Natural Resource Endowments and Nigerian Developmental Paradox NESA CONFERENCE 2016, Lagos Natural Resource Endowments and Nigerian Developmental Paradox By DR. GYLYCH JELILOV

Epigraph He who knows what sweets and virtues are in the ground, the waters, the plants, the heavens, and how to come at these enchantments, is the rich and royal man. Only as far as the masters of the world have called in nature to their aid, can they reach the height of magnificence. Ralph Waldo Emerson, ‘Nature’

Introduction What is the economic impact of natural resources? The answer to this question has attracted considerable interest through decades of development economics, macroeconomics, resource economics, and political economics research. Most of the existing empirical studies approach this problem by aggregating heterogeneous natural resources and studying the experience of a set of different countries, states, counties, etc. together. Since most economies with the exception of countries such as Israel, Japan, and South Korea possess large endowments of at least one valuable natural resource, it is very hard to interpret the results of many of the existing studies in light of the fundamental question of how an economy would have evolved in the absence of natural resource endowments.

Paradox of Plenty Terry Lynn Karl (1997) The Paradox of Plenty explains why, in the midst of two massive oil booms in the 1970s, oil-exporting governments as different as Nigeria, Venezuela, Iran, Nigeria, Algeria, and Indonesia chose common development paths and suffered similarly disappointing outcomes. Meticulously documented and theoretically innovative studies illuminates the manifold factors; economic, political, and social that determine the nature of the oil state, from the coherence of public bureaucracies, to the degree of centralization, to patterns of policy-making.

Dutch Disease The term was coined in 1977 by The Economist to describe the decline of the manufacturing sector in the Netherlands after the discovery of the large Groningen natural gas field in 1959. Dutch disease is the negative impact on an economy of anything that gives rise to a sharp inflow of foreign currency, such as the discovery of large oil reserves. The currency inflows lead to currency appreciation, making the country's other products less price competitive on the export market.

Dutch Disease C’d Dutch disease is the apparent causal relationship between the increase in the economic development of a specific sector (for example natural resources) and a decline in other sectors (like the manufacturing sector or agriculture). The putative mechanism is that as revenues increase in the growing sector (or inflows of foreign aid), the given nation's currency becomes stronger (appreciates) compared to currencies of other nations (manifest in an exchange rate).

Dutch Disease c’d This results in the nation's other exports becoming more expensive for other countries to buy, and imports becoming cheaper, making those sectors less competitive. While it most often refers to natural resource discovery, it can also refer to "any development that results in a large inflow of foreign currency, including a sharp surge in natural resource prices, foreign assistance, and foreign direct investment".

Literature Review &Empirical St Weitzman (1999) Collier and Hoeffler (2004) Sala-i-Martin et al. (2004) Mehlum et al. (2006) Sachs (2007) Mansoorian (1991) Brunnschweiler & Bulte (2008) Fearon (2005) Conard (2009) Manzano and Rigobon (2001) Matsuyama (1992) Sachs and Warner (1995) Rodríguez (2001) Rigobon (2002) Torvik (2002) Ploeg (2011) Vicente (2010) Gerlagh (2007) Moene (1990) Caselli and Michaels (2011)

Resource curse Economic effects Dutch disease Revenue volatility Enclave effects(Mono sector economies) Human resources Incomes and employment Political effects Armed conflict Authoritarian rule Gender inequality International cooperation

Normal Decision Making FORMULATING NATIONAL ECONOMIC STRATEGY OPTIMIZING THE REGULATORY ENVIRONMENT ENHANCING ECONOMIC EDUCATION AND DEVELOPMENT FACILITATING TECHNOLOGY EXCHANGE AND INNOVATION IMPROVING ACCESS TO FINANCE NETWORKING AND AWARENESS

Normal Regime Resources Citizen Management

Autocratic Regime Resources Citizen Management

Paradox of ‘Jobless Growth’ Most cynics of the appellation of Nigeria as “the giant of Africa” were better convinced when the country became the continent's biggest economy due to its rebased gross domestic product (GDP) data using 2010 as the base year. Rebasing the data, undeniably, has its advantages including capturing economic activities that were initially uncaptured and decreasing debt-GDP ratio which increases investors’ confidence and gives more room for borrowing for developmental purposes. However, most of the 60 percent of poor people in Nigeria may be doubtful of the gains of being the “biggest economy” in Africa. In other words, the desired growth requires more jobs creation and poverty reduction. Any deviation from this implies a growth that is not inclusive-an issue needed to be addressed.

Benefit from Plenty (Chile-Norway) The lessons from resource-rich Chile and Norway highlight important points for international development policy. Resource-rich countries need advice on how to build institutions to manage inflows. Learning from Norway, Chile and other resource-rich economies could make commodity-related international co-operation a major aspect of foreign affairs policies, bringing expertise to neighboring or other middle- and low-income countries. The creation in Chile, the world largest exporter and producer of the metal, of a World Copper Institute could be one example of a resource-based foreign policy.

Benefit from Plenty c’d The experiences of Norway and Chile show that natural-resource wealth can be a blessing rather than a curse if the economic and institutional parameters are well adapted to the task. The growth in these two countries has not taken place in spite of natural resources; to a large extent their resource management has enabled increased growth and development, although Chile lags behind Norway in many areas. The success of the two countries has been made possible not only through well-adapted macroeconomic policy choices but also through reliable and well-informed civil servants implementing the policy, through a relatively well-developed business community and through across-the-board good standards of human capital.

Thank You