Nigeria: A Strange Mix of Poverty and Oil Wealth

Countries which have large reserves of oil are usually considered to be rich. Barring a few exceptions like Venezuela, Iran, and Nigeria, most oil-producers in the world have a thriving economy. Socialism caused the economic collapse in Venezuela whereas Iran has been plagued by radical Islam. Nigeria does not seem to have any obvious problems. However, it has still overtaken India as the country where the maximum number of people live below the poverty line.

In this article, we will have a closer look at the curious case of Nigeria which is both rich and poor at the same time. We will understand the factors which have led to the existence of this strange paradox.

How Wealthy Is Nigeria?

In order to understand the scale of this paradox, we need to first understand how wealthy Nigeria really is. Firstly, it needs to be understood that Nigeria has the largest oil reserves in Africa. It is the 26th largest economy in the world. Its GDP is greater than many of its more developed African peers like the Republic of South Africa.

The wealth in Nigeria is concentrated in very few hands. The top 5 richest Nigerians own and control more resources than everybody else combined. Also, the pool of Nigerian millionaires grew by 44% in the past decade.

How Poor Is Nigeria?

Nigeria also has some of the most crushing poverty rates in the word.

120 million out of their 200 million population live under $1 per day. In the interior regions of Nigeria, subsistence is a major problem.

75% of the youth population (below the age of 25) is unemployed.

The Nigerian economy ranks 121st in the world in terms of per capita income despite being the 26th largest economy.

20% of the children in Nigeria do not live till their fifth birthday due to the lack of basic facilities.

Most Nigerian citizens have no access to water, electricity or any other basic infrastructure.

Reasons behind Nigerian Poverty

It is strange that so much wealth and so much poverty co-exist in the same country. Some of the reasons behind this co-existence have been listed below.

• Population: The number of people in Nigeria is very high. This population is also growing at a very alarming rate. Hence, even though the country generates a lot of oil revenue, very little actually reaches the masses.

  Nigeria has a population of 200 million, and it produces around 800 million barrels of oil per year. Hence, on a per capita basis, they produce only 4 barrels of oil which translates to a revenue of less than $200. On the other hand, countries like Saudi Arabia produce over 130 barrels of oil per person creating a revenue stream of over $6000 per person. Nigeria can neither increase its oil production nor reduce the population. Hence, it is completely dependent upon the price of oil.

• Poor Policies: The Nigerian government has taken very few steps to encourage economic activity in the country. As mentioned above, the infrastructure is already in tatters. However, the government isn’t taking any efforts to develop its human resource either. India was also suffering from a population explosion. However, it educated its people and turned a problem into an opportunity.

  The Nigerian government doesn’t seem to be interested in replicating India’s model. This is the reason why it spends a dismal 5% and 3% on education and healthcare respectively.

• Negligence: The government of Nigeria has also been negligent when it comes to other industries. Nigeria had a booming agricultural and manufacturing sector before the 1960s. In fact, Nigeria was a net exporter of food products to the rest of Africa. The situation is very different now. Nigeria doesn’t produce enough to even be self-sufficient. It has to pay a huge import bill every year. The government can be held responsible for this since they did not pay attention to any industry except for the oil industry. The manufacturing sector was also destroyed since the sources of funding for these sectors were diverted towards the oil sector.
• Corruption: Apart from the handful of rich businessmen, the politicians in Nigeria are also very wealthy. This comes as a surprise since most of them don’t own any legitimate businesses. Corruption in Nigeria is known to be rampant.

  Public property is sold into private hands for pennies on the dollar in return for kickbacks. Nigeria is one of the few countries in the world which has a regressive tax system. The government levies indirect taxes on a lot of goods which are used by the poor. On the other hand, the Nigerian government is also known for giving huge tax breaks to the rich. The taxation policy of the Nigerian government is a giant wealth transfer scheme which aims to make the “haves” even more richer at the expense of the “have-nots.”

Attempts to Diversify

In the past few years, the Nigerian economy has seen a major contraction. This is because the government derives more than 75% of its revenue from oil and the prices of oil have plummeted. Hence, the government is now diversifying to other sectors such as telecom.

The government is focusing on the service sector since it employs more people which reduces the overall unemployment rate. However, the efforts are too little and too late. At the present moment, the Nigerian economy is a perfect example of how despite having so many resources the country is still mired in poverty.