongo is a subset of France's postcolonial Africa policy — Françafrique — designed to create structural dependence and domination by reasserting geostrategic control over natural resources through the use of black "governors." The pulse of the Françafrique ideology — fric is slang for cash — is rooted in shadow economies sustaining respectable corporations, various intersecting shadow networks, secret services, private lobbies, and political and diplomatic relationships between the official and unofficial political elite. These forces are individually and collectively able to mobilize substantial economic, political, and military support.