Nigeria's Oil Crisis: Wealth, Poverty, and Exploitation

Introduction: The Paradox of Oil Wealth and Poverty

Nigeria, a land of 137 million people drawn from 250 ethnic communities, achieved independence from Britain in 1960 and became a republic in 1963. This country has witnessed crisis after crisis — colonial rule, religious strife, and harsh military dictatorships — yet saw a small silver lining of economic hope when oil was discovered beneath its soil (Leech, 91). Until then, agriculture had been the mainstay of its economy, and a large fraction of its development plans relied on it. This mono-cultural economy underwent a drastic change in 1958 when oil was discovered in Oloibiri (Emmanuel; Olayiwola; Babatunde, 226). However, foreign exploitation of its bountiful oil reserves, in conjunction with economic mismanagement, has failed to deliver the much-anticipated economic and social improvement to this struggling country. As Bobo Brown, a Nigerian public relations executive working for Shell, puts it: "Nigeria is the land of no tomorrow" (Leech, 91).

According to UNDP and World Bank reports, Nigerians live in abject poverty, with the average citizen surviving on one dollar per day (Emmanuel; Olayiwola; Babatunde, 226). This is deeply ironic given several striking facts: Nigeria is considered one of the world's major players in the energy market; it is the seventh-largest oil-producing country in the world; one-fifth of United States oil imports are supplied by Nigeria; and the country is positioned to become one of the more significant suppliers of liquefied natural gas (LNG) in the world (Ikelegbe, 212). Moreover, oil contributes 92% of the nation's foreign exchange earnings (Obi, 10).

The Niger Delta region, which provides more than 90% of Nigeria's oil wealth, endures excruciating and endemic poverty. It is paradoxical that Nigeria's oil wealth is not just the lifeline of the country's economy but is vital to its national survival. Oil revenues contribute 70% of government revenues and 40% of GDP. According to 2003 statistics, 80.6% of total government receipts were contributed by gas and oil wealth. Despite such figures, the central question remains: what have the host communities gained from the abundant wealth generated by the exploration and extraction of this lucrative "liquid gold"? Why has the average Nigerian been unable to socially or economically benefit from the potential that oil offered? (Emmanuel; Olayiwola; Babatunde, 228; Ikelegbe, 223).

The answers are multi-factorial and can be attributed to a toxic combination of excessive exploitation by foreign multinationals, a militant and apathetic attitude among successive governments, domestic militancy, poverty, ethnic division, and a host of other major and minor reasons (Emmanuel; Olayiwola; Babatunde, 230; Ikelegbe, 223; Ihonvbere, 27). The source of foreign exploitation can be traced to the history of the Nigerian oil industry, which passed through three significant stages: the "oil concession" phase, followed by the "state participation" period, and then "deregulation." According to the old colonial law known as the Minerals Oil Ordinance of 1914, oil concessions could be granted only to British companies or companies allied with British ones.

Colonial Roots of Foreign Exploitation

It was under the Minerals Oil Ordinance that Shell D'Arcy — today known as Shell-BP — was granted an oil concession in Nigeria in 1938. Following the successful discovery of substantial oil deposits in the Niger Delta, other multinational players including Mobil, Safrap, Agip, Texaco, Chevron, Elf, and Esso also entered the market. The old law was suitably adjusted by the ruling colonists to accommodate non-British companies as well. This phase was entirely monopolized by foreign companies, while Nigeria received only taxes and rents. Most other foreign companies occupied areas abandoned by Shell. Shell has remained the dominant player in the Nigerian oil sector ever since (Obi, 18; Frynas, 10).

Shell's exploitative and negligent attitude became immediately apparent in the 2004 Niger Delta oil spill, when an old 28-inch high-pressure pipe dating back to 1963 ruptured, resulting in major fires. This caused serious environmental hazards and severely affected the local economy. Three hundred hectares of land — including farmland, wildlife, and aquatic ecosystems — were adversely affected, and trees worth several billions were destroyed. It is reported that Shell deliberately neglected the issue and caused delays in spill containment for the benefit of "third parties," namely clean-up operators who profit financially from such incidents (Concannon, 128).

According to many scholars, colonialism bears significant responsibility for the dismal state of development in Nigeria. Oil and other mineral resources were heavily exploited to benefit European and North American markets. Colonial policies encouraged foreign companies to enter, capture, and exploit the oil industry, but provided no opportunity or incentive for the development of local expertise at the technical or managerial levels. This resulted in the development of an inflexible public sector in which patronage and political appointments were rampant. In addition, "the state-heavy, 'extractive' structure of the economy failed to encourage entrepreneurialism" (Gearey, 37). Nigeria's economic problems can also be "seen as an extension of colonial policies aimed towards the development of a small managerial elite rather than a meaningful system of democratic accountability" (Gearey, 37). When Nigeria gained independence, its oil industry was still mostly owned by foreign companies. As in other sectors, the productive and distributive aspects of the oil industry were dominated by multinationals.

After independence, the Petroleum Profits Tax Ordinance also ensured that profits from oil wealth would be shared equally between foreign companies and the Nigerian government. Customary land laws restricted individual Nigerians from economically exploiting their own land and also discouraged any change or disruption that a new economic order might have brought. "It could hardly be supposed that the former colonial power would take leave of its possessions without an eye to future economic advantage" (Gearey, 40). The constitution framed for the newly independent country in 1960 can only be described as a product of legal hybridity.

Since mineral rights were vested in the Crown, foreign oil companies simply exploited the various weaknesses in the constitution to obtain their drilling mandates from the Crown. This meant that Nigerians received no compensation for giving up their land for drilling operations. Companies like Shell became a formidable presence in the country (Gearey, 40). According to Oronto Douglas and Ike Okonta, authors of Where Vultures Feast: Shell, Human Rights and Oil in the Niger Delta, "Royal Dutch/Shell is more than a colonial force in Nigeria. A colonial power exhibits some measure of concern for the territory over which it lords. This is not the case with this mogul, which goes for crude oil in the crudest manner possible" (Okonta; Douglas, 11).

U.S. Geopolitical Interests and Oil in Africa

American interest in Africa has had more to do with oil than with tackling terrorism or initiating development programs. The Bush administration pursued an aggressive and imperialistic oil policy, and declining oil production in other regions of the world made the United States increasingly eager for the possibilities Nigerian oil offered. By 2001, the U.S. was already importing 16% of its oil from Africa, a figure projected to rise to 25% by 2015 (Watsons Web). This strategic need was the prime force behind the creation of AFRICOM — the U.S. Africa Command — by President Bush in 2007. According to researcher Jesse Salah Ovadia, "AFRICOM is part of a larger project to create an 'American Lake' — a term first used to describe a sphere of U.S. influence in the Pacific Basin carved out by a heavy military presence — in the oil-rich Gulf of Guinea in order to facilitate the extraction of natural resources, primarily oil" (Ayyash; Hendershot). This "American Lake" included African countries such as Nigeria and Angola (Ayyash; Hendershot).

"America's technological, military, and economic security is growing increasingly vulnerable because of a lack of energy security. As a result, America's need to locate, exploit, and control fuel resources has intensified its engagement of the African continent" (McDougal, 805). The U.S. is thus becoming increasingly dependent on "crude military power for policing oil installations" (Lubeck; Watts; Lipschutz, 10). Since this strategy requires the active support of local governments, the U.S. favors authoritarian rule over democratic accountability. As a consequence, democratic voices on the continent continue to be suppressed (Lubeck; Watts; Lipschutz, 10).