AN EVALUATION OF GOVERNMENTAL POLICIES USED IN THE MANAGEMENT OF NATURAL RESOURCES: A FOCUS ON BOTSWANA AND NIGERIA AND LESSONS FOR GHANA

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Abstract

This paper examines the theory of the resource curse in relation to Botswana and Nigeria, two countries in Africa abundant in natural resources. After reviewing existing literature relevant to the topic, this paper considers policies and regulations used in the management of natural resources from both countries in an attempt to find out how Botswana has managed to be identified as a country enjoying unmatched growth rates in Africa while Nigeria is barely taking advantage of the resources available to it. This analysis will serve as a reference point to the Ghanaian government on steps to take to avoid the resource curse in its enthusiasm to benefit from the Jubilee oil fields. With regards to Ghana, this paper reviews the Petroleum Revenue Management Act and its provisions for the collection and distribution of petroleum revenue in the country. The paper focuses on anti- corruption measures used in both countries to ensure the fair and equitable distribution of rent. The paper comes to the conclusion that transparency plays a key role in the growth and development of a country especially when it comes to resource revenue. It must therefore be noted that institutions play an important role in the management of resource revenue, and even though it is important to learn from other successful countries, policies used to combat corruption must be modified to suit the economic, political, social and legal environment of the particular country.

Keywords: natural resources, resource curse, institutions, corruption

TABLE OF CONTENTS

List of Acronyms……………………………………………………………………….. vi

List of Tables…………………………………………………………………………… viii

List of Figures…………………………………………………………………………… ix

CHAPTER 1: INTRODUCTION………………………………………………………. 1

  • BACKGROUND OF THE STUDY………………………………….. 1
    • COUNTRY BACKGROUND………………………………………….. 9
      • Botswana………………………………………………….. 9

1.2.1a Botswana Today……………………………………….. 9

  • b    History,  Evolution  and    Development  of Botswana       
    • Nigeria……………………………………………………. 12
    10

1.2.2a Nigeria Today………………………………………….. 12

1.2.2b    History,  Evolution  and    Development  of Botswana……………………………………………………………………… 13

  • MOTIVATION………………………………………………………… 21
    • PROBLEM STATEMENT…………………………………………… 21
    • RESEARCH QUESTIONS………………………………………….. 22
    • RESEARCH OBJECTIVES…………………………………………. 23
    • RELEVANCE OF RESEARCH……………………………………… 23

CHAPTER 2: LITERATURE REVIEW…………………………………………….. 25

  1. INTRODUCTION……………………………………………………. 25
    1. THE    EFFECT OF NATURAL RESOURCES ON ECONOMIC GROWTH 26
    1. THE IMPORTANCE OF INSTITUTIONS………………………… 29
    1. INSTITUTIONS IN SUB-SAHARAN AFRICA………………….. 32
    1. SUMMARY OF LITERATURE………………………………………. 34

CHAPTER 3: METHODOLOGY……………………………………………………… 35

  1. INTRODUCTION……………………………………………………. 35
    1. DATA AND METHODS……………………………………………. 35

CHAPTER 4: ANALYSIS OF PROJECT RESEARCH AND DISCUSSION OF

RESULTS………………………………………………………………………………….. 38

  1. INTRODUCTION…………………………………………………… 38
    1. BOTSWANA AND CORRUPTION……………………………….. 39
      1. THE GOVERNMENT OF BOTSWANA AND POLICIES REGARDING THE MANAGEMENT OF    RESOURCE

RENTS……………………………………………. 40

  • NIGERIA AND CORRUPTION…………………………………….
    • THE GOVERNMENT OF NIGERIA AND POLICIES REGARDING THE MANAGEMENT OF    RESOURCE
    42

RENTS……………………………………………. 43

  • GHANA AND CORRUPTION………………………………………. 45
    • THE         GOVERNMENT    OF     GHANA     AND     POLICIES REGARDING THE MANAGEMENT OF RESOURCE RENTS 47
    • THE PETROLEUM REVENUE MANAGEMENT ACT,     2011

(ACT 815)………………………………………………………… 48

  • SUMMARY……………………………………………………………. 51

CHAPTER 5: RECOMMENDATIONS AND CONCLUSIONS………………. 54

  • RECOMMENDATIONS…………………………………………….. 54
    • CONCLUSION………………………………………………………. 55

WORKS CITED……………………………………………………………………………. I

APPENDIX 1……………………………………………………………………………….. i

APPENDIX 2………………………………………………………………………………. ii

List of Acronyms

GDPGross Domestic Product
GNPGross National Product
IMFInternational Monetary Fund
OECDOrganization for Economic Co-operation and Development
OPECOrganization of the Petroleum Exporting Countries
ICTInformation and Communications Technology
HDIHuman Development Index
SSASub-Saharan Africa
NIENewly Industrializing Economy
FDIForeign Direct Investment
UNCTADUnited Nations Conference on Trade and Development
GNPCGhana National Petroleum Corporation
GRICSGovernance Research Indicator Country Snapshot
BHCBotswana Housing Corporation
DCECDirectorate on Corruption and Economic Crime
ICACIndependent Commission Against Corruption
TICPITransparency International Corruption Perceptions Index
DDFDomestic Development Fund
ICPCIndependent Corrupt Practices and Other Related Offences Commission
EFCCEconomic and Financial Crimes Commission
MoFEPMinistry of Finance and Economic Planning
PRMAPetroleum Revenue Management Act
PHFPetroleum Holding Fund
BoGBank of Ghana

GRA             Ghana Revenue Authority

ABFA           Annual Budget Funding Amount IAC                   Investment Advisory Committee

List of tables

Table 1.1: Major producers of oil in 2009…………………………………………. 2

Table 1.2: Contribution of oil to total export revenue in 2009……………… 3

Table 1.3: Major producers of diamond in 2008 and 2009…………………. 4

Table 1.4: Contribution of precious stones to total export revenue in 2009       4

List of figures

Figure 1.1: A comparison of the level of control of corruption in Botswana, Ghana and Nigeria………………………………………………………………………………… 17

Figure 1.2: A comparison of the GDP per capita of Botswana, Nigeria and Ghana……………………………………………………………………………………………….. 18

Figure 1.3: A comparison of the Human Development Index of Botswana, Nigeria and Ghana………………………………………………………………………………… 19

Figure 1.4: A comparison of the Human Development Index of Botswana, Nigeria and Ghana………………………………………………………………………………… 20

CHAPTER 1: INTRODUCTION

  • BACKGROUND OF THE STUDY

According to the 2010 World Trade Report, natural resources are defined as “stocks of materials that exist in the natural environment that are both scarce and economically useful in production or consumption, either in their raw state or after a minimal amount of processing”. Examples are oil and gas, gold, diamond, copper, nickel, emerald and uranium. Some countries are considered rich today due to the simple fact that they have effectively managed the natural resources which they have access to. Examples of these countries are Canada whose provinces like Alberta and Saskatchewan are endowed with coal, oil and gas, which have contributed to higher production in sectors like banking, retail and real-estate (Macquarie, 2011).

The same however, cannot be said for other countries who are abundant in some of these same resources but still find themselves in the undesirable category of low-income or developing countries. Gylfason (2001) points out that out of 65 countries which can be described as resource-rich, only four (Botswana, Indonesia, Malaysia and Thailand) have managed to achieve long-term investment of an average of more than 25% of Gross Domestic Product (GDP) from 1970 to 1998, and a per capita Gross National Product (GNP) growth of an average of more than 4% per year for the same period.

Sachs and Warner (1995 and 2001) (as cited by Carmignani and Chowdhury, 2010) describe this curious occurrence where resource-rich countries perform poorly as the resource curse. However, the criteria for determining why a

country with resources will suffer the resource curse remains unclear in the literature.

Africa is ranked number one in the production of mineral resources like gold, platinum, cobalt and diamonds (Twerefou, 2009). This paper focuses on oil and diamond production in Africa because, as Twerefou (2009) points out, “the large deposits of mineral resources in Africa indicate that the continent has a wealth of natural capital which, if exploited sustainably, could turn the continent around”. This paper seeks to find out what oil and diamond rich African countries are doing to maximize the benefits they get from these minerals.

The table below shows some of the major oil producers in the world in 2009: Table 1.1: Major producers of oil1 in 2009

  CountryNumber of barrels (in thousands)Change2 (2009 over 2008)
Russian Federation  10032  1.50%
Saudi Arabia9713-10.60%
Iran4216-3.30%
China3790-2.80%
Nigeria2061-3.60%

(Source: BP Statistical Review of World Energy, 2010)

1 Includes crude oil, shale oil, oil sands and NGLs (the liquid content of natural gas where this is recovered separately). Excludes liquid fuels from other sources such as biomass and coal derivatives.

2 Annual changes and shares of total are calculated using million tonnes per annum figures. Growth rates are adjusted for leap years.

The table below shows the contribution of oil to the total export revenue of the 5 major oil producers in 2009 and their GDP per capita for the same year:

Table 1.2: Contribution of crude oil to total export revenue in 2009

GDP per

  CountryShare of total                 capita3 in exports                      2009
Russian Federation31%                     $8,614.03
Saudi Arabia73.94%                   $14,744.61
Iran78.17%                     $4,334.13
China0.18%                      $3,738.95
Nigeria84.50%                     $1,111.75

(Source: International Trade Centre, 2010 and Economy Watch, 2011)

Table 2 shows that most of these oil producing countries are dependent on crude oil for a majority of their export revenue. With crude oil contributing almost 85% to Nigeria’s export revenue, it is evident that with their low status of development, the country is not making good use of their revenue from crude oil exports.