Squandered Oil Wealth Leaves Nigeria in Dark Age

Tume Ahemba, Reuters, July 21, 2008

With oil prices at record highs, government coffers in the world’s eighth biggest oil exporter are swollen to unprecedented levels.

Yet the vast majority of Nigeria’s 140 million people live in no better conditions than their neighbours in West Africa, the least developed region of the world’s poorest continent.

The same is true of many of Africa’s major oil producers—including Angola, Sudan, Equatorial Guinea and Chad—but Nigeria’s sheer size and 2-million-barrel-per-day output make the poverty-wealth contrasts more striking.

Nigeria has earned the equivalent in today’s terms of nearly $1.2 trillion from oil production over the past four decades, the sort of money that enabled oil-producing Gulf states like Qatar to develop some of the strongest economies in the Arab world.

But its four state-owned refineries are not fully operational, largely due to mismanagement and vandalism, its distribution network is chaotic, and it relies heavily on fuel imports, which cost around $4 billion each year.

In Lagos, a mega-city of more than 10 million people, the elite sip champagne on exclusive islands—albeit to the incessant drone of diesel generators—while the masses live in mainland slums without water or electricity.

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Healthcare is virtually non-existent, the roads are potholed, unemployment and crime are on the rise, and Nigeria is suffering from spiralling food prices.

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The government has frozen the price of fuel but retailers have taken advantage of short supplies to more than double the price of diesel in some parts of Nigeria in the last few months.

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Nigeria’s generation capacity has plunged to less than 1,000 megawatts from 3,000 MW a year ago, largely due to lack of maintenance at power stations. South Africa, with a third of Nigeria’s population, has over 10 times that capacity.

Much of Nigeria goes without power for weeks at a time. The crisis has closed hundreds of factories and slashed millions of jobs.

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A committee he set up to review the sector said last month Nigeria needs $85 billion to meet its domestic power demand, estimated at roughly 20,000 MW.

That dwarfs the $10 billion former President Olusegun Obasanjo spent on the sector during his eight-year tenure, an amount which failed to deliver on his pledge to raise capacity to 10,000 MW by the end of 2007.

A parliamentary probe showed more than $50 million of that money had been paid to non-existent companies.

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Lagos state governor Babatunde Fashola has acknowledged the problems and said the state must spend more than $700 million over the next five years to improve the road network alone.

Nine out of 10 Nigerians live on less than $2 a day, their lives blighted by poor infrastructure and a lack of public services resulting from decades of endemic corruption.

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