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Quantifying resource dependency

This blog addresses a question that frequently comes up in debates about the EITI; how do we present data in a way that better informs debate and decision making? In the context of current events a dramatic decline in oil prices and increasing economic uncertainty we explore one way of quantifying resource dependency.

Data collected through EITI processes includes open data covering the economic contribution of the extractive sector. The EITI requires that governments monitor how the extractive sector contributes to their countries’ gross domestic product (GDP), government revenues, total exports and employment.

One use of this data is to assess resource dependency. Countries are typically considered to be resource dependent when the contribution from their extractive sector amounts to more than one fifth of exports or government revenues. Chad, Guinea, Iraq, Nigeria, and Kazakhstan are just some of the EITI implementing countries that rank high in terms of extractive activities, although varying in their dependency.

Data on resource dependency is usually shown as a percentage of the economy as a whole. But how does knowing the percentage of government revenues from extractive resources help citizens, particularly those who live close to mines and oil fields? It is these groups who often feel that they are disproportionately affected by extractive sector activity.

Considering the dependency question from the perspective of citizens – the ultimate owners of resources – gives a different lens. How much money does the government make from the extractive sector per individual? Taking this question as a starting point, resource dependency rankings change dramatically.

To build these rankings, we used data reported through the EITI in open format in combination with demographic data from the World Bank’s Databank. The results were surprising.

This analysis reveals large differences between EITI implementing countries. Government revenues per capita range from over USD 3 000 in Norway, to about one dollar in Afghanistan, Ethiopia and Malawi. We find similar results for exports and for data relating to the gross value added by the sector (their share of GDP).

The figures for resource-endowed Norway are perhaps less surprising. The country tops the charts thanks to its significant oil production and relatively small population. This means that each year, the Norwegian government receives over USD 3 000 in its budget to invest, save or spend on each of its citizens, reflecting a high capacity of the government to provide services, even more so in per-capita terms.

Yet Nigeria, a country with a large dependency on extractive sector revenues (91%), only ranks eighth in per-capita terms, lagging behind countries that are not typically associated by the public as having large natural resource sectors. This per-capita measure shows that the extractive sector may be more important for an individual in states such as the Trinidad and Tobago, than in the African petroleum giant. Similarly, the Democratic Republic of Congo received only USD 13 per capita from extractives, substantially less than Trinidad and Tobago.

This is not to say that the extractive sector in countries such as Nigeria are not important. But this type of analysis shows a different approach to resource dependency, putting individuals at the centre. Per-capita rankings enable us to raise important questions about the relationship between a country’s natural resource sector and its ability to provide services to citizens. And, in turn, how populations might be affected, directly or indirectly, by large changes in oil, gas and mineral prices.    

These charts use 2016 data, as most EITI implementing countries have this information readily available. However, many countries have submitted more recent data.

Curious to see how your country fares in government revenues per capita? Download the raw dataset and charts in open format to compare different countries and years.

Authors: 

Christoffer Claussen

Technical Manager

Christoffer is an economist supporting the International Secretariat in their work on open data and ensuring countries systematically disclos