The Extractive Industry Transparency Initiative and Corruption in Nigeria: Rethinking the
links between Transparency and Accountability
By
Uwafiokun Idemudia
York University
Toronto, ON
Canada
[email protected]
1
Abstract
The identification of corruption as the development problem in resource rich African countries
has in recent years led to the emergence of a dominant perspective that suggests the link between
transparency and accountability as a strategy to address corruption and other aspects of the
resource curse. This idea informed the establishment and the promotion of the Extractive Industry
Transparency Initiative globally, and its subsequent adoption locally in Nigeria in the form of the
Nigerian Extractive Industry Transparency Initiative (NEITI) to fight corruption. However, since
the adoption of NEITI in 2004, limited efforts has been geared towards ascertain the effectiveness
of NEITI or assessing its implications for the purported link between transparency and
accountability. Drawing on a critical examination of the experiences in Nigeria, this paper
suggests that the NEITI has at best been ineffective in the fight against corruption in Nigeria, and
the assumed association between transparency and accountability is based on a misdiagnosis of
the governance failure complex in Nigeria, an underestimation of the problem of structural
formalism and an unfounded expectation of the capacity of civil society groups to demand for
accountability in the country. The paper concludes by considering the theoretical implications for
using transparency as vehicle to deal with the problem of corruption in Africa.
2
INTRODUCTION
The correlation between natural resources and negative political, economic and social
consequences in Africa has come to define what is often referred to as the „resource
curse‟(see Aunty, 1993; Aunty and Gleb, 2001; Ross,1999; Sach and Warner, 2001).
While critics and proponents of the resource curse thesis continue to debate its merit i,
recent advances in social science knowledge seem to suggest that it is not just the
presence of natural resources that leads to the resource curse. Rather, it is the „governance
structure‟ around resource extraction, processing and the management of generated
revenues that determine if natural resources will turn out to be either a curse or a blessing
for a country (Alao, 2007). Consequently, efforts to address aspects of governance failure
seen as crucial for ameliorating the „resource curse‟ in Africa have come to define
international policy responseii. An example is the institution of the Kimberly Process
Certification Scheme to help regulate the international trade of conflict diamonds that are
generally believed to have contributed to and prolonged the conflicts in Democratic
Republic of Congo, Angola and Sierra Leoneiii. Similarly, as part of this international
response to the resource curse, a key question has been how revenue from natural
resource extraction can be efficiently utilised for sustainable development. For example,
Gary and Karl (2003) noted that if oil revenue management is based on transparency,
accountability and fairness, oil revenue will become a source of blessing for oil
producing African countries. Indeed, some have suggested that resource revenue should
first be distributed to the citizens and then taxed back by the state as a means of reducing
the mismanagement of natural resource revenue and introducing accountability into statesociety relations (Salai-Martin and Subramanian, 2003). However, it is the supposedly
3
not too radical alternative strategy that links transparency with accountability that seemed
to hold sway among policy makers. For example, according to Kolstad et al. (2008),
transparency is viewed as an important factor in reducing corruption and other resource
curse related dysfunction. The strategy linking transparency with accountability is based
on the simple assumption that the greater the transparency around natural resources
revenue earned by African states, the greater the opportunity and possibility for these
governments to be held more accountable for the use of such revenue. This strategy
informed the institution and promotion of the extractive industry transparency initiative
(EITI) by western governments, some governments of developing countries, and
transnational corporations. The objective of this paper is to critically examine the
Nigerian Extractive Industry Transparency initiative as a vehicle for promoting the
efficient use of natural resource revenue to meet sustainable development goals in
Nigeria.
AN OVERVIEW OF NIGERIA’S OIL INDUSTRY
The oil industry in Nigeria has predominantly been dominated by two of its three key
stakeholders i.e. the Federal Government of Nigeria (FGN) and foreign oil companies.
The consideration of the host communities as a stakeholder in the Nigerian oil industry is
a relatively new phenomenon. However, the reality remains that the host communities are
still relegated to the background in decision-making processes within the oil industry.
This is partly because the FGN, by virtue of a number of decrees and laws (such as the
Land Use Act of 1978 and the 1969 Petroleum Act), remains the only legitimate authority
4
that can enter into negotiation and grant concessions for oil exploration to international
and local oil firms, since ownership of crude oil has been vested in the Nigerian state.
Oil exploration and marketing takes place in Nigeria through complex joint venture (JV)
partnership agreements and production sharing contracts (PSC) between the FGN and the
oil companies. However, since ownership of crude oil is vested in the state, taxes and
royalties accrue to the FGN directly. Hence, the FGN is in effect both a direct
„stockholder‟ as well as a stakeholder in the Nigerian oil industry. The FGN also has the
responsibility for regulating the activities of the oil companies through the Nigerian
National Petroleum Corporation (NNPC). The NNPC was established in 1977 and
charged with the responsibility of regulating and supervising the oil industry on behalf of
the Nigerian government. The NNPC has therefore been the sole superintendent of the oil
sector, dictating the pace and direction of activities in the industry. As the Federal
Government's proxy in the oil business, the NNPC holds an average of 57% in the joint
venture partnership arrangements with the multinational oil exploration and production
companies in Nigeria.
The private sphere of the Nigerian oil industry is dominated by foreign oil companies,
and they can be relatively classified into first and second generation oil companies, on the
basis of the date they went into full independent concessional agreement with the FGN
(see Table 1). The first-generation of oil companies account for about 90% of the total
crude oil production in Nigeria. Among the first generation oil companies Shell is the
largest and accounts for roughly half of Nigeria‟s total oil production .
5
TABLE 1
OIL COMPANIES BY GENERATION
First Generation
Second Generation
Shell (1937)
Statoil/BP Alliance (1992)
Mobil (1955)
Esso (1992)
Chevron (1961)
Total Nigeria (1992)
Texaco Overseas (1961)
Amoco (1992)
Elf (1962)
Conoco (1992)
Philip (1962)
Abacan (1992)
Pan Ocean Oil (1972)
Bought Over Ashland Oil (1973)
Agip (1979)
Source Idemudia and Ite,2006b
Frynas et al (2000) argued that the first generation oil companies in Nigeria have been
able to maintain their dominance in the oil industry by virtue of „first mover advantage‟.
On the other hand, the second-generation oil companies are confined to areas that were
either left behind by the first generation oil companies or to newly discovered oil blocks.
With respect to the third group of stakeholders in the Nigerian oil industry (i.e. local
communities), there are an estimated 3000 communities, which comprise over 40
different minority ethnic groups, speaking over 250 different languages and dialects in
the Niger Delta area (Figure 1) where the bulk of Nigeria‟s oil is extracted. Agim (1997)
has divided communities in the region into three principal groups, each of which claims
equal rights to the oil extracted from their land. These are:
a) Producing communities - communities in which onshore oil exploration take place;
6
b) Terminal communities - coastal communities on whose territory port or terminal
facilities are located sometimes because oil exploration takes place offshore; and
c) Transit communities - communities on whose territory transit pipelines pass through
However, despite the region‟s major contribution to national wealth, poverty and
unemployment levels in the Niger Delta are higher than the national average and 70% of
its people live in rural areas with no access to basic social amenities like tap water, good
roads, electricity and health care facilities (NDDC 2004).
Figure 1: Constituent States of the Niger Delta, Nigeria
7
NIGERIA, OIL: RENTERISM AND THE RESOURCE CURSE
The 1914 forced amalgamation of the southern and northern protectorates driven by the
British colonialist political and economic interests as opposed to the concerns or
aspirations of the indigenous people, marked the birth of the modern Nigerian state. The
nature of this amalgamation, and its political and economic basis, has had significant
ramifications for post-colonial state-society relations. Unfortunately, this issue is often
ignored by the resource curse literature. For example, Watts (2005a) criticised the
resource curse literature for failing to consider how oil‟s contribution to violence in the
Niger Delta built on pre-oil political dynamics.
The discovery of oil in 1956, and its subsequent extraction in 1958, has over the past 30
years transformed the Nigerian economy from an agriculturally based economy to an
economy essentially dependent on oil. For example, between 1960 and 1973, oil output
exploded from just over 5 million barrels per day to over 600 million barrels per day and
government revenue also rose from N66 million (naira) in 1970 to over N10 billion in
1980 (Watts, 2007). Today, the rentier status of the Nigeria state is emblematic in the fact
that oil accounts for 40 percent of its GDP, 95 percent of exports and 83 percent of
government revenue. This centrality of oil in national politics against the backdrop of
pre-oil politics facilitated the full manifestation of the resource curse. In economic terms,
over the period 1965-2004, per capita income fell from $250 to $212. Between 1970 and
2000 the number of people subsisting on less than $1 a day grew from 36 per cent to
more than 70 per cent, from 19 million to about 90 million (Watts, 2007). Income
8
distribution deteriorated, such that 90 percent of oil revenue accrues to 1 per cent of the
population, while between 1960 and 1999 the country lost as much as $380 billion to
corruption and waste (HRW, 2007). Indeed, Watts (2007), noted that in 2003 70 percent
of the country‟s oil wealth was either stolen or wasted. Today, Nigeria is ranked 159th out
of 177 countries in the UNDP‟s human development indexiv. Politically, oil wealth
transformed the state into an effective tool for primitive accumulation. Consequently,
military coups and counter coups with military dictatorships have been the dominant
form of government in Nigeria for over thirty years between 1960 and 1999 (see Table
3). For example, while the administration of Babangida who ruled between 1985 and
1993 saw the disappearance of $12.2 billion, General Abacha‟s regime is believed to
have embezzled one to three billion dollars. In addition, the advent of democracy in 1999
has seen the „instrumentalisation of disorder‟ as a means of winning elections and
holding on to power. Indeed, Idemudia and Ite (2006) have noted that conflict in the
Niger Delta where oil is mainly extracted has increased both in intensity and scale.
Incidence of oil bunkering, kidnapping and ransom demand, electoral violence, and
inter/inta-community violence now occur almost on a daily basis. As one analyst puts it,
the question today in the Niger Delta is no longer whether there will be violence; rather,
it is a question of when and where (Ibeanu, 2000). Nevertheless, oil has also been the
organic glue holding the country together. The centralization of oil revenue and the
subsequent overdependence of all other tiers of government on the centre (i.e. federal
government) essentially allowed the federal government to purchase compliance from the
various state governments. Hence, the federal government has been able to enforce some
degree of political cohesion within the fragile federation (see Figure 2).
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Efforts to address the resource curse dysfunction in Nigeria have generally focused on the
creation of two types of new institutions. The first sets of institutions are those designed
to address the specific grievances of the Niger Delta people by directing more oil monies
to the region. Examples of such institutions include the Oil Mineral Producing Area
Development Commission (OMPADEC) that was created in 1992, the Niger Delta
Figure 2: Oil Revenue Flow in Nigeria
10
Source: Watts, 2005
Development Commission (NDDC) created in 2000, and the Ministry of the Niger Delta
created in 2008. While Frynas (2000) has described OMPADEC as a tool of public
relations and for the siphoning of oil monies, Omotola (2007) asserts that the NDDC has
been a failure. The second sets of institutions are those set up to fight corruption. Notable
examples include the Independent Corrupt Practices and Other Related Offences
Commission (ICPC) in 2000, Economic and Financial Crime Commission (EFCC) in
2002 and the Nigerian Extractive Industry Transparency Initiative (NEITI). For example,
the EFCC claims it has successfully prosecuted more than 82 people on charges of
corruption and fraud and recovered more than $5 billion in stolen money (HRW, 2007).
Despite these efforts to fight corruption that have yielded some dividend, the HRW
(2007) noted that success has so far been limited and corruption continues to remain
rampant at all levels of government. Today, Nigeria still ranks 121st out of 180 countries
in the corruption perception of index of transparency international survey.v
THE EMERGENCE OF EITI AND THE NIGERIAN EXTRACTIVE INDUSTRY
TRANSPARENCY INITIATIVE (NEITI)
The emergence of EITI is best understood through the lens of Polanyi‟s „dual movement‟
i.e. capitalism automatically provokes the impulse to protect (see Polanyi, 1957). In this
case, the recognition that globalisation and economic liberalisation were altering the
balance of rights, and obligations of transnational corporation (TNCs) in ways that meant
TNCs were now enjoying new rights, powers and freedoms without a commensurate
increase in obligations and responsibilities especially with developing countries
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reinvigorated the old tension between capitalism and regulation (Utting, 2005; Turner,
2007). On one side, was the coalition of NGOs that constituted, the Publish What You
Pay (PWYP) campaign launched in 2002 that demand for a mandatory disclosure of
taxes, fees, royalties and other payments made by TNCs to government and other
agencies. In contrast, critics of the rigour and mandatory form that the proposal of the
PWYP campaign took adopted an accommodating and legitimating strategyvi that meant
that the entire demands of the PWYP coalition was not completely rejected. Instead, it
was sufficiently modified to better reflect the interest of the pro-capitalist movement in
the form of EITI also launched in 2002. Hence, In contrast to the PWYP proposal, EITI
promotes a voluntary approach to disclosure and a shift in emphasis to government and
TNCs disclosure. The central tenet of the EITI is the idea that the opacity that marks
business-government relationship in the extractive industry facilities greed, the
mismanagement of natural resource revenue and the inability to hold government
accountable. Hence, EITI is an attempt to severe the nexus of revenue opacity,
corruption, poverty and the propensity for violence in resource dependent countries
(Hayman and Crossin, 2005)
Nigeria in 2007 became the first candidate country with a statutory backing for the
implementation of EITI. The willingness of the Nigerian government to commit to EITI
in 2003 and then subsequently launch the NEITI in 2004 can be attributed to internal and
external factors. The first is global actors and discourses that pushed transparency issues
to the forefront of global policy response to the „resource curse‟ by highlighting the
negative impact of corruption on social, economic and political development in Africa.
12
For example, Transparency International‟s consistent ranking of Nigeria as one of the
most corrupt countries in the world presented the new civilian regime in 1999 with both
an opportunity and a challenge. The challenge was the need to address the negative
international reputation of Nigeria, and the opportunity was the „war on corruption‟
provided a useful mobilisation tool for the new administration to gain legitimacy. For
instance, the war on corruption was instrumental to the ability of the Obansanjo‟s regime
to secure some $18 billion debt relief from Paris Club creditors as well as gain some local
support given that the election that brought the regime to power was also marked with
fraud. The internal factors were largely driven by populist disenchantment with decades
of military rule that saw not only the embezzlement and mismanagement of public
resources but also the institutionalization of corruption to the detriment of nationalist
development goals. The interaction of these two factors is reflected in a background
paper on NEITI which noted that “the federal government has recognized that
improvements in the transparency of petroleum revenue data are needed for the effective
management of public resources and to improve the image of Nigeria at home and
abroad.vii”
The NEITI Act was passed into law in 2007 and its governing body is the National
Stakeholder Working Group (NSWG) that consists of representatives from civil society,
government, oil companies, representative of communities from the six geo-political
zones, and the media. The primary objectives of NEITIviii are:
(1) to ensure due process and transparency in the payments made by extractive
industry companies to the federal government and its agencies;
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(2) To ensure accountability in the revenue receipts of the federal government from
extractive industry companies;
(3) To eliminate all forms of corrupt practices in the determination, payments,
receipts and posting of revenue accruing to the federal government from
extractive companies.
In view of these objectives, NEITI undertook the first financial, physical, and process
audit for the period between 1999 and 2004 in the country. While the initial report
suggested that the discrepancies between revenues paid by oil companies and those
received by government agencies amount to $300 million, subsequent auditing suggests
that only about $6million is unaccounted for. The director of communications with
NEITI attributed the initial discrepancies to sloppy book-keeping, improper labelling and
inadequate communication between companies and various governmental agencies (see
Taiwo, 2007). In addition, NEITI has also been able to boost governmental oil revenue
earnings by ensuring that proper payments are made by oil companies. For example, the
Chairman of NEITI, Dr Siyan Malomo noted in 2007 that NEITI was about to recover
over N130 billion from oil companies in the country between 2004 and 2006 by
identifying lapses that traditionally lead to loss of oil revenue for the governmentix.
However, while Nigeria has until 2010 to undertake validationx, HRW (2007) notes that
the government has failed to push through key pieces of legislation that would have
complemented its participation in EITI by making government expenditure at all levels
more transparent. For example, the government is yet to pass into law the fiscal
14
responsibility bill that would introduce new measures of integrity, transparency and
uniformity of budget-making and government expenditure at all levels. At any rate, there
is no doubt that the present local and international efforts to address the resource curse
via emphasis on transparency and accountability have yielded some benefits, and
continue to face serious challenges. However, the real danger lies in the fact that the
present approach seems to also be diverting attention away from real political, economic
and social constrains enabling the manifestation of the resource curse in Nigeria and
other African countries. Unfortunately, it these underlining political, economic and social
problems that inform the „governance failure complex‟ driving the full manifestation of
the resource curse in Nigeria and other resource rich African countries.
EFFECTIVE USE OF NATURAL RESOURCE REVENUES: BEYOND
TRANSPARENCY AND THE NEED FOR COMPATIBLE CULTURAL
DEMOCRACY
While there is no doubt that EITI (i.e. NEITI in Nigeria) opens a new space of
engagement among different stakeholders, and offers new possibilities for accountability,
it suffers from some inherent shortcomings that undermine its effectiveness as a vehicle
for making accountability work for sustainable development. These shortcomings are
largely rooted in a limited diagnosis of the „governance failure complex‟ in Africa. The
misdiagnosis of the nature of the governance failure complex in Africa is manifested in
the fact that:
(a) EITI is often treated as ideationally neutral, and as if it is devoid of power
relations. For example, while transparency is called for with regard to payment
15
made by oil multinational corporations (MNCs) to the government of Nigeria, the
fact that the government cannot independently determine outside figures
presented by the oil MNCs the amount of crude oil pumped per day from their
territory is not covered in the initiative. In addition, EITI does not address the
problem of safe havens provided by western banks for stolen natural resource
revenue in western countries. Surely addressing the problem of safe havens in
western country for stolen revenue from Africa is just as important as
transparency in government revenues
(b) The ahistorical nature in which EITI is often presented is yet another problem. It
is as if with the adoption of EITI, all the underlining reasons behind the demand
by the Publish What You Pay (PWYP)xi campaign as well as its concern about the
effectiveness of a voluntary initiative like EITI have all simply disappeared.
(c) The tendency for EITI to emphasise government revenue earning with limited
focus on governmental expenditure. For example, the Nigerian Extractive
Industry Transparency Initiative (NEITI) have so far identified and published
discrepancy between government account of oil revenue earning and oil MNCs‟
record of payment. In contrast, the monitoring of actual governmental expenditure
of oil revenue has so far been limited.
(d) EITI places enormous faith on civil society to be able to demand for
accountability, yet little attention is paid to the nature, character, and capacity of
civil society in Africa.
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(e) EITI is essentially a top-down process with little or no space for the voices, and
ideas of
the poor and marginalised in whose name the initiative is been
undertaken in the first place
These shortcomings have inevitably made EITI more of an attempt to create
accountability for accountability sake, as opposed to an attempt to create accountability
for sustainable development in Africa. This is because, while greater transparency and
less corruption could increase government revenue, the crucial question with regard to
sustainable development is what happens to governmental expenditure (Jenkins, 2005).
Hence, any effort to connect accountability to sustainable development in Africa requires
a more critical but holistic diagnosis of the governance failure complex in Africa. Such
an approach will reveal that the problem of inefficient utilization of natural resources
revenue is not rooted in the lack of accountability per se; rather, the mismanagement of
resource revenue and the lack of accountability are in fact emblematic of the governance
failure complex in Africa. This governance failure complex is a result of Africa‟s unique
colonial history, its weak position in international political economy, poor leadership, its
heterogeneous society and its overdependence on natural resources. These factors interact
in different ways to ensure the lack of an enabling environment for the equitable
redistribution and efficient utilization of natural resource revenue in Africa. For example,
Nigeria as a state-nation rather than a nation-statexii meant that from its creation it faced a
legitimacy crisis. Indeed, Chief Obafemi Awolowo referred to Nigeria as a mere
geographic expression (see Olojede et al., 2007). In addition, given its multi-ethnic
17
constituents and religious diversity essentially reified during the colonial era (Idemudia
and Ite, 2006; Breman, 1998), it also meant nationalism had to be enforced top-down.
According to Rejia and Enloe (1969) this process of top-down cultivation of nationalism
is due in part to the pre-existence of a state, which is trying to bolster its own legitimacy
as well as deliberately quell upward development of nationalism out of fear
heterogeneityxiii. In addition, given that Nigeria was predominantly under military rule
that relied largely on coercion, the state has therefore been essentially historically
alienated from its citizensxiv. Furthermore, given that the colonial and postcolonial state is
basically the same, at independence; competitive communalism dominated national
politics in which the three major ethnic groups were each suspicious of one another as
well as seeking to maximise their share of the „national cake‟ (see Tamuno, 1970;
Ayoade, 1973; Afigbo, 1991). Hence, there was never a coalition of nationalist elites
capable of developing and pursuing nationalist development goals that were free of
politicsxv. In the following years, pressure to adopt multi-party politics and structural
adjustment programmes together with inept self-interested leadership effectively allowed
for the total metamorphosis of competitive communalismxvi into a better structured and
more exclusive neo-patrimonial relationship. Since under neo-patrimonial relationshipsxvii
that dominated national politics emphasis was on feeding clients as opposed to pursuing
the common good, institutions and traditional African norms of co-operation, coexistence, and accountability were effectively subjugated and those of corruption,
inefficiency, and the so called „Big Man syndrome‟ became dominant. For example,
Awe‟s (1991) analysis of the history of governance structures suggests that while
governance in pre-colonial Nigeria ensured participation and accommodation of common
18
interest, governance structure in the post-colonial Nigerian state does not provide room
for the same. To make matters worse, the forced integration of a pre-capitalist Nigeria
into the world capitalist system and its eventual overdependence on oil that essentially
made Nigeria a mono-commodity rentier state further undermined the state-society
relationship. This is because as a rentier state, the average Nigerian citizens increasingly
became irrelevant to the state and its ability to continue to reproduce itself. On the other
hand, decades of governmental disappointment meant the average Nigerian either
displayed apathy towards the state or saw the state as merely a tool for primitive
accumulation (by the elite). These structural and systemic factors effectively ensured that
a developmental state capable of equitably redistributing and efficiently utilizing natural
resource revenue has never existed in Nigeria. It is these structural and systemic
inadequacies inherent in African states and their societies that inform the governance
failure complex in Nigeria and is manifested in the absence of an enabling environment
for the efficient use of oil revenue, lack of accountability, bottleneck bureaucracies and
ineffective government.
CONNECTING NATURAL RESOURCE REVENUES WITH SUSTAINABLE
DEVELOPMENT BENEFITS: POSSIBILITIES IN NIGERIA
While there is no doubt that the Nigerian example described above has its idiosyncrasies,
similar trends are discernable in most resource rich African countries. Hence, to
effectively address the question of how natural resources revenue can be efficiently
utilised for sustainable development in Africa, there is the need to pay attention to these
structural and systemic problems. Such an effort would mean emphasising how to
19
generate, sustain, and drive an enabling environment for efficient use of resource
revenue. To foster an enabling environment for the effective use of natural resource
revenue (and address other aspects of the resource curse) would require going beyond
tackling the symptoms of governance failure complex, via a piecemeal approach as is the
case with EITI or EFFC or ICPC, to dealing with the root cause (i.e., structural
deficiencies in African state) and proximate cause (i.e., systemic inadequacies in its
societies).
Efforts to address the structural dimension to the governance failure complex in Africa
would require resource rich African states like Nigeria to pursue a compatible cultural
democracy as opposed to blind emulation of western multi-party political form of liberal
democracy. Indeed, Ake (1993) points out that for democracy to be relevant and
sustainable in Africa, it must not only be radically different from liberal democracy, but
must also reflect the values and interests of its social base (i.e. the ordinary African). This
is because the appropriateness of a political system is dependent on the history of the
people and their cultural environment. In the absences of such an appropriate political
system, sustainable development goals, human rights objectives and the capacity to aspire
are likely to remain an illusion. Osabu-kle (2000) suggested that compatible cultural
democracy thesis draws on contingency theory and accepts that there is no single best
organization for the solution to all human problems. Instead, outcomes depend not only
upon agent, but also upon the fit between that agent, the cultural environment, and the
applied technology. Compatible cultural democracy therefore calls for the authoritative
allocation of African values to the African people by Africans within the context of
20
African culture and history (Osabu-kle, 2000; Ake 1993). The merit of this position also
arises from the fact that it is now a common knowledge that culture and development are
intricately intertwined. Indeed, while the exceptionalism of Botswana within Africa is
often cited, given that the state has defied the resource curse thesis. However, what is
often not mentioned, as pointed out by Maudeni (2001), is that the success of Botswana is
rooted in its indigenous state initiator culture. The argument here is not that the Botswana
political structure of democracy should be blindly replicated in all other African countries
or that the model has no deficiency. Rather, what is being suggested is that resource rich
African countries stand a better chance to generate the missing enabling environment for
transparency, accountability, and active citizens‟ participation in affairs of the state if
they were to integrate indigenous culture into their political structure in a manner
consistent with the African philosophy of Ubuntuxviii. Contrary to proponents of the
„retraditionalisation thesis‟ in Africa that basically characterise African cultures as
negativexix, a culture-development framework tells us that culture is neither inherently
good nor bad for development since no culture is perfect. Instead, the key challenge is to
harness positive aspect of culture for nationalist development (see Schech and Haggis,
2000; Allen and Thomas, 2000; Rao and Walton, 2004).
There is no doubt that there will be internal and external resistance to the pursue of
compatible cultural democracy in Africa, given that in the West, African communalism is
often likely to be quickly equated with either the re-emergence of Communism or
socialist tendencies that most not be tolerated and therefore subjugated. Similarly for
African elites (i.e., compradors) such changes would be incompatible with their insatiable
21
taste to hold on to power as well as engage in primitive accumulation. However, if local
and international hullabaloo about addressing the resource curse and tackling corruption
is to be genuine, and yield sustainable development benefits, then the pursuit of
compatible cultural democracy underpinned by the principles of Ubuntu needs to be
encouraged, and central to any strategy to address the resource curse in Africa.
Furthermore, a core problem that continues to undermine the effective use of resource
revenue in Africa is the weak institutional and technical capacities of the agencies that are
supposed to provide checks and balances within the African state. Hence, efforts directed
at technical and institutional capacity building at all levels of government (i.e. federal,
state and local government institutions) is essential. For example, the present focus of
NEITI in Nigeria on the federal government alone without a similar focus on state and
local governments means that transparency at the federal level will not necessarily
translate into sustainable development in local communities. This is because oil revenues
that are not mismanagement at the federal level are effectively being misused at the state
or local government levels. For example, despite significant increases in oil revenue to
the state and local governments in the Niger Delta (see Figure 3), there has been no
tangible gain either with regard to community development or poverty reduction in the
Niger Delta (Annej, 2004; HRW, 2007).
22
Source: HRW (2007):
In addition, issue-specific partnerships to compensate for institutional weakness can be
encouraged. For example, to deal with corruption associated with contracts that
undermine effective delivery of services, Transparency International (TI) Canada is
facilitating a partnership between TI-Nigeria and the Niger Delta Development
Commission (NDDC) to adopt Integrity Pacts (IP) in contracting for NDDC economic
development projects. The integrity pact concept refers to independent monitoring of the
contracting process at every stage from preparing specifications, to competitive bidding,
to selecting a contractor, to implementing the contract, to preparing a final auditxx. If
successful, the partnership between TI-Nigeria and the NDDC would facilitate the
institutionalisation of integrity pacts and help reduce wasteful costs associated with
project implementation in the Niger Delta.
Crucial also is the need to strengthen the institutional and technical capacities of civil
society groups in Africa as well as encourage them to diversify their strategy for
23
engagement with the state. For instance, limited institutional capacity and a dearth of
material resources among civil society groups in Nigeria mean they rely solely on
activism as a strategy for achieving their objectives. While this strategy might be
effective on some issues, there is the need for civil society groups to expand their tools of
engagement to include active lobbying of governmental institutions and agencies for
sustainable development goalsxxi. Similarly, civil societies in Nigeria tend to have a
diversified portfolio in which they focus on a wide range of issues such as the
environment, democracy, conflict resolution and human rights. There is no doubt that
these issues in an African context are intricately related, which therefore explains the
tendency for one civil society group to focus on all of these issues. However, this broad
issue focus often means that in the face of limited resources, these civil society groups are
often over- stretched, leading to internal fragmentation and the inability to serve as an
effective countervailing force for the public good. Hence, there is the need for civil
society groups to engage in the process of specialization (i.e. a focus on one issue area)
and collaboration (i.e., partnership with other non-governmental organisations) as both a
strategy to mitigate the impact of limited resources, consolidate their competence,
facilitate inter-organisational learning and build solidarity. The point here is not that this
strategy of specialization-collaboration does not presently exist; rather, it is that it needs
to increasingly become the norm.
Additionally, the centrality of oil to the Nigerian economy means that oil MNCs have an
important role to play as well as a significant leverage to support the efficient use of
natural resources revenue via their corporate citizenship initiatives. Unfortunately, at
24
present, there is a tendency among oil MNCs in the country to focus almost exclusively
on micro-level corporate citizenship issues such as social investment in roads, school and
clinics in local communities to the detriment of macro-level corporate citizenship issues
such as corruption, accountability, and a decline in the agricultural and manufacturing
sectors due to the Nigerian state overdependence on oil. However, while attention to
micro-level corporate citizenship issues might address some aspects of local grievances,
it is unable to deal with the root causes of grievances. This is because events at the
micro–level (i.e. host communities) are often consequences of activities (i.e. action or
inaction) at both state and national levels. Hence, an emphasis on both micro and macro
issues is critical if oil MNCs wish to contribute to sustainable development via their
corporate citizenship initiatives. Addressing macro-level corporate citizenship is bound to
increasingly become critical to the long term viability of the oil industry, if the federal
government plans to abound the joint venture contract (JVC) model come to passxxii. This
is because the present „blame culture‟xxiii in which the oil MNCs are able to hide behind
governmental failure and claim that their community development spending is restricted
by their JVC partners will no longer suffice. To avoid collective action problems and
issues of free riding in the oil industry, rather than have individual oil MNCs pursue
macro-level corporate citizenship issues, oil MNCs can collectively actively support the
Oil Producers Trade Section (OPTS) of the Lagos Chambers of Commerce to work with
NEITI and TI Nigeria to deal with the issue of transparency and accountability at federal,
state, and local government levels. This kind of a strategy will go a long away in ensuring
that transparency in the oil industry would yield some sustainable development benefits
in host communities as well as ensure that no one oil MNCs is put at a competitive
25
disadvantageous position in Nigeria due to its involvement with macro-level corporate
citizenship issues.
Finally, the overdependence of the Nigerian state on oil and its weak position in the
global capitalist system means that the state lacks both the capacity and incentive to
effectively regulate the activities of oil MNCs. For example, the Department of
Petroleum Resources (DPR) that is supposed to regulate the oil MNCs depends on oil
MNCs to provide it with information regarding the nature, volume, and extent of
environmental damage with regard to oil spills. In addition, based on the JVC contract
between the government and oil MNCs, the Nigerian government is the senior partner as
it owns a majority share in the partnership (see Table 2). However, the fact that it is only
oil MNCs that have the technical capacity to extract oil and they essentially control the
running cost of the JVC, they are in practice effectively the senior partners. Under these
circumstances there is the need for internationally binding laws to regulate the activities
of oil MNCs in Nigeria if oil extraction is to translate into sustainable development. The
point here is not to reiterate the voluntary initiative versus mandatory initiative debate;
instead, the argument here is that the rentier status of the Nigerian state means it lacks the
most basic incentive to pursue sustainable development goals when these are not
perfectly aligned with the goal of oil extraction. As a result, a significant driver of
voluntary initiatives does not exist in Nigeria as in most other African countries.
CONCLUSION
26
The paper suggests that while the transparency-accountability strategy in the form of
EITI (or NEITI in Nigeria) offers the opportunity for the demand for accountability, it
does not sufficiently allow for the translation of the demand for accountability into
sustainable development goals. This was attributed to the misdiagnosis of the governance
failure complex in Africa. The governance failure complex in Africa is due to the
dynamic interactions of the structural inadequacies inherent in the African state-nation
and the systemic anomalies in its society. Hence, it was suggested that a focus on tackling
the governance failure complex in Africa offers a better comprehensive approach for
linking natural resource revenue with sustainable development goals. This is because it is
the governance failure complex that is often manifested in the form of a lack of an
enabling environment for the emergence of a developmental state that can equitably
redistribute and efficiently utilize natural resources revenue in Africa. It was therefore
suggested that there is a need to generate, sustain and drive an enabling environment in
Nigeria for the effective use of natural resource revenue. Fostering such an enabling
environment would require the pursuit of compatible cultural democracy, the
strengthening of the institution of checks and balances and the diversification of civil
society‟s strategies for engaging the state, active engagement with micro and macrocorporate citizenship issues by transnational corporations and the international regulation
of the socio-environmental impacts of the activities of transnational corporation in
Nigeria.
The paper makes two inter-related contributions to the literature on the resource curse
and how to overcome or mange it. First, by conceptualising the multitude of intervening
27
variables linking natural resources and the „resource curse‟ consequences in terms of
governance failure complex in Africa, the paper bypasses Rosser‟s (2006) criticism of
researchers in the field and extant literature for being reductionist in their approach and
positing deterministic relationship between natural resources abundance, various
pathologies (e.g., irrational behaviours by policy elites, rent seeking and weak
institutions), and negative developmental outcomes (poor economic performance, civil
war and authoritarianism). In addition, by suggesting that the governance failure complex
is rooted in the structural inadequacies inherent in African state-nations and systemic
anomalies in their societies, the papers offers an opportunity to consider the role of sociohistorical forces and external political and economic environment in shaping
developmental outcomes in resource rich countries. These issues, as pointed out by
Rosser (2006), have traditionally been neglected and represent a major gap in the
literature. The combination of structural and material with the cultural and cognitive in
the analysis of the governance failure complex in Africa potentially offers a useful
framework that can better enhance our understanding of why some resource rich
countries like Botswana are able to avoid or overcome the resource curse and others like
Nigeria is not.
Secondly, the ideas presented here draw upon and complement previous suggestions on
how to overcome the resource curse such as diversification of the economy, adoption of
sensible macro-economic policies, use of stabilization funds, and institutional reforms
(see Sarraf and Jawaji, 2001; Seymour, 2000; Karl, 1997; Pearce, 2005; Aunty, 2004).
However, Rosser (2006) points out that a major problem with these recommendations is
28
that of political feasibility. This is because it remained unclear how these
recommendations might be brought about given that most analyses seem to also suggest
that the required changes cannot take place as long as the countries remain dependent on
natural resources. The culture-development framework advanced here offers an
alternative perspective that attempts to locate and address the root cause of the
governance failure complex in Africa that is often overlooked by previous studies. By
suggesting that resource rich African countries like Nigeria seek an appropriate political
system that is rooted in or draws on indigenous culture, the paper identifies compatible
cultural democracy as critical to the political feasibility for the kind of recommended
changes to occur. This is because a compatible cultural democracy allows for the active
participation of the ordinary African whose democratic participation is both at issue and
essential for the needed kind of reforms to occur (Ake, 1993). A compatible cultural
democracy form of government in Africa would entail among other things, a consocietal
arrangement (i.e. the use of ethnic groups, nationalities and communities as the
constituencies for representation. It would be both centralised and decentralised with
equal emphasis on individual and communal rights (Ake, 1993; Osabu-kle, 2000). The
underpinning logic here is that Africa is still largely a communal society and it is this
communalism which defines the people‟s perception of self-interest, their freedom and
their location in the social whole (see Ake, 1993; Kamwangamalu, 1999). Nevertheless, it
is important to point out that the argument here is not another attempt at cultural
determinism or an attempt to romanticise African cultures. Rather, what is being
suggested is that culture-i.e., the context of meaning and social practice through which
Africans encountered, interpreted and responded to the institutional and cultural intrusion
29
of colonialism and postcolonial development, plays an important role in shaping the
developmental outcomes associated with the abundance of natural resources in Africa
(see Berman, 2004). As such, any suggestions with regard to the appropriate governance
structures needed to address the resource curse needs to fit well with both the social
realities and cultural contexts in Africa.
i
See Cramer (2002); Brunnschweiler and Bulte (2008) for detail of the debate.
ii
See Turner (2006) for detailed discussion of different initiatives.
iii
See Pugh et al, 2004; Arnson and Zartman,2005;Le Billion, 2001.
iv
http:// undp.org/hdr2006/statistics (accessed 14 December 2006).
v
see http://www.transparency.org/news_room/in_focus/2008/cpi2008/cpi_2008_table
(accessed April 28, 2009)
vi
Indeed Utting points out that a remarkable characteristic of business is their capacity to
accommodate opposition and resistance, and to deal with crisis conditions and
contradictions by developing new institutions.
vii
See http://www.neiti.org.ng/files-
pdf/BACKGROUND%20PAPER%20ON%20THE%20NEITI.pdf (accessed 12 April
2007)
viii
See http://www.neiti.org.ng/files-pdf/NEITI%20BILL.pdf
ix
See Binniyat, 2007; Adesami,2007
x
A quality assurance mechanism designed to foster dialogue and learning at country
level as well as maintain the EITI brand (see http://eiti.org/Validation)
xi
Hayman and Crossin (2005) point out that while there is a tendency to conflate or
confuse the PWYP campaign with the EITI, the two initiatives are very different in
character and focus
xii
According to Rejia and Enloe (1969) given the process of state formation in Europe
and America, African states are state-nations as opposed to nation-states. This is because
in 19th century Europe, the nation preceded and created the state, whereas in Africa this
30
relationship is reversed, so that the state is creating the nation. Similarly, Chabal (2002)
referred to African states as nothing more than a relatively empty shell.
xiii
In this case the experience of a Nigerian civil war essentially along ethnic lines
represents one of such fear of heterogeneity.
xiv
Ake (1993) points out that the cycle of coercion and alienation worsened the prospect
of development that led to yet more coercion and alienation
xv
The politicization of national development goals often meant that effective and
efficient development planning and implementation were often sacrificed for political
expediency. For example, while oil extraction takes place mainly in the Niger Delta (i.e.
southern Nigeria), a major oil refinery was located in Northern Nigeria for reasons not
associated with economic efficiency but rooted in ethnicity politics.
xvi
Ake (1993) indeed described the state as a contested terrain on which contending
primary groups fight for the appropriation of what is suppose to be the common wealth.
See also Idemudia and Ite (2006)
xvii
that dominated national politics
xviii
Ubutun is a value system which governs societies across the African continent that
emphasizes cooperation, co-existence and consensus ( for details of see
Kwamwangamlu,1999;Bhengu,1996)
xix
Reflecting their modernization theory roots. For example, see Chabal,2002
xx
Personal communication with Wesley Cragg, Project Director and Principal
Investigator Canadian Business Ethics Research Network and Founding Chair and
President Transparency International Canada, Schulich Business School, York
University, Canada
xxi
especially as at relate to the institution and implementation of laws
xxii
See Onuoah and Okere (2007)
xxiii
See Ite, 2004 ; Watts, 2005b
31
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