TWO PETRO-STATES DIVERGE: EXPLAINING THE INSTITUTIONAL EVOLUTION OF NIGERIA AND ANGOLA ROSS HARVEY Thesis Presented for the Degree of DOCTOR OF PHILOSOPHY in the School of Economics UniversityUNIVERSITY of OF CAPECape TOWN Town Supervisor: Professor Don Ross Co-Supervisor: Professor Brian Levy August 2019 The copyright of this thesis vests in the author. No quotation from it or information derived from it is to be published without full acknowledgement of the source. The thesis is to be used for private study or non- commercial research purposes only. Published by the University of Cape Town (UCT) in terms of the non-exclusive license granted to UCT by the author. University of Cape Town The copyright of this thesis vests in the author. No quotation from it or information derived from it is to be published without full acknowledgement of the source. The thesis is to be used for private study or non-commercial research purposes only. Published by the University of Cape Town (UCT) in terms of the non-exclusive license granted to UCT by the author. Declaration I, Ross Graeme Harvey, hereby declare that the work on which this thesis is based is my original work (except where acknowledgements indicate otherwise) and that neither the whole work nor any part of it has been, is being, or is to be submitted for another degree in this or any other university. I authorise the University to reproduce for the purpose of research either the whole or any portion of the contents in any manner whatsoever. Signature:.......................... ................... Date: ........19 August 2019........ ii ABSTRACT It is well-established that oil wealth in weakly institutionalised states tends to undermine development instead of catalysing it. Cross-country regressions, however, struggle to explain why comparably oil-wealthy countries such as Nigeria and Angola experience different political and economic outcomes over time. This thesis explains these differing outcomes through a theoretical lens derived from the New Institutional Economics and Political Settlements literature. Methodologically, it employs analytic narrative – the application of a game theoretic model to a historical puzzle to produce a thin explanation – and treats economic transactions as the key unit of analysis for understanding why particular outcomes obtain and not others. As a comparable site of analysis, I select the oil-for-infrastructure deals that were negotiated in Angola and Nigeria with Asian National Oil Companies between 2004 and 2007. Contrary to expectation, the deals were struck in Angola but failed in Nigeria. I hypothesise that the differential outcome reflects the varying quality of the institutional arrangements in each country for engaging foreign investors. This differential institutional quality resulted in differing commitment credibility over time, which partly accounts for deal failure in Nigeria. Divergent political economy trajectories and political settlements account for these differences. I use a game theory model that explains heterogeneity within authoritarian regimes to test these hypotheses. Application of the model to Angola and Nigeria respectively shows that Angolan dictator, José Eduardo dos Santos, was able to consolidate power within six years of becoming the head of state by successfully eliminating potential threats to his dictatorial ambitions. Under this closed, stable regime, foreign investors perceived greater levels of commitment credibility and struck deals. Nigeria’s uneven institutional evolution towards greater openness was punctuated by multiple successful coups and occasional civilian rule between long periods of military autocracy. The resultant instability undermined the perception of credibility, explaining why the deals failed. The thesis closes with a description of how Nigeria and Angola’s political economies have evolved since the oil-price crash of 2014, including how dos Santos unexpectedly lost power, and poses questions for future research. iii Dedication I dedicate this thesis to the late Dee Bradshaw, professor at UCT and friend from Jubilee Community Church. Taken from us too soon, a light has gone out, but we will meet again in glory: ‘When we’ve been there ten thousand years, bright shining as the sun, we’ve no less days to sing God’s praise than when we first begun.’ iv Acknowledgements Without the Lord Jesus Christ, I would not have been able to complete this thesis. Paul writes to the Ephesian church that they should be filled with the Spirit, ‘giving thanks always and for everything to God the Father in the name of our Lord Jesus Christ’ (Ephesians 5:20). I thank God for sustaining me in bringing this thesis to completion. In the Lord Jesus, I have redemption from sin through his blood shed on the cross for me. That He would exchange my sin for His righteousness is amazing grace. This grace has also ‘brought me safe thus far’. It is God who saw me through an undergraduate PPE, a postgrad in Public Policy and eventually a PhD. For someone who did not excel at school, it really is only attributable to God’s grace that I get to write this acknowledgements page at all. As another old hymn put it, ‘All I have needed Thy hand hath provided; Great is Thy faithfulness, Lord unto me.’ To my supervisor, Professor Don Ross, I am deeply grateful. I first met Don in 2003 and it turned out, unbeknown to me at the time, that he had constructed the four-year PPE programme that allowed me to get into UCT at all. It seems more than merely accidental that he has been instrumental in guiding me through a PhD too. Don, thank you for your patience and your clear, rigorous and consistent supervision through this process. Even across three continents since 2013, you have always been accessible, and I have so appreciated your efficient turnaround and gracious correction when I have embarked on intellectual misadventures (of which there have been more than a few!) I am privileged to have enjoyed access to your great mind and have learned more from you than you could imagine. Thank you. To my co-supervisor, Professor Brian Levy, I am greatly indebted. I have been shaped and sharpened by Brian’s long history of grappling with the complexity of development, his intellectual acuity and passion for thinking accurately about these matters. Brian, thank you for the conversations through the years that I have so enjoyed and your extensive input on the project, especially your line early on in the process: “I want you to have sleepless nights over your question. Work out the question. Everything else follows.” Sleepless nights there have been! To my Mom, Debra, and my Dad, Euan, thank you for your unconditional love and support for me. You have encouraged me endlessly and never tired of me rambling on about the curious curse of oil. Mom and Dad, you have provided for me in more ways than a son could hope for; v more than anything, in pointing me to the Lord Jesus. Thank you. To my sister, Catherine, thank you for being the best little sister a brother could wish for. I am so proud of you, and very grateful for your support, prayer, and love through this journey. To my extraordinary wife, Blythe, and our two precious children, Caleb and Anna, this doctorate belongs as much to the three of you as it does to me. Thank you for the sacrifices that you have made over the last five years for me to complete this project. Blythe, your patience, gentleness, support and encouragement have been more than any husband could hope for. I love you and am ever grateful to God for you. Despite the hardships, you have grown more beautiful in character and appearance over our ten years of marriage. To my editor, Linda Kelly, thank you for the late nights, painstaking reference checking, proofreading and formatting. You have done an outstanding job. To my former colleagues at SAIIA, thank you for enduring this journey with me. I wish to express special thanks to Dr Oladiran Bello, my former programme head at SAIIA who invited me to work with the organisation back in 2013 and encouraged me to pursue this PhD. Dr Bello, thank you also for the invaluable comments that you offered on a chapter (most of which was ultimately discarded!) that shaped the tenor of the dissertation. To our friends and extended family, thank you for looking after my family so well while I’ve been on this sojourn. God has blessed me and Blythe with an amazing community to do life with, especially through Jubilee Community Church. Friends, you know who you are, thank you for praying for me faithfully all these years. For all these blessings, I am humbled and deeply grateful. Lastly, I wish to thank SAIIA for granting me annual interest-free loans to fund the thesis, and for granting me sufficient sabbatical leave to finish it. vi Abbreviations AD Alliance for Democracy AFRC Armed Forces Ruling Council AG Action Group ANOCs Asian National Oil Companies ANPP All Nigeria People’s Party APC All Progressives Congress APP All People’s Party CIF Chinese International Fund CNOOC Chinese National Offshore Oil Company COMD Crude Oil Marketing Division CSIH China Sonangol International Holding Ltd. DCA Domestic Crude Allocation FAA Forças Armadas de Angola (Armed Forces of Angola) FAPLA Forças Armadas Populares de Libertação de Angola FMG Federal Military Government FNLA Frente Nacional de Libertação de Angola GDP Gross Domestic Product IMF International Monetary Fund ING Interim National Government IOCs International Oil Companies KNOC Korean National Oil Company LAO Limited Access Order LCVs