Niger Delta Conflict On The Nigerian Economy Politics Essay

Niger Delta Conflict On The Nigerian Economy Politics Essay The objective of this Chapter is to provide a background to the study. This includes the implication of the Niger-Delta (ND) conflict on the Nigerian economy, the genesis of amnesty policy, the objective of the study, research questions, methodology as well as scope and limitations to the study. Background to the Study The centrality of the Niger-Delta Region to Nigerias economy is indisputable. This is because it produces the oil that presently sustained the economy. Unfortunately, however, over the last decades, it has become a centre for violent protests with destructive consequences on the Nigerian economy and socio-political stability as well as the rippled effect across the international. For instance, government statistics have shown that in 2005, Crude oil production has fell from 2.7million barrels per day (mbpd) to 2.4mbpd thereby showing a shortfall of 0.3mbpd in crude oil production. On the revenue side, in the same year, the projected revenue of N1.63trillion was revised downward to N1.4trillion due to shortfall in crude oil production (2006 FGN Budget Speech). Similarly, in 2006 expected revenue into the Federation Account fell by N570 billion due to loss of 600,000bpd (2007 FGN Budget Speech). In 2007, the projected revenue was short to the tune of N796billion due to disruption of cr ude oil production in the Niger-Delta region (2008 FGN Budget Speech). In 2008, crude oil production was projected at around 2.45mbpd but only 2.00mbpd was achieved also due to disruption of production (2009 FGN Budget Speech). In 2009, crude oil revenue projection fell by 17% due to disruption in production as well as fall in crude oil price at the international market (2010 FGN Budget Speech). Another pointer to the gloomy nature of the Nigerian economy was the use of the Excess Revenue Account (ERA) from year 2006 every month, except in some very few cases, to augment the monthly disbursement of revenue from the Federation Account. For instance, over N733.81bn and N795.41bn were withdrawn from the ERA to augment budget expenditure for the three tiers of government in 2007 and 2008 respectively (CBN, Annual Report, 2008). The conflict has been blamed on the nations imbalance political structure; long years of environmental pollution due to oil exploration and extraction activities; infrastructural neglect and demand for larger share of revenue from crude oil sales (Omeje, 2006). But, recognizably, over the decades, government have used carrots and sticks approaches both to coerce and appease the people of the Niger-Delta Region. While the past measures have made some significant impacts in some respects, there are recurring echoes of consternation from the region. Among the past efforts were the creation of the Niger-Delta Development Board (NDDB), Oil Mineral Producing Areas Development Commission (OMPADEC), Niger-Delta Development Commission (NDDC), Derivation Principle (from 1% to 13%) and the establishment of Niger-Delta Ministry in 2008. Fisher-Thompson (2010) writing for the Bureau of International Information Programs, U.S. Department of State observed that the key to Nigerias economic progress is stability in the Niger River Delta, where the bulk of the countrys oil and natural gas is produced and where a smouldering militancy and sabotage of production facilities threaten progress for the regions 30million residents. Thus recognising the enormous potentials of Niger-Delta for the nation at large, the late President YarAdua, for example, said it would be delusional to think that electricity could be generated and transmitted on a sustainable basis in Nigeria if resolution of the Niger-Delta question remains literally or figuratively in the pipelines (Adeniyi, 2010), Similarly, the Technical Committee on the Niger-Delta (TCND, 2008), noted that President YarAdua recognised the strategic importance of the Region as the main source of Nigerias foreign revenue by making the Niger-Delta problem one of the 7-Point prog ramme of the administration. Thus, amnesty was granted to the militants in the Niger-Delta region of Nigeria in June 2009, by late President YarAdua to assuage the nagging militancy in the region. There is, however, hardly any study at the moment that have made any constructive attempt to analyse the impact of the amnesty programme on the nations crude oil production as well as revenue flow into the Federation Account except for the dotted newspapers clips and other scattered official documents. Also, as it is with most novel approaches, the amnesty programme has been greeted with lots of scepticism as its likely impact of restoring peace and improved crude oil production and flow of revenue into the Federation Account might not be achieved. Accordingly, as a topical issue in Nigeria, which viability is questioned, it provides the motivation and interest to peruse government documents in order to give a better picture of the situation. Moreso, as a staff of Revenue Mobilisation Allocation and Fiscal Commission (RMAFC), an agency of government that is constitutionally charged with the function of monitoring revenue accruals into and disbursement from the Federation Account, added more impetus to the subject of the research. Hence, this research is an attempt to put together official records as well as other sources in order to give a preliminary impact of the amnesty programme on crude oil production and revenue into Federation Account. OBJECTIVES In this research, the quest is not to discuss the amnesty programme or to dwell on the oil debacle in Nigeria, but to relate the amnesty programme to some of the expected benefits, which are specifically interconnected with improved crude oil production and flow of oil revenue into the Federation Account. In other words, the primary aim of this research is to find out whether the acceptance of amnesty by the militants in the Niger-Delta has any significant impact on crude oil production output and flow of oil revenue into the Federation Account. RESEARCH QUESTIONS This research would particularly attempt to answer the following research questions: To what extent has the granting of amnesty as a mechanism to manage resource conflict in the Niger-Delta region contributes to improved crude oil production? What is the effect of the amnesty on the flow of revenue into the Federation Account (Common Pool) from the oil sector? How does the amnesty programme impact on the Nigerias fiscal federalism? METHODOLOGY Jankowicz, (1995) has defined methodology as a systematic and orderly approach taken towards the collection of data so that information can be obtained from those data. This research adopts a qualitative approach, which has been described as a subjective account that one generates by getting inside situations and involving oneself in the everyday flow of life (Gill and Johnson, 2005:89). In Strauss and Corbin (1990:17) Qualitative Research is any kind of research that produces findings not arrived at by means of statistical procedures or other means of quantification. The objective of using this approach is to be able to draw conclusion from the research question as to whether there was an increase in crude oil production as well as revenue flow into Federation Account as a result of the amnesty granted to the militants. This research uses secondary data collection approach. The data of crude oil production statistics and revenue inflow were sourced from Nigerian National Petroleum Corporation (NNPC), Central Bank of Nigeria (CBN), Revenue Mobilisation Allocation and Fiscal Commission, Federation Account Allocation Committee Files (FAAC) and National Bureau of Statistics (NBS). Despite, their shortcomings, the credibility of data from these institutions is not in doubt because no any other agency can provide such data within and outside Nigeria without referring to them as source. The data collected were evaluated using a simple data inspection technique which is a comparison between actual experience and counterfactual scenarios. This type of technique is comprised of three methods namely; with versus without, before versus after and target versus actual. This method is basically used to analyse the effects of programmes and performance (Douangboupha, 2004). This research adopted the before and after technique because it provide the basis in which comparison is done between crude oil production and revenue flow into Federation Account before and after the amnesty has been granted. The before versus after method is used to compare performance of a new policy with what was before the reform. This approach usually shows what happened and not why it happened. However, this approached is criticised on the fact that it ignores other external factors that can influence it outcome (Douangboupha, 2004). SCOPE OF THE RESEARCH The scope of this research is to examine crude oil and revenue data from January 2009 May 2010. Similarly, the research would not be interested in looking at the amnesty programme in general. Chapter Two LITERATURE REVIEW Introduction The main objective of this Chapter is to critically review literature from variety of perspectives on the causation and management of conflict with links to natural resources induced conflicts. Review of Literature Conflict is a tragedy and impediment to development (Collier and Hoeffler, 2000). Conflict is an interruption of development as no development project will ever take place in a state of conflict. Of course, this has been acknowledged by late President YarAdua that conflict is threatening peace, security, order and good governance and jeopardising the economy of the nation (YarAdua, 2009). Conflict has been defined by Burton (1990) as those behaviours of individuals or groups that go beyond disagreement that cause serious injury to physical, security and future development of individuals, groups and nations. As in Omeje (2006:17), Fisher (2000) defines conflict as uneasy relationship between two or more parties who have, or think they have incompatible goals. These incompatible goals are largely associated with deep-human needs characterised by interest, desires and aspirations. Without doubt, conflicts do not just happened as there are always such factors that lead to conflicts. The causation of conflicts have been theorised in various ways such as in biological disposition, psychology, religion, identity, ethnicity, nationalism, ideology, history and ancients hatred, bad neighbours, manipulative leaders, security dilemma, cultural dysfunction, nature of the State and incompatible world views (Mac Ginty, 2009). Despite these incisive but opposing perspectives, the rentier state theory and resource curse thesis were, indeed, two central frameworks that have provided in-depth analysis on the impact of natural resources to the political, economic and social settings of resource blessed nations. In the rentier theory, it is argued that it is any state reliant not on the surplus production of the domestic population or economy but on externally generated revenues or rents usually derived from the extractive industries such as oil (Omeje, 2006). The rentier theory believed that reliance on economic rents promotes inefficiency and impede socioeconomic development (Mahler, 2010). Proponents of this theory argued that, on the political strand, rents promote authoritarian rule because it encourages network of patronage, pervasive clientelism and selfish policies of distribution. The net effects of these are lack of democratisation and gross societal depoliticisation. Another contention is that the presence of cornucopia of revenues, particularly, coming from oil sector discourages taxation thereby making the political class less accountable to the people and less interested in the promotion of citizen participation in governance. Though rentier theory focus more on the stability of authoritarian rule, rather than violence, there are evidence that rents are used to finance security apparatus by the political class to repress opposition, which in essence amount to violence (Mahler, 2010). As an example, the Nigerian political history has been dominated by both military and political elites that have less sympathy for the promotion of democracy. The evidences of coup and counter-coups that shaped the nations political past are obvious while election rigging and disenfranchisement have so far characterises the democratic dispensation. On the whole, there are submissions that the bulk of the youths in the Niger-Delta were armed by politicians. Okolo (2009) aptly states that the politicians in their unbridled lust for power, arm these youths as private armies against their real and perceived enemies making all sorts of promises to secure their loyalty but immediately their aim is achieved they abandon them forgetti ng that they still hold the arms. The youths unemployed and angry must a matter of necessity employ the guns to some use? The world is today not faced by the Thomas Malthus (1798) assertion that scarcity leads to conflict but by the argument that resource abundance has a link to conflict. The Malthusian argument is based on the idea that natural resources are in fixed supply and as demand of the resources increased, the price also increases, while the resources depleted thus leading to conflict (Mahler, 2010). On the contrary, staple theorist argued that resource abundance leads to the improvement of peoples well-being because natural resources provide the much needed revenues for the provision of goods and services. Unfortunately, resource abundance is now seen as a curse that is associated with all sorts of problems ranging from slow economic growth, corruption and conflicts (Oyefusi, 2007). Economic theorists have contended that over-reliance on single source of revenue makes a nation vulnerable and prone to conflict (Herbst, 2001) because of large rents and exposure to variety of shocks (booms and bursts). For instance, Nigeria has faced several crude oil related shocks and conflicts from 1966 to date often resulting in loss of lives and dislocation of the nations economy. More compounding to Nigeria is that the oil resource is largely located in one geographical region. And, as aptly observed by Ndikumana and Emizet (2005), dependence alone does not motivate conflict but the concentration of the natural resources in one geographical region and their unequal distribution significantly contribute to conflict. Moreso, the topography of the Niger-Delta area seems conducive for militancy activiti es. Olowu (2009) described the Niger-Delta as an intricate network of lagoons, creeks, estuaries, and mangroves swamps, stretching across 1 million square meters. Howsoever, sound is the above proposition; a many countries like Saudi Arabia, Iran, Norway and host of others were able to demystify the resource-dependency theory by making considerable progress in transforming their respective nations. So, for Collier (2004) the solution is to diversify the sources, which reduces the risk of conflict. Also, the resource-dependency theory has been criticised on the fact that dependency alone on a single natural resource does not lead to armed conflict. As Mac Ginty, (2005:67) argued scarcity and violence are a product of social relations rather than inherent in the relative abundance of a particular good, object or resources. It is further argued that conflict arises from a complex mix of events in the presence of resources the mode of resource exploitation, perception on benefits and identity affiliations. As it has been observed if the stake are high, identity affiliations can mutate, with groups and individuals attaching increasing weight to the purity of their ethnic group and rediscovering (or inventing) their unique history (Mac Ginty, 2005). Added to this, Ross (2003:19) pointed out that any given conflict is brought about by a complex set of events; often poverty, ethnic or religious grievances, and unstable governments The fundamental problem noted in this context is that of the management of the resources. It has been pointed out that it is the nature of the extraction coerce or voluntary, licences distribution patronage or open competition, profit destination public or private pockets that significantly explained whether there is resource curse or not (Mac Ginty, 2005). Similarly, poor management of resources create situations where individuals or group that harbour some grievances will use that as opportunity to argue against plundering of the resources located in their backyard without benefits. This is, somehow, the case in the Niger-Delta region of Nigeria where there is demand for fair share of revenue from the resources extracted from the area. The Resource curse thesis presumed misery in the midst of plenty. It is argued that abundance rather than serve as a means for development leads to struggle for the control of the natural resource which often result in armed conflict (Obi, 2008). Indeed, the armed conflict in the Niger-Delta is over the control of crude oil between the State and the local communities caused by poverty and low human development index (Omeje, 2006). On another hand, studies by Sachs and Warner (1997:3) demonstrated that resource-poor economies often vastly outperform resource-rich economies. The point is that nations with abundant natural resources tend to grow slower than economies with fewer resources. In support of the above, Ross (2003) reported that the GDP per capita of countries which mining export was between 6% to 15%, fell by an average rate of 0.7% while those with mining export of about 15% 50%, their GDP per capita fell to 1.1% a year. Similarly, it showed that the GDP per capita of count ries with over 50% of mining exports, dropped by 2.3% per year. Furthermore, Sachs and Warner, (1997) cited historical instances to buttressed this point that in the 17th century despite the overflow of gold and silver from the colonies of Spain, the Netherlands surpassed Spain. This is similar with Japan and Switzerland that cast shadow over resource abundant Russia in the 19th Century while Korea, Taiwan and Hong Kong became the star performers of the 20th century despite having fewer resources. Sachs and Warner (1997:4) conceptually situate this economic puzzle within the context of easy riches leads to sloth and the Dutch disease proposition. The Dutch Disease thesis argued that the availability of large rents from a single natural resources often result in the neglect of other productive sectors of the economy (Ross, 1999). In other words, the Dutch disease demonstrates that booms in natural resource sectors usually affect the distribution of employment throughout the economy, as wealth effects pull resources in and out of non-traded sector s (Sachs and Warner, 1997:5). And this is evident in Nigeria where oil revenue continue to grow from 3% in the 1960s to now over 80% of federally collectable revenue while total agricultural export dropped from 60% in the1960s to less than 8% by 2005 (Omeje, 2006). However, contrary to the persuasive argument put forward by Sachs and Warner, (1997), that one surprising features of modern economic growth is that economies abundant in natural resources have tended to grow slower than economies without substantial natural resources, Stijns, (2000:3) argued that it was a misleading result which was short of recommending that developing countries should leave their natural resources undiscovered and/or unexploited. Stijns (2000:4) further contended that natural resources are not significant determinants of economic growth because of the coexistence of positive and negative channels of effect from natural resources to other economic factors. It has been variously argued that natural resources have the potentials of promoting violent conflict through grievance and greed. The grievance theory sees conflict emerging from the long concern over deprivation and injustice (Collier, 2004 and Collier and Sambanis, 2007). Therefore, Communities whose land is being exploited sees themselves as collateral damage and where benefits is not forthcoming, they resort to protest and violence that leads to economic sabotage such as disruptions of production. For instance, the Niger-Delta region has been famous for economic sabotage as a way of protest against environmental degradation and neglect (Omeje, 2006). However, economists like Collier and Hoeffler have argued that greed is more inherent in motivating conflict than grievance or conflicts are far more likely to be caused by economic opportunities than by grievance (Mac Ginty, 2005:79, Tar, 2008). This is because the abundance of natural resource often serves as an incentive in which elites and warlords loot. The greed theory also presupposes that natural resources provide attraction to covetous individuals or groups to rebel in order to take control over revenues from the natural resources. However, critics argued that the expression made economists on the causation of conflict is economic rationalism taken to extreme (Mac Ginty, 2005:71) and pointed out that conflicts cannot be measured only by econometric methodologies or mistook correlation for causation while also subjecting the causes of conflicts only within the national environment without placing external factors such as trade, religion, regional dynamics in arms flow, etc. G enerally, it is argued that the real agents of conflicts are politics and identity while economic factors only appear to change the nature and aim of the conflict at some stage (Mac Ginty, 2005). As further contended, economic factors can enable conflict, but it cannot combust or sparks the conflict without other factors. Closely related to the greed thesis is the frustration and aggression theory, which deals with relative deprivation as a perceived disparity between value expectation and value capabilities (Afinotan and Ojakorotu, 2009). The theory argues that if there is a gap between expectation and attainment caused by lack of capability, tension crept in as a result of unfulfilled aspiration, which leads to frustration that eventually produces violent aggression. It was noted by Afinotan and Ojakorotu, (2009) that men are most inclined to aggression when subjected to unjustified frustration. Indeed, the potentials of violence are define by the gravity of deprivation. As Afinotan and Ojakorotu, (2009) pointed out men who are frustrated have an innate disposition to do violence to its source in proportion to the intensity of their frustration. The Niger-Delta conflict is a perfect demonstration of this theory because people are frustrated by lack of development, etc. However, this theory has been criticised on the ground that aggressive response to frustration may be dependent upon the individuals level of tolerance Afinotan and Ojakorotu, (2009). The separatist theory suggests that natural resources portend the risk of a secessionist conflict because it gives those in the region where the resources is located the incentive to demand for separate State (0yefusi, 2007). Indeed, it is more obvious from the emerging picture and dynamics of the conflict in the Niger-Delta region that the element of greed rather than grievance is more pronounced as various groups and factions emerged making conflicting demands and more often violently clash with each other over the control of areas where pipelines installation passes through (Omeje, 2006, 2008). In another perspective, Bannon and Collier (2003:2) contended that conflict is more likely to occur in a state of low per capita income, low economic growth rate and the structure of the economy. For instance, since the 1970s oil exports generated huge revenues in Nigeria, and yet, per capita income has remain very low in 1975 the per capita from oil was $127 which raised to $351 in 1980 and plummeted to $81 in 1989 but gradually grew to $337 in 2007 and to $391 in 2007 (CBN, Annual Statistical Bulletin, 2008). Though growing population in Nigeria has played a pivotal role in this low per capita, it is hard to conclude that low per capita from oil revenue is not one of the factors that leads to conflict in Nigeria (Mahler, 2010). But Mahler (2010:15) persuasively argued that even though falling oil revenues in the 1980s and the 1990s have contributed to low per capita, it was not only the shrinking abundance of oil but also its interplay with weak resource management performance in the country that caused further socioeconomic problems. These are issues associated with managing environmental problems and resource allocation principles. Therefore, as a solution, Collier (2004:7) suggested that doubling the level of income halve the risk of conflict. A percentage point on growth rate reduces the risk by around a percentage point. Despite the preponderance of econometric and case study analyses, there are still profound opposition that resources alone cannot be the direct link to conflict. This is because other extraneous factors and historical assumptions which are necessary for creating a link between resources and violent conflicts have not been properly contextualized through in-depth empirical studies to create linkages between resources and conflicts (Mahler, 2010). To this end, Mahler, (2010) has provided in a tabular form a matrix of resource and non-resource contextual conditions that will guide debate on the link between conflict and resources: Using the matrix in Table IV, and as has been postulated, the conflict in the Niger-Delta is premise on four contextual factors with oil serving as the main attraction (Omeje, 2006) as well as other external factors. Some commentators have situated the conflict in the Niger-Delta within the hypothesis of historical context arguing that the amalgamation of Nigeria in 1914 was unconscious of the heterogeneous nature of the nation as it failed to address the concern of the minority groups. Thus, the dominance of majority groups over the minority groups whose environment eventually produces the nations revenue, give rise to agitation for the restructuring of Nigeria (Omeje, 2006). The second ground situates the conflict in the Niger-Delta on the legal framework relating to landownership and extraction policies. Proponents of this thesis argued that the existing legal framework has given more control to the Multinational Oil Companies operating in the country thereby making them less lia ble to the environmental problems associated with exploration and extraction. In other words, the current legal mechanism within Nigeria lacks the impetus of enforcement. In the case of landownership, it is argued that the Land Use Act of 1978, for instance, has given State Government the ownership of land thus depriving individuals and groups from the right to demand for appropriate compensation, a situation which late President YarAdua attempted to reverse (Adeniyi, 2010). The third view positioned the Niger-Delta conflict on the pedestal of dependency in which the incorporation of Nigeria into global economic and political scene that is yet to be understood has disadvantaged Nigeria thereby leading to conflict. The fourth school of thought with Marxist approach sees the conflict in the Niger-Delta as the contradictions of class or groups interest intrinsic to the political economy of Nigeria as well as the character of the state (Omeje, 2006). Indisputably, the above issues are cause largely by institutional arrangement. As noted by Bardhan (2005) institutions either economic or political constitute or form the nucleus in which equitable distribution of resources or powers among divergent groups are made. And where the institution is inefficient, it becomes less credible thus attracting disquiet among the people. Bardhan (2005:27) put it that the history of underdevelopment is littered with cases of formidable institutional impediments. The failure of the institutions gives birth to collective action problem such as dispute over the sharing of the cost of bringing change known as free-rider problem and disputes over the sharing of benefits. All these problems, often, lead to breakdown of coordination among divergent and competing groups. Douglass North in Acemoglu and Robinson (2008:2) define institution as the rules of the game in a society or, more formally, are the humanly devised constraints that shape human interaction. Both economic and political institutions are influence by collective choices. The political institution, for instance, allocates de jure and de facto powers even though the latter sometime uses the instrument of force to meet it objectives. Acemoglu and Robinson (2008:6-7) noted that de facto political power originates from both the ability of the group in question to solve its collective action problem and from the economic resources available to the group which determines their capacity to use force against other groups. They further noted that when a particular group is rich relative to others, this will increase it de facto political power and enable it to push for economic and political institutions favourable to its interests, reproducing the initial disparity. Certainly, the Niger-Delta co nflict is a prime example of this assertion because the militants were capitalising on the location of the crude oil in their geography as a weapon to move for drastic change in the way political power and resource distribution are made. The history of Nigeria has depicted vivid evidences of political and economic asymmetry, which means unequal power and resource distribution and relation between communities within the States and between the State and the Federal Government. It is palpable that despite the creation of more States in the last decades, the cries of marginalisation still pervade the nations political terrain. For instance, State and Federal relationship has been situated on the north/south divide created by the amalgamation of 1914 which created a presume fear that the north with numerical population would continue to dominate the south. Oputa (2000:113), for example, observed that political asymmetry in this case persists because of the fear of domination by the north in the context of party electoral competition for control of political power and, therefore, of the enormous fiscal resources and patronage deriving from it at the federal level. Another issue political asymmetry lies in the balance of po wer where the States have remained dependent on the Federal Government. But it should be noted that Nigerias federalism was unique because the centre created the units unlike in other federations where the units create the centre. Contributing to the conflict debates, the neo-liberalists through the conception that free-market made free men believe that individual freedoms, open markets and rational choice guides human beings away from encouraging conflicts but instead sees development as a ladder out of conflict. This argument was re-enforced by the submission that free trade prevents conflicts and was demonstrated by the post-colonial studies of Krause and Suzuki, which concluded that the probability of conflict under open trade is insignificant (Mac Ginty, 2009). However, this postulation was criticised on the ground that free trade encourages market-induced inequality thereby creating enmity and tension among individuals and communities. Indeed, the Niger-Delta region is the symbol of Nigerias international trade where Multi-national Companies (MNCs) engage in Oil and Gas business, surprisingly, it is the same region that has been inundated by violence. Often, there were clear evidences to suggest the invo lvement of the MNCs in the brewing of the conflicts (Omeje, 2006, 2008). Development is another issue that is said to be behind conflict. This is so because the process of development sometime provide s