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
- COUNTRY BACKGROUND………………………………………….. 9
1.2.1a Botswana Today……………………………………….. 9
- b History, Evolution and Development of Botswana
- Nigeria……………………………………………………. 12
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
- INTRODUCTION……………………………………………………. 25
- THE EFFECT OF NATURAL RESOURCES ON ECONOMIC GROWTH 26
- THE IMPORTANCE OF INSTITUTIONS………………………… 29
- INSTITUTIONS IN SUB-SAHARAN AFRICA………………….. 32
- SUMMARY OF LITERATURE………………………………………. 34
CHAPTER 3: METHODOLOGY……………………………………………………… 35
- INTRODUCTION……………………………………………………. 35
- DATA AND METHODS……………………………………………. 35
CHAPTER 4: ANALYSIS OF PROJECT RESEARCH AND DISCUSSION OF
RESULTS………………………………………………………………………………….. 38
- INTRODUCTION…………………………………………………… 38
- BOTSWANA AND CORRUPTION……………………………….. 39
- THE GOVERNMENT OF BOTSWANA AND POLICIES REGARDING THE MANAGEMENT OF RESOURCE
- BOTSWANA AND CORRUPTION……………………………….. 39
RENTS……………………………………………. 40
- NIGERIA AND CORRUPTION…………………………………….
- THE GOVERNMENT OF NIGERIA AND POLICIES REGARDING THE MANAGEMENT OF RESOURCE
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
| GDP | Gross Domestic Product |
| GNP | Gross National Product |
| IMF | International Monetary Fund |
| OECD | Organization for Economic Co-operation and Development |
| OPEC | Organization of the Petroleum Exporting Countries |
| ICT | Information and Communications Technology |
| HDI | Human Development Index |
| SSA | Sub-Saharan Africa |
| NIE | Newly Industrializing Economy |
| FDI | Foreign Direct Investment |
| UNCTAD | United Nations Conference on Trade and Development |
| GNPC | Ghana National Petroleum Corporation |
| GRICS | Governance Research Indicator Country Snapshot |
| BHC | Botswana Housing Corporation |
| DCEC | Directorate on Corruption and Economic Crime |
| ICAC | Independent Commission Against Corruption |
| TICPI | Transparency International Corruption Perceptions Index |
| DDF | Domestic Development Fund |
| ICPC | Independent Corrupt Practices and Other Related Offences Commission |
| EFCC | Economic and Financial Crimes Commission |
| MoFEP | Ministry of Finance and Economic Planning |
| PRMA | Petroleum Revenue Management Act |
| PHF | Petroleum Holding Fund |
| BoG | Bank 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
| Country | Number of barrels (in thousands) | Change2 (2009 over 2008) |
| Russian Federation | 10032 | 1.50% |
| Saudi Arabia | 9713 | -10.60% |
| Iran | 4216 | -3.30% |
| China | 3790 | -2.80% |
| Nigeria | 2061 | -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
| Country | Share of total capita3 in exports 2009 |
| Russian Federation | 31% $8,614.03 |
| Saudi Arabia | 73.94% $14,744.61 |
| Iran | 78.17% $4,334.13 |
| China | 0.18% $3,738.95 |
| Nigeria | 84.50% $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.
