TITLE:
Oil a Blessing or Curse: A Comparative Assessment of Nigeria, Norway and the United Arab Emirates
AUTHORS:
Ali Elwerfelli, James Benhin
KEYWORDS:
Natural Resource Curse, Dutch Disease, Institutions, Nigeria, Norway, UAE
JOURNAL NAME:
Theoretical Economics Letters,
Vol.8 No.5,
April
20,
2018
ABSTRACT: Oil booms have brought
unprecedented wealth and development to some countries while in others this has
not been the case. The latter is attributed to the resource curse phenomenon
which has been explained by the Dutch disease and more recently by poor quality
institutions. This paper is a three country comparative assessment of how
countries have utilised their oil revenues and the extent to which key policy
environments, such as institutional and political aspects, may have influenced
different outcomes. Evidence shows that in Nigeria, oil has been more of a
curse because institutions have not been strong enough to efficiently manage
the vast oil revenue to have a positive impact on the economy and for the
benefit of its people. In Norway, the management of oil resources reflects the
view of decision makers that the resources belong to current and future
generations, and therefore the development of the industry should benefit both
generations. Appropriate institutions and policies such as the Petroleum
Pension Fund, Sovereign Wealth Fund, a more diverse economy and a fiscal rule
for controlling, and more targeted, expenditures were implemented. These, in
addition, to a very stable democratic political environment and effective legal
system meant that oil has become a blessing to Norway. The UAE has a similar
but different approach to Norway, by using oil as a basis for sustained
development. It has a Sovereign Wealth Fund, and focuses on distribution of the
oil-wealth and investment in social and economic infrastructure leading to a
more diverse economy. The nature of its political stability, although essential
to avoiding the curse, is different from Norway’s and there is potential for
tension and conflict. For developing countries in general, good governance,
accountability, high government effectiveness, appropriate regulations and
anti-corruption policies will help link natural resources with high sustained
economic growth and turn the resource from a curse to blessing.