The Self-Dependent Government: Post-Colonial Nigeria in the Era of Globalization
No longer subject to colonial rule by the British, Nigeria set out to accomplish a difficult task: to achieve economic self-dependence. Given the reliance of the country on British institutions and investments, it would be difficult for the West African country to truly establish itself as a self-reliant entity. Of course, the philosophy of the day is globalization: each state is but a component in a wider, global economy. Nigeria fits into this scheme – in spite of its state of dependence on Britain – by being a source of crude oil. It is no problem that Nigeria has limited resources for drilling its own oil, since multinational corporations can provide the much needed investment in the region to make this oil extraction possible. As the philosophy goes, this economic liberalism grows the economy and is thus good for the world. Yet in Nigeria’s case, it does not appear to have worked out as well as anticipated.
While Nigeria has been governed independently of Britain for fifty years now, allowing for Nigeria to have further control over its trade policy, the country still suffers from a poor infrastructure, high unemployment, and rampant corruption. Furthermore, political instability has, for the most part, discouraged growth in Nigeria. As it would appear, economic liberalization has been at a disadvantage to Nigeria.
It is worth noting that Nigeria’s course of pursuing free trade is largely out of pragmatism. Upon achieving independence, the new Nigerian government sought a policy of economic self-dependence, seeing as it would further the nation’s autonomy. To that end, the government played a highly active role in the economy. Given that the history of Nigeria involves British business interests setting up shop for only the benefit of other Britons, the government’s role was thus to create strong market institutions where they did not previously exist and to limit foreign investment to keep ownership within the country. That is not to say that the country banned all foreign investment; such a thing would have been counterproductive. Rather, the government set up a three-tiered enterprise system: there were companies that could only be domestically-owned, companies that could be up to 40% foreign-owned, and companies that could be up to 60% foreign-owned. While the exclusively Nigerian-owned companies were mostly government utilities and other social services, the companies that permitted a certain degree of foreign ownership were largely to attract British investors for projects requiring a great amount of capital.
In spite of later liberalization, the government’s stake in the economy has been immense. Considering the lack of a developed private economy, the government, even to this day, maintains this role as a major player in the domestic economy. For instance, since there was no private economy to purchase foreign-owned shares that were now required to stay in the country, the government simply bought them up themselves. Most interesting, however, is the government’s role in the oil economy. Ninety-seven percent of the Nigerian government’s revenue comes from the various joint ventures it has with multi-national corporations. This paper will focus on the relationship between Nigeria and Royal Dutch Shell, which, as the largest multinational corporation in Nigeria, accounted for over 42% of Nigeria’s oil production in 1997.
Incidentally, Shell is willing to do business in Nigeria despite the clear risks that are carried with it, mostly related to the various power struggles in the region. In fact, the instability of the region may actually benefit Shell. As Frynas explains in his article, “Political Instability and Business: Focus on Shell in Nigeria,” the definition of risk must be taken into account. He defines political risk as the “likelihood that political forces will cause drastic changes […] that affect profit,” He notes that while Nigeria indeed has short term stability as a political entity (i.e., it will probably not change governments tomorrow), there is especially little risk that whoever controls the state will not be interested in the lucrative oil industry. As a result, petroleum policy in Nigeria has remained stable. It is also worth considering the value of the oil in the region itself; Nigerian crude has less sulfur than the crude oil of other regions and Nigeria is located closer to the U.S. and European markets than the Middle East.
In this analysis of Shell’s role in the development (or destruction) of Nigeria as an economic power, we must also consider the role of extant political instability in the region. It is well known that African national boundaries were not drawn with respect to indigenous peoples of the region, and in a similar respect, neither have the state boundaries have been drawn with respect to local ethnic groups and religions. With between 250 and 400 ethnic groups in the country, as well as three different religions – Christianity, Islam, and Animism – it is very easy to feel as though one is a disenfranchised minority. To that end, there have been several different governments – military and civilian – in Nigeria since becoming independent in 1960. Such is the nature of African politics, regrettably, and this is what Shell has had to deal with when it had decided to invest in the Niger Delta.
The consequence of Shell’s involvement, of course, has been to make life in Nigeria that much worse for the people who live there. As is standard for any oil refining business, Shell engages in gas flaring – the burning off of excess gas. According to Gberme’s affidavit in the case Gberme v. Shell, gas flaring causes bronchial diseases; kills off crops, causing food security issues; and causes house roofs to corrode due to acid rain. This occurs in spite of a constitutional guarantee of environmental protection; such a guarantee is not even present in the constitutions of developed countries such as the United States. Unfortunately, the 1999 Nigerian Constitution provides no way to actually enforce this guarantee of environmental protection, and in most cases, the courts had typically prioritized economic development over environmental protection. In this instance, Shell is clearly responsible for the conditions in the region, by virtue of their gas flaring. Furthermore, in most instances, the notion of economic development is so entrenched that an action on behalf of a multinational corporation which has been of demonstrable disinterest to the country – affecting the quality of life negatively – cannot be punished. It is gratifying, then, to see that the court issued a reserved judgment favoring Gberme, even though the judge’s decision could easily be reversed by a higher court.
Gas flaring is just one of the ways in which oil production has had a detrimental effect on the indigenous people to the region. Indeed, the Movement for the Survival of Ogoni People (MOSOP) has come about as a reaction to the activities of Shell in the Niger Delta. In addition to the environmental issues, a main concern of MOSOP is the fact that while Shell is exploiting the region’s resources, an appalling small sum of money is invested back into the region. Recall that the entire purpose of foreign investment was to bring additional capital into Nigeria as part of the ultimate post-colonial goal of achieving economic self-dependence. It appears that once Nigeria was induced into liberalizing its trade policies to the extent that it did, the result was akin to Nigeria during its days as a British colony: foreign companies step in to exploit resources and keep the profits for themselves. In the name of economic progress, the Nigerian government lost sight of their original goal.
Of course, it depends on what one means by the “Nigerian government.” Aside from the myriad coups which have occurred since independence, there is also the issue of who is actually in charge. As Frynas explains, Shell has a history of working in conjunction with the local police force, i.e., ordering them around. On October 29, 1990, Shell ordered a mobile police force to protect facilities from an “impending attack.” Despite the clear lack of such a threat, as later indicated by an investigation, eighty people died that day. As the request for additional security obviously backfired on them, Shell issued an apology, but this quote very poignantly explains the amount of control Shell had over the state: “[Major] Okuntino understandably considered Shell rather ungrateful because he was risking his life to protect Shell oil installations.”
More directly, Shell employees literally became part of the government. Ernest Shonekan, who briefly served as the Interim President of Nigeria, was a Shell employee, as were Rufus Ada George, who was Governor of Rivers State, and O.C.J. Okocha, who was the Attorney General of Rivers State. Corruption is indeed an endemic issue in Nigeria; a former Governor of the Central Bank of Nigeria stated that those participating in the nation’s economy have “a strong propensity to circumvent laid-down rules of economic behavior,” and that the economy “provides a fertile ground for bribery, corruption, idleness, and the contrivance of get-rich quick attitude which are antithetical to hard work and discipline.” Thus it seems that in a culture of entrenched corruption, Shell plays the role well.
But then who is to blame for the condition of Nigeria: is it Shell’s exploitation of the region, or has it been a government that has not been responsible to the people? Since 97% of the government’s revenue has been through petroleum, the government does not have a tax base to answer to, and it can carry out the operations of a state regardless of what any one person thinks. Shell, which is just one of the various multinational oil interests operating in Nigeria, has thus been enabling the Nigerian regime by entering joint ventures with the government. They could not have – and they still cannot – engage in such enterprise with other private companies in the country, as there is no private economy in the country. As the government sought to create a self-dependent economy, they did so by expanding the government’s role in the economy, rather than by investing in an infrastructure which would have sown the seeds for a private economy to take form. Rather than achieving a self-dependent economy, they achieved a self-dependent government, a government which relies on no one and does not need to answer to anyone else.
Royal Dutch Shell is nonetheless complicit in the creation of this self-dependent government. It is a matter of corporate ethics: Shell, knowing that oil drilling is a dirty business, and knowing that Nigeria had the kind of political climate which fostered corruption, proceeded to do business with no regard to the Ogoni people who inhabit the Niger Delta. It also did not consider the benefit of investing in the region to improve the condition of living and to grow the economy, preferring the colonial approach: take all the resources and leave the people in worse shape. Indeed, Shell’s operations has left the region in a worse environmental condition, given the rampant release of noxious gases, leading to crop failures, disease, and acid rain.
As it relates to the broader idea of a global economy, the history of Shell in Nigeria has certainly demonstrated that politics is local. Despite the existence of global economic institutions, such as the World Trade Organization, there are no institutions which would require a Dutch multinational corporation to behave in Nigeria, or regulations which would require Nigeria to have higher transparency standards if it is to do business with a corporation based out of the Netherlands. Nor do I imagine that such an institution will come to fruition anytime soon; the nation state has been an effective wielder of power, and considering the extent to which the nation state is institutionalized worldwide, it will not simply disappear overnight.
As far as Nigeria is concerned, it has made progress on its corruption issue within the last ten years. As a result of organizations such as the Independent Corrupt Practices and Other Related Offenses Commission and the Economic and Financial Crime Commission, scores of people have been prosecuted on corruption charges and billions of dollars have been recovered. This demonstrates the growth of state power during a time of globalization, and with continued progress in creating a more transparent government, it is possible that it will become a source of light and put a check on Shell’s power. In the meantime, the two perpetuate each other: Shell is the financial benefactor to the self-dependent government, and the Nigerian government allows Shell to conduct its business no matter what the locals think.