Cargo Cult Arithmetic and Anambra Oil

By Biko Agozino

“The primary association in cargo cults is between the divine nature of "cargo" (manufactured goods) and the advanced, non-native behavior, clothing and equipment of the recipients of the "cargo". Since the modern manufacturing process is unknown to them, members, leaders, and prophets of the cults maintain that the manufactured goods of the non-native culture have been created by spiritual means, such as through their deities and ancestors, and are intended for the local indigenous people, but that the foreigners have unfairly gained control of these objects through malice or mistake. Thus, a characteristic feature of cargo cults is the belief that spiritual agents will, at some future time, give much valuable cargo and desirable manufactured products to the cult members.” ^{(Wikipedia, citing} Harris, Marvin. Cows, Pigs, Wars, and Witches: The Riddles of Culture. New York: Random House, 1974, pg. 133-152)

In The Trouble With Nigeria, 1984, Chinua Achebe lambasted the leaders of developing countries who were always boasting that they were prepared to steal technology if those who possess the know-how refuse to transfer it to them. Achebe chided their cargo cult mentality and explained that technology is not like some material possession waiting to be stolen but a way of life and a worldview that can be learned through disciplined study. Rather than look for technology to steal, why not develop your own technology by funding research and development projects?

As oil and gas deposits are being discovered all over Nigeria and in some other parts of Africa, giving rise to claims and counter claims by communities who contest the ownership of the oil-rich land, we need to pause for some sober reflections. There is a gross overestimation of the potential income from oil and gas and as a result, there is an excessive expectation by even learned elites that oil wealth would be enough to banish poverty from the land whereas only a select few are likely to line their pockets from petrodollars. A Professor of Political Economy in Nigeria recently circulated this formula online to rather uncritically buttress the oil bounty hypothesis:

‘1. Crude Oil production/day - 2.5M barrels
2. Current Price = $113/barrel
3. Daily Sales = 2.5M x 113 = $282.5million
4. Monthly Sales = 282.5M x 30days = $8.475billion
5. Yearly Sales = $8.475billion x 12 = $101.7billion
6. Naira Equivalent = 101.7billion x #160 = 16.272trillion Naira per year.
7. Nigeria's budget for 2012 = 4.5trillion Naira.

Even if you take 90% of 16.272trillion naira as the Fed Govt's Share of the barrel, which comes to14.645 trillion naira we still expect over 10 trillion surplus!!! Now, the question is: Where is the surplus going?! -(Analysis by Femi Falana (Senior Advocate of Nigeria/Activist, on Channels Tv).’

I agree with some of the the cargo cult logic in Falana's arithmetic above: Even 10% of the profits from oil since 1960 should be enough to Chinarize Nigeria or out-Cuba Cuba and beat Japan, Singapore or Finland (all with less natural resources than Nigeria) in the improvement to our Human Development Index. However, the danger in overestimating the potential income from oil and gas is that other sectors of the economy end up being neglected even though they contribute more to the economy than oil and gas.

It is cargo cult arithmetic to simply multiply the oil barrels per day by current market price and project to national revenue. In my opinion, such calculations falsely raise the sense of relative and absolute deprivation among the people and potentially heat up communal violence in the struggle over scarce resources.

I recommend that readers should consult the chapter, ‘Revenue Allocation and the National Question’, by Professor Eskor Toyo in the book edited by Abubakar Momoh and Said Adejumobi, The National Question in Nigeria, which I published in the series that I edit for Ashgate Publishers.

According to Professor Toyo, the contribution of oil to the national revenue is less than 50% with the rest coming from taxes (paye taxes and sales taxes mostly) and other sources of revenue from sectors like agriculture, customs and excise, and culture. Surprised? Well do not be surprised. The explanation is that the Nigerian state, like most oil-producing states, is not an oil-producer but a rentier state that collects rents or royalties from the oil companies. The National Bureau of Statistics confirms this by reporting that the contribution of oil and gas to the GDP in the second quarter of 2012 is less than 14% while the contribution from agriculture is 40% http://www.nigerianstat.gov.ng/

This is why oil which contributes over 70% of internal revenues from taxes also contributes a small part of the GDP and the GNP compared to agriculture which employs 70% of the working population: An oil company receives the license to explore for oil in a field; the company invests billions of dollars and sometimes strikes it lucky or fails; when it fails it bears the loss, perhaps written off as tax deductions; when it succeeds, it pays royalties of 10% to the government on the profits (after deducting operating costs, research and development, etc.).

Surprisingly, 10% is considered a generous royalty considering that authors get 8% or less from book publishers as royalties (I think that they are so miserly that they should be called peasantries), with questions emanating about the accurate declaration of sales figures, wastage, theft, subsidy scams and fraud. The recent dispute in Ecuador over agreements with gas companies exposed the exploitative arrangements internationally. The new left-wing government insisted on getting more than 10% in royalties and the gas companies refused. 

 

Anambra State Government under Peter Obi should be commended for having the foresight to form an oil company (perhaps the only state government with such an investment in Nigeria, nothing stops the other states from doing the same) to refine the oil from the area and thereby maximize the benefits to the state but the people should still be made aware that the expectation, even without corruption and the likely harm to the environment through oil spills, will not come close to the expected revenue and benefits from agriculture. Yet Anambra state continues to neglect the agricultural sector like the rest of Nigeria.

Peter Obi has invested billions of naira to develop Orient Oil Company for Anambra State, building on the foundation laid by his predecessors, starting with Mbadinuju. The question the people of Anambra should be asking is how many billions has Peter Obi invested in agriculture which employs approximately 70% of the people and provides food and wellness beyond anything that the oil industry could aspire to?

The answer is provided in the Anambra State contribution to Vision 2020 in which Governor Obi reports that Agriculture receives less than 1% in capital expenditures of the state compared to 77% for transportation while recurrent expenditure for agriculture is less than 2% compared to 37% for education (I commend this prioritization of education, if only the federal government would fund education as generously at the national level). The report proposed to increase livestock and fruit trees in the state but did not specify how.

Rather than invest heavily in agriculture to modernize it and maximize its contribution to the economy, environment and society, Kogi State and Enugu state communities are already lining up cargo cults to contest ownership of the Anambra oil deposits with an eye on the potential royalties. Yes, there is oil in Enugu state too, especially in Awgu Shale, according to the geological map of Nigeria. Kogi State probably has oil too as oil is being discovered all over the country. All I am saying is that the states with oil should be forewarned not to neglect the golden goose that laid the golden eggs - agriculture. As Nigerians will say, na oil we go chop?

If these states prioritize agriculture they would reduce unemployment much more than is possible through oil and gas and they will create massive wealth for the people and potentially reduce the threat of kidnapping and violent crime. Orient Oil is only a refinery and so it does not really matter where the oil comes from given that Kaduna with no oil had a huge refinery located there by military regimes that strategically refused to cite any such factories in Eastern Nigeria probably out of grudge over the Nigeria-Biafra war.

Peter Obi appears to have tapped into the can-do attitude of the Igbo by actualizing the dream of making Anambra an oil-producing state in spite of the federal government intentions. My warning is that the cargo cultists around an oil refinery should be reminded that oil is a finite resource (as the sunflower logo of Orient Oil symbolizes) and that existing oil refineries in Nigeria are sitting dormant in disrepair whereas agriculture is a renewable resource, a gift that will go on giving forever.

I conclude with my tireless call for the revenue allocation formula to be changed constitutionally to guarantee that 10% of the annual budgets at the federal, state and local governments will be allocated directly to Nigerians to invest as they see fit, similar to the farm subsidies and business or research grants that all industrialized countries disburse constantly to their privileged citizens. In ten years, we will count the miles after the race.

As E.F. Schumacher put it in his classic, Small Is Beautiful: ‘…in agriculture and horticulture, we can interest ourselves in the perfection of production methods which are biologically sound, build up soil fertility, and produce health, beauty and permanence. Productivity will then look after itself.’ He goes on to demonstrate that if we plant one tree for every citizen of Nigeria every year, within 10 years we will have billions of new trees in Nigeria that could help to check erosion and desertification, provide food and beauty and create wealth without requiring a lot of work since the trees will generally look after themselves and also look after us as our best friends.

Governor Kayode Fayemi got the memo and I am impressed to hear that he just distributed half a billion naira to 140 unemployed youth who were retrained and funded to start their own farms in Ekiti state. Governor Peter Obi did get the memo too and distributed 100 million naira to unemployed youth to start their own businesses in Anambra. Comrade President Yaradua surely got the memo when he allocated 200 billion naira to be distributed to unemployed youth for start-ups before he died (and I agree with Baba Soyinka that his death should be investigated thoroughly).

Obasanjo and Okonjo-Iweala snatched the idea up when I first aired it in 2006 and proposed 50 billion naira grants just for cassava farmers and reserved 30% for women but I advised that it is not just for one crop and that women should get 50% of the funds. In reviewing my proposals for poverty eradication in his column in The Guardian, the socialist mathematician, Dr. Edwin Madunagu, agreed with some reservations and suggested that 10% of the budget is too small for this purpose. He may be right, my proposal said that it should be at least 10%.

I commend these tentative steps and urge policy makers not to make them a one off but an annual commitment and not to regard them as loans but treat them as grants. If this is done consistently at the federal, state and local government levels, we will no longer be trying to calculate the square root of minus one or zero with cargo cult mentalities. Obviously, we cannot do this systematically without democratically contesting for power on a progressive platform at the global, continental, regional, national, state and local levels and thereby use our abundant resources to empower the tremendous talents of our people.

Biko Agozino is a Professor of Sociology and Africana Studies, Virginia Tech.

G8 $20 BILLION QUESTION

By Biko Agozino

Analysts are slow to give credit to whom honor is due for a key decision of G8 leaders in Italy. I propose that we give the credit to our self-proclaimed ‘Servant Leader’, President Umaru Yar’Adua, who must have used quiet diplomacy to sway the G8 leaders in the desired direction. Some analysts were quick to point out that the $20 billion grants for agriculture agreed by the leaders was a little step in the right direction but complained that it was still too small to solve the huge problem especially in Africa. No one wondered where the idea came from in the first place.

Some wrongly suggest that brother Barak had to bully his G8 colleagues to get them to agree on the initial $15 billion and then he had to bully them some more to raise it to $20 billion shortly afterwards. This is unlikely because the likeable President Obama does not have it in his character to bully even an ant. Moreover, the way the initial sum was agreed only for the amount to be increased shortly was indicative of the fact that the leaders did not plan to make such a decision or they would have agreed on the target amount in advance.

So who done it? I wish to suggest that President Yar’Adua of Nigeria, was the only leader from the developing countries at the G8 meeting with an antecedent of having provided a similar policy in the form of a 200 billion naira credit facility for agriculture in Nigeria this year. As he reluctantly boasted to The Guardian Newspaper in an exclusive interview in April 2009, such a policy had never been implemented in Nigeria before.

It is true that Yar’Adua’s predecessor, Olusegun Obasanjo, had proposed a similar policy but on a smaller scale and no one is certain what became of it. I recall that Dr. Ngozi Okonjo-Iweala, the then finance minister, had announced out of the blue that 50 billion naira would be made available as credit to cassava farmers for commercial export-focused production. Sister Ngozi also promised the innovation that 20% of the fund would be set aside for female farmers and I advised her immediately to make it 50-50 considering that women did the lioness’ share of the work on farms in Nigeria. I hope that both Yar’Adua and the G8 would observe gender equity in the disbursement of the huge investments that they have promised to the agricultural sector.

As I observed in newspaper opinions and interview responses at the time, the policy sounded very similar to proposals that I had announced barely weeks before the Federal Government adopted parts of it. In my preliminary campaign for office of Governor of Enugu state in the 2007 elections, I had proposed that one sure way to turbo-charge the economy of the state was to disburse billions of naira annually as grants, not credits, to the people of the state to invest productively as they saw fit. I pointed out that this was the trend in the industrialized countries and that we need to emulate such a policy if we hope to eradicate poverty from our lands. Of course, I was pleased to hear that the Federal Government was ready to adopt my policy option merely weeks after I made it public but I pointed out the errors in the interpretation of the policy – I called for grants and not credits, I called for such grants to be given to all sectors of the economy and not just to agriculture and surely not for one crop like cassava and definitely not just for export production, not a one-off but a systematic part of the annual budget with at least 10% of the budget to be set aside as grants to the people year after year!

In the past, as I have been arguing without fear of contradiction, the leaders of the developing countries routinely attempted to dictate agricultural policy to the leaders of the developed countries. They usually argued like this – ‘Boss, you know that we do not give a dime as subsidies to our farmers while you give hundreds of billions to yours as subsidies annually. Following the gospel of free market, we insist that you should eliminate farm subsidies to level the playing field.’ Nonsense, thought the leaders of the developed countries. Just because you neglect your farmers is no reason for you to wish to dictate that we neglect ours too.

I have always been convinced that the wiser policy was to support our own farmers and other investors in our economy to the best of our ability and watch our dynamic people take it and run with massive wealth creation despite the inevitable losses in some investments as is always the case. The fear of inflation is raised by critics of such a fiscal policy but my proposal is not for consumption but for production and the government would be able to recover the grants through taxation of the profits of the investors, income taxes on their employees and VAT on purchases.

I have argued repeatedly that this is part of my answer to the Niger Delta question and the question of predatory crimes of kidnapping and armed robbery across the country. If we guarantee that at least 10% of the budgets at the Federal, State, and Local Government levels would be reserved for disbursement to the people as individuals or cooperatives annually, a lot of the youth who are seduced into violent crimes for monetary gains or as protest against underdevelopment could have been empowered to create wealth, jobs and increased happiness in our country. Instead, what we have is brazen kleptocracy in which a few people raid the economy and horde the loot abroad, leaving many people with little option but to work in the devil’s workshop.

My humble hypothesis is that our servant leader, who bravely adopted this policy suggestion as part of his Seven Point Agenda, went to the G8 leaders and looked them straight in the eyes and pontificated: ‘There is an old African saying that if you give a man fura de nunu (fresh yogurt), you feed him for a while but if you give him a cow and teach him how to milk the cow, you feed him for life. For too long, you have acted as humanitarians who provided food aid to the many needy people especially in Africa. We commend you for this generosity without which millions could have died of starvation. But have you considered the option of providing grants to agriculture along the lines of your farm subsidies so that our farmers may be better able to feed our people and even have some to spare for export? Such grants might save you money on food aid and the saving could then be awarded to the poor unemployed youth in your cities to enable them to set up their own enterprises. It is a win-win option for all!’

The G8 leaders must have looked at each other and wondered why they never thought of that before. I hope that brother Barak Obama would take this insight further by announcing an Obama Plan for Africa and inviting a coalition of the willing to contribute to the fund annually to help Africa overcome centuries-old disadvantages. When Africa is empowered to release the immense economic potentials in the continent, the whole world would benefit because Africa would be able to buy more from and sell more to the rest of the world as China and India are beginning to do. I hope that African states will recognize the wisdom of this policy and continue it annually even if the G8 leaders fail to continue such grants. I hope that the Peoples Republic of Africa will soon emerge to continue this policy and end the humiliation that Africans continue to endure in the midst of plenty. Obviously, this extends to all the poor in the world if their governments adopt similar policies of investing 10% of the budgets in the people-initiated research and development or commercial ventures.

NIYI OSUNDARE: A RESPONSE

REPLY TO NIYI OSUNDARE’S LETTER TO PRESIDENT YARADUA
By Biko Agozino

Dear Prof.,

If to say na me be President Yar’Adua, I for reply your long letter like this: Thank you for your so long a letter in the tradition of Mariama Ba. How madam and pickin them dey? Na waa for you brother Niyi self. You done dey turn oyibo o! How you take write your brother so long a letter and you no even ask about family, unlike Mariama? Plus, na only oyibo man go write one letter put am for three envelopes say this one na part one, that one na part two and then this last one na part three. African man go put all the parts for one envelope to save money for stamp. Abi na lie? You sabi how much poor man go pay to buy The Guardian for three straight days (May 26-28) just to read your dogon turenchi? You know say your letter dey sweet like your poetry wey we no dey miss for Sunday Tribune in those days. I beg make you no stop o, make you keep on writing a column now. I beg now, e joor, biko nu, mbo, dualla.

Anyway sha, joke na joke and Joké na person name. The national problems that you bemoaned in your letter(s) also preoccupy yours truly, wallai tu lai. I thank you for adding your powerful voice to the task of seeking solutions. In the words of the young Nigerian Pan Africanist, Tajudeen Abdul-Raheem, who was killed in a tragic motor accident in Kenya on Africa Day and buried in Funtua recently; Do Not Agonize, Organize! Feel free to join us in doing what you can to help solve the problems.

But Prof, even you will admit that you were going over the top when you concluded by suggesting that the re-branding of our country could be represented with the metaphor of re-branding of a rotting corpse. Haba! Quite to the contrary, Insha Allah, our people dey kamkpe, we continue to be vibrant and very much alive, for as you said in one of your poems, ‘Our Earth Will Not Die’, and as you put it in your letter, our people remain dynamic. Our task is to tap the dynamism for the development of the people in a sound environment.

I was also surprised that you heaped all the bucks at my door mouth without a word of advice to the international community that created the financial meltdown that is affecting the local economy on how to lend a hand while they spend hundreds of billions to rescue their own firms. Nor did you have any words for local politicians and residents to please behave themselves in a democratic manner. Our people should learn to lose elections gracefully or go to court to challenge the results reasonably instead of all that magomago and gragra to intimidate voters or influence electoral officials. Four years time, you have a chance to try again, it no be by force. The same goes for militants who boast about kidnapping and killing workers in Nigeria – let them go to court if they have a genuine case.

My next surprise is that you did not mention anything positive that we are doing on the ground in Nigeria. I am pleased to tell you that I discuss our Seven Point Program with other African servant leaders and I hope that they will accept and implement the key principles. For instance, we are making available this year, a two hundred billion naira credit facility for commercial farmers. This has never happened in this country before whereas Europe and North America routinely give hundreds of billions annually to their farmers as farm subsidies alone.

In the past leaders of developing countries have tried to lobby that the developed countries should withdraw subsidies from their own farmers to level the playing field. None of them figured out that it was much more practical to provide as much help as they could to their own farmers on an annual basis as Professor Biko Agozino has been arguing for some time now. This has changed from this year in Nigeria. Do you advise that we continue to invest hundreds of billions annually to support farmers in this country? As I told The Guardian, agriculture contributes 60% to our GDP compared to 20% from petroleum and gas and 5% from industry. We need to build up our capacities in all areas with the state acting as an activist and catalyst for development in partnership with the private sector and the community at large. Shouldn’t we make similar grants to the arts, research and development, small businesses, inventions, sports, health, education, power-generation, transportation, annually?

Bros, let me end before my letter gets as long as yours. You know say I no sabi book reach you, Prof! Thanks again brother Niyi for writing. Please write again soon and keep the suggestions for innovative policy options coming. Make you greet your family for me. If na me be him, na so I for reply you. We go see now, Se gwo be, Ka e mesia nu, Alafia.

For those who missed Osundare's Letter(s), follow the link below:

http://groups.google.com/group/USAAfricaDialogue/browse_thread/thread/f736e93bd351676f