Oil export: Adopt best practices in oil proceeds usage

Tuesday, August 6th, 2019 19:38 |
Oil exploration. Photo/Courtesy

Last week, President Uhuru Kenyatta announced that Kenya has now joined the league of oil exporting countries after the government signed a deal to export 200,000 barrels of crude oil worth Sh1.2 billion.

He called on everyone to ensure the resource is put to the best use to make the country prosperous. However, this is easily said than done. Oil resource can be curse as witnessed in many developing countries. 

In such resource-rich nations, oil discovery has led to economic instability, environmental pollution and perpetual conflict. British economist Richard Auty, who coined the term resource-curse, explored how countries with rich mineral wealth are ruled by corrupt regimes.

The resource curse refers to the paradox of countries with an abundance of natural resources having stagnated economy and poor democracy. Examples abound, with Nigeria, Libya, Angola, South Sudan, DRC, Gabon, Chad and Sudan suffering from the effects of the resource curse.

Most, if not all, of these countries are battling perpetual conflicts that have seen citizens killed and others displaced. At the same time, the conflict has taken a toll on the economies.

In many of these nations trouble begins when communities in the resource-rich regions feel excluded from minerals windfall.

Fighting between government forces and armed groups over control of the oil riches has led to blood shed and instability in these nations, resulting to increased poverty because people cannot engage in productive activity. 

Considering such cases, our leaders must learn from the mistakes and adopt best practices in management of oil proceeds to grow the nation equitably. The proceeds should not be concentrated in the hands of a few at the expense of native communities. 

Further, the government must embrace transparency and fight any attempts by multi-national oil firms to inordinately enrich themselves.

Finally, Kenya must also be careful not to fall into the trap of the “Dutch disease” phenomenon, where discovery of the oil may lead to the decline in other productive sectors such as manufacturing and agriculture. 

Our oil reserves may not be vast compared to other African nations and therefore should  not be exclusively relied on to power the economy. This calls for prudent management.

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