Why IOC divesment might not be such a bad thing

I read something in the news a few days ago about IOC’s selling their assets in Nigeria, particularly their onshore assets. Something about it being a sign that the Nigerian oil industry is in trouble. Read here and here.

There may be a silver lining to this divestment. A blog post on the Why Nations Fail blog a while ago made the argument that participation of domestic firms in extractive industries influences the quality of institutions positively and promotes transparency. As they put it:

getting the domestic private sector involved in resource exploration, extraction and rent distribution has positive impacts on exactly the sorts of institutions that might help to reverse the oil curse.

Government love working with foreign firms because they can be “bullied” to conform with whatever corrupt schemes they cook up. The threat of being kicked out make cooperation with governments worthwhile. Domestic firms are however more likely to fight such schemes and promote more transparency and accountability. I guess publicly listed domestic firms even more so.

Silver lining. You can read the post here or the actual book on natural resource governance here  here.


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