Report: A Skeptical View of Cash Transfers in the Niger Delta

For years, Nigeria's Delta states have stood as a prime example of the paradoxical blessing of oil wealth. The region's abundant resources, instead of increasing development, have fueled sustained, violent conflict and have failed to alleviate severe income inequality. In an environment as complex and turbulent as the Niger Delta, it's difficult to evaluate whether a new oil revenue policy can bring about better results than current practices.

The Center for Global Development released a paper last month, "The Prospects for Cash Transfers in the Niger Delta: A Skeptical View," in which my co-author Aaron Sayne and I consider what would happen if government allocated oil revenues directly to Niger Delta citizens through cash transfers. Such a policy is not unfeasible. It could emerge as part of a measure in the long-pending Petroleum Industry Bill to transfer more oil wealth to communities, or state governors could independently choose to institute the policy on their own. But what would happen next?

Assuming the transfers would actually reach the people, we anticipate three kinds of effects. The economic impact would likely be positive but not transformative. Cash transfers, while small, would augment the wellbeing of most households in a meaningful way. However, they would not help shore up the missing infrastructure and security that hobble the region's development.

These limited economic benefits are outweighed by the potential for associated conflict and governance risks. Cash transfers are unlikely to reduce conflict in the Niger Delta and could actually spark new tensions. Debate over who gets what is often an underlying cause of resource-related turmoil, not just in Nigeria, and the identification of cash transfer recipients could lead to further violence.

But most importantly, there are concerns about the governance effects of cash transfers. In Nigeria, and especially in the Niger Delta, state-citizen relations are characterized by rent-seeking and efforts to access state largesse. Rather than democratizing control over resources, cash transfers could reinforce this state of affairs.

The paper is part of a larger inquiry by the Center for Global Development into cash transfers as a potential remedy for the resource curse. The Center's series of papers offers arguments for why transfers might work where other policies have failed. In the coming months, RWI will release additional research on how cash transfers have worked in places like Timor-Leste, Bolivia and Alaska, and what steps can be taken to improve their effects and minimize their risks.

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