Carrying Crude Oil to Newcastle: The Resource Curse Strikes Again in Nigeria

Source: Newswire NGR

Source: Newswire NGR

By Otito Greg-Obi

On May 20th, 2015 the lights went out in Nigeria, Africa’s biggest oil producer. Nigeria suffers from a phenomenon known as the curse of oil which is a subset of a larger issue known as the resource curse. The idea behind the curse of oil is that countries with large oil reserves cannot seem to manage revenues in a way that benefits the majority of the population economically and socially. Some of the symptoms of the curse of oil include lack of economic diversification, revenue volatility, inability to provide public goods and services, corruption, government inefficiency and the Dutch Disease.

As soon as the massive fuel shortage in Nigeria struck, numerous businesses and banks shut down. Power outages also affected common households because neighborhoods are typically powered by individually owned generators due to inconsistent provision of public utilities. As soon as licensed gas stations closed down, black market vendors looking to make a quick Naira (Nigeria’s currency) began selling low quality oil at exorbitant prices. The shortage exemplifies the curse of oil by revealing an inability to provide a crucial public good. Furthermore, the shortage unveils the existence of corruption in black market practices.

Oil importers shut down operations claiming that the government owed them $2 billion. Nigeria’s Minister of Finance Okonjo-Iweala countered that importers misrepresented the debt in an attempt to recover lost revenue from the recent decrease in value of the Naira due to global declining oil prices. The global decrease of oil prices is a perfect example of the volatility that comes with the curse of oil and how it can complicate economic transactions between the governments and oil corporations.

Fortunately, oil suppliers and distributors eventually met with the government for negotiations that put an end to the crisis. The specifics of the negotiations have not been revealed but it appears that the crisis has been averted for now. But as global oil prices continue to decline, economic shocks are imminent. What will the government do to thwart the curse of oil?

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World Chambers Congress focuses on SMEs and Job Creation

Speakers7

Under the banner of “Identity, Community, Vision,” over 1,300 delegates from around the world gathered in Turin, Italy on June 10 to attend the World Chambers Congress. The main focus of the three day event was how to strengthen small and medium enterprises (SMEs) worldwide to create jobs. Organizers focused on the need to create enabling environments for these businesses to grow and prosper – especially when it comes to youth and entrepreneurs.

“Chambers of Commerce play an increasingly important role in the global economy and are central to the International Chamber’s vision to promote trade as a driver of growth, jobs and sustainable development,” International Chamber of Commerce (ICC) Chairman Terry McGraw told the delegates. “The World Chambers Congress is an essential forum to promote knowledge sharing between chambers from around the world – driving real development of public-private partnerships.”

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Enhancing Youth’s Political Participation in Pakistan

pakistani-youth-reclaim-national-anthem-world-record-1508x70

By Fayyaz Bhidal, Research Manager at Sustainable Development Policy Institute

Internationally, the average age of eligibility for election to national parliament starts at 25 years old. According to a UNDP 2012 Global Parliamentary Report, approximately 1.65 percent of parliamentarians globally are in their 20s, while 11.87 percent are in their 30s. However, the global average age of parliamentarians is 53 years old.

In Pakistan, youth represent 60 percent of the total population, but their voice is largely unrepresented in the political system. The youth population is not only a dynamic source of innovation and creativity, but has contributed to and even catalyzed important changes in political systems, power-sharing dynamics, and economic opportunities since Pakistan was created. One leading force for these changes is the Youth Parliament of Pakistan which was created in 2007 to engage youth in dialogue on important issues affecting Pakistan. Within local government, youth are also taking an active role in achieving implementation of work. In the recently held local government polls of Khyber Pakhtunkwa Province of Pakistan, 3,339 seats were devoted for the youth.

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A Trinity of Trade: Africa soon to Launch TFTA

Map of TFTA

By Otito Greg-Obi

Recently, African heads of state gathered together in Egypt to sign the Tripartite Free Trade Area agreement (TFTA) which will join the forces of the East African Community (EAC), the Common Market for Eastern and Southern Africa (COMESA), and the Southern African Development Community (SADC).

Free trade is crucial to global economies because it reduces tariff barriers which in turn results in trade creation. The benefits of trade for developing nations in general are numerous. To name a few: first and foremost, trade allows for specialization meaning countries can build a comparative advantage by focusing on producing goods with low opportunity costs. Secondly, trade encourages healthy competition which incentivizes businesses to increase efficiency and cut costs. Lastly, trade can reduce dependence on existing markets and stabilize countries affected by seasonal changes in markets.

The TFTA agreement has been long awaited – negotiations began in 2005 and were expected to conclude in December 2013. Major components of the trade agreement include the promotion of socioeconomic development and the free movement of goods and services. A customs union is also in the works to be implemented at a future date. But, the TFTA addresses more than just trade, it promotes the upward mobility of business people and advances the cause of social justice.

Although the creation of the TFTA is an exciting development in the world of business, there are still hurdles to overcome during its implementation. Economic integration can be a slow, demanding process, especially since many African countries in this new trading bloc are at varying stages in economic development and trade activity. Furthermore, transportation costs pose a major impediment to the integration of TFTA. Connecting these 26 countries will be a difficult task because the land is vast and requires large infrastructure projects. It will be difficult to ensure that domestic African businesses reap substantial benefits from the new trade area. And lastly, some countries such as Swaziland, Uganda, Tanzania and Zambia are concerned about the loss of revenue that will come from customs unions.

The promotion of the free market is a major stimulant for economic development. However, in order for the free market to run smoothly, it is important for African countries to continue working on other important issue areas such as corporate governance, transparency, and public-private dialogue. CIPE has engaged with TFTA countries such as Ethiopia and Kenya on these issues. These issues must remain at the forefront so that the new TFTA can operate effectively and remain beneficial to all parties involved.

Challenges aside, there is still plenty for businesses and governments in the new African free trade area to look forward to. This trade powerhouse totals $1 trillion in GDP. This is big news for African businesses because it will enhance enterprise ecosystems in the region immensely. With the implementation of this new agreement, trade is expected to increase from 12 percent to 30 percent, meaning economic activity will reach more than 600 million people. This could be a major step towards a Continental Free Trade Area, which the African Union aims to complete by 2017.

Otito Greg-Obi is a CIPE intern for Knowledge Management. She is a rising junior at University of Pennsylvania. 

Feature Service Highlight: Ronald Coase’s Views on the Conduct of Economics

Mary Shirley delivering her speech at  the "The Next Generation of Discovery: Research and Policy Change Inspired by Ronald Coase" conference in March 2015.

Mary Shirley delivering her speech at the “The Next Generation of Discovery: Research and Policy Change Inspired by Ronald Coase” conference in March 2015.

Ronald Coase would often say that if Darwin were to come back to earth today, he would be amazed at how much biology has progressed since The Origin of Species. Whereas if Adam Smith came back today and looked at economics, he would be amazed at how little has changed since he wrote The Wealth of Nations.

– Mary Shirley, President of the Ronald Coase Institute

CIPE’s latest Economic Reform Feature Service article features President of the Ronald Coase Institute Mary Shirley’s speech delivered at a conference co-hosted by the Ronald Coase Institute and CIPE on the topic “The Next Generation of Discovery: Research and Policy Change Inspired by Ronald Coase.” The conference, which was held in March this year, honored Ronald Coase – one of the most influential economists of the 20th century – and celebrated his important contributions to the field of economics. 

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CIPE Launches First Annual Photo Competition

Photo: © 2011 Swapping aid for trade in northern Uganda, Pete Lewis/UK Department for International Development

Photo: © 2011 Swapping aid for trade in northern Uganda, Pete Lewis/UK Department for International Development

“There is one thing the photograph must contain, the humanity of the moment.” – Robert Frank

Show us your best story-telling photo

Do you like to tell stories through photography? Then show us your best work! The first annual Center for International Private Enterprise (CIPE) Photo Competition is now open for submissions.

Open to participants of all ages, including student, amateur, and professional photographers, the inaugural photo competition will focus on the theme of Entrepreneurship.

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Riinvest Institute Celebrates 20 year Anniversary

Riinvest 20th Anniversary 2

CIPE’s long term partner Riinvest Institute for Development Research is celebrating their 20th anniversary this year. To mark the occasion, Riinvest held a conference on May 15 and 16 titled, “Activating the Sources of Economic Growth in Kosovo”. The conference brought together an impressive audience— the President and the Prime Minister of Kosovo*, the Deputy Minister of Finance, the World Bank Country Manager, other high level public officials, academics, business people, NGO leaders, the donor community, and members of the media.

*Kosovo’s newly-elected Prime Minister, Isa Mustafa, is the former President of Riinvest.

Riinvest leaders presented awards to a number of partners, individuals, and organizations who have supported the organization since its inception. CIPE had the honor of being presented the first two awards, one for Executive Director John Sullivan and one for the organization as a whole. CIPE Senior Consultant Carmen Stanila kindly received both awards on behalf of John and the organization.

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