To our new leader

Dear Mr President,

Aso rock Abuja,


It is with immense pleasure that we welcome the beginning of your tenure especially as it marks the first smooth democratic transfer of power. However, our pleasure is marred by past events which often indicates that a change in power does not necessarily mean a productive change in society. But in a show of faith I would love to believe change is on the way, one area this would be highly appreciated would be the creation of a diversified economy. Why that and not the provision of constant power supply you might ask? My reasons are explained below

Facts about oil production

Source: Oil-Led Development: Social, Political, and Economic Consequences by Terry L. Karl, January 2007.

Oil-led Development: this is development based on overwhelming dependence on revenues from the export (and not the internal consumption) of petroleum, as measured by the ratio of oil and gas to GDP, total exports, and the contribution to central government revenues.

Resource Curse: is the negative growth and development outcome associated with minerals and petroleum-led development. In its narrowest sense, it is the inverse relationship between high levels of natural resource dependence and growth rates.

Dutch Disease: this occurs when resource booms cause real exchange rates to rise and labour and capital to migrate to the booming sector. This results in higher costs and reduced competitiveness for domestically produced goods and services, effectively “crowding out” previously productive sectors.

Rent: as defined by Adam Smith’s is the unearned income or profits “reaped by those who did not sow.” According to economists, rents are earnings in excess of all relevant costs, including the market rate of return on invested assets.

Rentier State: A state that lives from externally generated rents rather than the surplus production of the population. In oil-exporting states, it is measured as the percentage of natural resource rents in total government revenues.

Rent-seeking: This refers to efforts, both legal and illegal efforts, to acquire access to or control over opportunities for earning rents. This can be seen in the public or private sector.

Oil boom can be beneficial or detrimental to a society depending on two factors first, the existing political, social and economic institutions available to manage oil wealth as it comes on-stream and, second, the extent to which oil revenues subsequently transform these institutions in a rentier direction. According to the above statements the occurrence of the 1970 oil boom just at the end of the Biafran war in Nigeria probably played a huge role in the negative impact of oil on our nation.

The impact of an oil-led development on the economy and society as a whole tends to be negative, common effects include

1. An Increase in the real exchange rate of the country’s currency, thus rendering most other exports non competitive a phenomenon called the “Dutch Disease.” It “crowds out’ other productive sectors and makes the diversification of the economy particularly difficult.

2. Frequent economic shocks and susceptibility to acute boom- burst cycles due to the price volatility of the international primary commodities market. It affects economic development, budgetary discipline, the control of public finances, state planning, investment, income distribution and poverty alleviation.

3. It fails to offer long-term sustainable employment available to the masses, but seriously disrupts pre-existing patterns of production. It creates a few jobs in comparison to the amount of capital invested and the skill required for these jobs usually does not fit the profile of the mass unemployed.

4. It creates a rentier state which depends on oil rents rather than direct taxation. The leaders are likely to tax their citizens lightly or not at all, thus making them detached from and unaccountable to them. The citizens in turn, are less likely to demand accountability from its leaders.

5. The occurrence of social dislocations, environmental and health hazards, and higher levels of conflict increase. New oil exploitation attracts a large number of migrants, significantly increases the cost of living  probably due to the higher salaries of oil project workers which inflates the local prices of key goods and services, even for those who do not share in the benefits of an oil project. It also has an adverse impact on public health issues such as poor housing, increased Incidence of HIV/AIDS near oil localities.

In summary, countries dependent on oil as their major resource for development are characterized by exceptionally poor governance and high corruption, a culture of rent-seeking, often devastating economic, health and environmental consequences at the local level, and high incidences of conflict and war.

Mr President I am not saying that all our problems will be solved by diversification that would be naive. However, diversifying the economy would first decentralize the present monopoly market that carters for a few against the well-being of many, move the economy away from a rentier state and introduce taxation which would lead to more accountability.

Many have said you are a disciplined man, one interested in the rule of law, if this is true it is my belief that you can tackle this issue and move the nation to where it ought to be. Studying countries with a diversified economy, despite having oil resource would prove helpful. A good place to start might be Norway.

I hope to see some change as we are desperate for a new dawn and the day that the leaders we have been told we were comes to life.

Thank you,

A concerned citizen.

In response to The Daily Post’s writing prompt: “Dear Leader.”


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