The ‘our abundant natural resources’ myth

By Martin Ike-Muonso

It is usually a thing of pride when we boast about our abundant natural resources, our youthful population and vast markets. These vaunts are some unsung reference to the size of the theoretical factors of production consisting of raw materials, capital and labour that are available to us. All things being equal, the vast quantities of these resources ideally point to potential massive output should they be entrepreneurially deployed. But our natural resources, on the contrary, have remained either trapped underground or are creating a cult of ‘national resource sharers’ rather than the desired output. Our huge youthful population whose future can be better defined with the opportunities from these resources remain either poorly educated and unemployable or potentially misguided into illegalities.

Worse still, the abstraction of significant economic values in the international markets even for the already tapped resources has always been a tall order. Our primary products are either outrightly rejected as not meeting international standards or are grossly underpriced. The effect back home is that the full benefits of these resources are not maximized and fail to create the quantum of employment expected of their scale. Consider, for instance, our crude oil and its consideration as a curse rather than a blessing. Consider the groundnut pyramids of Kano which have now vanished before our eyes. Consider that we now depend on foreign vegetable oil even with our ‘supposed’ oil palm abundance. But when we look at our neighbours, we see a completely different picture of how they have utilized their own nature’s endowments to better their lives.

In the 1960s and 70s, Nigeria boasted of its cocoa production capacity. Kenya was also a vast cocoa producer but not comparable to Nigeria in any way. However, typical of us we were more interested in beholding and flaunting our vast cocoa heritage just as we watched our groundnut pyramids disappear. Today, Kenya has not only expanded its cocoa production capacity but has vastly expanded its ability to produce and export coffee industrially. Kenya is one of the world’s producers and exporters of industrially processed coffee. That was possible because, as a country, they decided to explore its nature-given advantage in coffee for its greater good. For us, several similar sad stories around our deliberate abandonment of the necessity and urgency to commercially and industrially develop our natural resources abound.

Life is about results; positive results always support higher living standards. The results demanded of a country usually revolve around such indices as employment, security and income, for its citizens. Invariably, the power to generate positive outcomes on these parameters is dependent mainly on the capacity to produce sellable goods and services in large quantities. The ability of a country to significantly succeed on this is a function of its level of industrialization. Unfortunately, there is evidently less than optimal efforts by our policymakers to get the significant quantum of the so-called abundant natural resources through industrial lines. Boasts of abundant natural resources that are untapped and not used to create exportable outputs are laughable. Now that does not mean that a country can not depend partially on the export of its unprocessed raw materials. It can, but, limiting the share of unprocessed natural resources in the overall export portfolio of a country is necessary mainly if improving on the economic value of such unprocessed resources will yield more than corresponding commercial impact when otherwise. It is even worse when such unprocessed raw materials are exportable but are constrained by locally made laws from being tapped. Both cases, hamper employment opportunities. However, in the former, local employment opportunities are exported.

We appreciate the iniquitous wrongdoing in our inability to effectively utilize the proceeds from our crude oil to develop crude our oil refining capacity. On the contrary, we spend more than what we earn from oil exports to import refined petroleum. Regrettably, many of the raw materials that our manufacturers are dependent upon the derivatives from the same crude oil. Only what is needed are legislative changes and policy support and entrepreneurs will turn them into highly demanded raw materials for our industries. The advantages are immense, ranging from the inexorably huge foreign exchange savings to the development of the capacity to identify and process these natural resources into usable raw materials. So what are our touted natural resources worth when the value expected from them are rarely at the level that they should be?

Capital, for instance, is worth nothing without entrepreneurial action which enables its ability to create the desired output. Similar to capital is the natural resources and labour inputs in production. Without proper doses of entrepreneurial-action, natural resources inputs will have little impact. Entrepreneurial action is what converts natural resources to produce yields that benefit the entire economy. Having thousands of hectares of arable land without having corresponding thousands of pounds of outputs from the same land resources does not make much sense. Consider that Nigeria is the natural home of oil palm, yet it is a net importer of the same product. The reason is simple. While other countries discovered the enormous economic benefits of oil palm and acted entrepreneurially on that opportunity by investing heavily in it, Nigeria from where the seedlings were obtained failed to see those opportunities. Today countries such as Malaysia and cote d’Ivoire boast of by far more capacity to export palm oil than Nigeria. In effect, therefore, boasting that Nigeria is oil palm’s natural home makes no meaning. Countries that make better sense of those opportunities have created better homes for the product. This story is the same for hundreds, even thousands of mineral resources that are languishing forgotten inside our soils. For instance, with our landmass and the fertile soil and favourable climatic conditions, it is strange that we import concentrates of orange, mango and other fruits that exist in large quantities in our country.

Imagine how economically beneficial it would have been if we can determine the price of crude oil. Imagine how prosperous our farmers would be if they can decide on the dollar price of most of the agricultural products that we export. Unfortunately, this is not the case. The determination of the prices of what we consider our offerings to the international market is outside our control. We are merely price takers. Those who buy our natural resources in the global market know that they will eventually resell a marginally improved version of the same product to us. Therefore, when our crude oil is purchased, all that the buyer needs to do is to refine the product and then determine the price of the refined products and sell it back to us with various other derivatives from same products as raw materials for our industries. What an economic neo-colonization!

The trap of the ‘abundant natural resources’ myth is one of the major drivers of the massive unemployment challenge we face. The myth projects a delusive feeling of self-sufficiency that cripples the hunger for initiatives and actions to find lasting solutions to our economic problems. It is typical of a child that wrongly perceives the parents as rich and has refused to understand how to preserve and grow more wealth merely because they see a lot of assets around and in their homes. Creditors, fraudsters and outright sale of such assets are usually what greets them at the demise of the parents. In our case, the more we delay the opportunity to develop our natural resources, the more we create fertile grounds for the emergence of insurgents and militant groups. It is ironic that we want to secure Nigeria, yet we turn away from reliable and well-implemented industrial policies that will harness these resources for the employment of our youth.

It is also ironic that we complain about the high cost of fuel, yet we are the world’s number eight exporter of crude oil. Is it not shameful that we are branded the poverty capital of the world while we flaunt our supposed abundant natural resource endowment? We are overly endowed with cotton, yet we depend on China to clothe ourselves. We are heavy importers of cement, yet our land hosts large quantities of lime and gypsum and other cement making inputs. The more we delay the development of our natural resources, the more we self neo-colonize our country to other countries, including India and Asia.

It is high time we stopped deceiving ourselves with this myth of abundant natural resources that never created the quantum of opportunities needed to join the league of prosperous countries. Of what importance is the presence of natural resources if they do not translate to more employment opportunities, more outputs, better infrastructure, and generally high-quality life for the citizens? It amounts to nothing. Natural resources are nature’s endowment for us to develop and improve the quality of our lives. If we cannot convert these resources into things of value, that create employment and income, then we would have failed not only ourselves but even our children unborn. If other countries can import our natural resources and become economically great on the back of those imports while we the natural home of these resources languish in poverty and deprivation then we should cover our faces in shame.

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Professor Ike-Muonso is the Country Director of Baywood Foundation as well as the Chief Transformation Officer of GTI Capital Group