oil to the people?

Nigeria’s economic focus on the trade of oil can be reversed from being its greatest downfall to being its greatest achievement. Currently, Nigeria’s economy is fueled and supported by the energy sector and the international trade system. Nigeria is Africa’s largest exporter of oil, being the number one exporter to China and the fifth largest supplier to the US. However, the corruption of the government, the un-diversified economy, political instability, and poor management has led to an over-dependence on the oil sector. The oil sector currently supplies 20% of Nigeria’s GDP, 95% of its foreign exchange earnings, and 80% of its budget revenues. The oil sector has not led to an end to the crushing poverty of Nigeria and this leads many to join the rebel groups combating foreign involvement and trade. Nigeria used to be a large exporter of food, but with an emphasis on fossil fuels and a growing population, the agriculture sector could not keep up and now the consequences can be seen.

Nigeria’s focus on international trade in oil has developed the problems that Nigeria now faces. International trade is the oldest and most controversial subject within the international political economy. International trade is the production structure of the international political economy, this means it deals with relations between states and non-state actors such as international businesses. Controversy on the international trade structure comes about when the state governments and international businesses grab the economic benefits and limit the negative effects on themselves. This controversy could not be more evident in Nigeria’s case as the government works to fight corruption of politicians, angered rebel groups, and the hunger of foreign governments and investors for raw materials. From Nigeria’s agreements and interactions with other countries in the international political economy we can view Nigeria’s place within the international system.

If you were to look at Nigeria’s international dealings with China and the US, you would notice two different perspectives on international trade. One perspective is China being mercantilist as they work to create bi-lateral agreements and the other, the US, with a push for a more liberal global system to allow multinational corporations access to the market. Hu Jintao, President of China, visited Nigeria for a second time in 2003 and secured four oil-drilling licenses for China in exchange for investing nearly $4 billion in infrastructure projects. In the international trade system, China is looking for a market to place its abundance of cheap goods and Nigeria is looking for a reliable importer of its oil who will also support the country financially. China is also on the search for natural resources to fuel its growing population. Yet the US is also seeking a place to receive oil as it looks to become less dependent on the Americas. US corporate interests are high in the energy sector and the US government has offer much help in the way of democratic reform. However as the world’s powers seek to find sources of energy, the instability of the Niger Delta region of Nigeria causes much concern as both US and Chinese workers are held hostage. This creates a strain on the pricing of production and consumption of oil. Likewise the kidnapping of foreign oil workers creates political tension, which could potentially lead to future problems in trade with Nigeria.

Nigeria now holds a prominent position as the world searches for its fossil fuel fix. With their abundance of oil, Nigeria has the potential to reform its political system and create positive trends from its trade in oil. The flow of oil brings in investors and in turn these investors can be used to build the countries dying infrastructure. As has been evidenced by China’s recent push in Nigeria, countries are willing to invest in Nigeria to have access to its oil. However, investors will not be able to help with ethnic tensions in the oil-producing region. Nigeria will need to solve its internal problems if they are to keep a hold on their oil-trading niche. There is now a significant push to calm those problems through social and economic development programs run by government agencies and multinational corporations. As Balaam writes, “If wealth is power, then trade is both.” Nigeria needs to be sure to use its trading power as both an internal development tool and a foreign policy tool. Nigeria needs its investors and MNCs to focus on more then just their international responsibility to provide oil to consumers. They need to have these international partners assist in focusing on domestic issues in order to be a trading partner.

In February 2007, the Nigeria Oil and Gas (NGO7) Strategic Conference was held. The conference held attendance from over 550 delegates from almost 70 companies in the Nigerian oil and gas market. Interesting to note is that although China has recently become a front-runner in Nigerian assistance, speakers at the conference included country managers and directors from the large US oil companies, however only one from a Chinese company. Was this a political move or are the US companies most prominent in Nigeria at this time? Time will tell.

The greatest hope for Nigeria is foreign investment. With foreign investment focused on development and reforms focused on eliminating corruption Nigeria will be able to become a more important regional and international trader. Investments are increasing in Nigeria. Companies are seeking long-term investment and are especially searching for trade in raw materials. Nigeria holds a huge potential and it needs to use its power in the international political economy to reverse past trends and push for greater development assistance from investors. Along with bringing in foreign investors, Nigeria needs to stress an understanding by investors of local conditions and make partnerships carefully.

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