Nigerian Oil Region Crisis Threatens Buhari’s Economic Plans

SEATTLE (Oil Monster): Fresh from his comfortable re-election, Nigerian President Muhammadu Buhari faces a huge hurdle to keep his vow to end the economy’s addiction to oil: win a lasting peace in the crude-rich Niger River delta.

The 76-year-old former military ruler will have to score a breakthrough that’s eluded previous governments in an area where armed groups and thieves pose a constant threat to the flow of crude. To carry out his plans to develop a backbone of stable power, roads and rail lines for agricultural expansion and industrialization in Africa’s most-populous nation, Buhari needs all the money he can get from oil, the source of two-thirds of government revenue.

“Oil revenue is still what dictates government spending and they will need to keep production going,” said Jubril Kareem, a Lagos-based analyst at Ecobank Energy Research. “Buhari has to be very smart in handling the situation because any disruptions will impact government revenue.”

While armed assaults in the region have eased, sabotage, protests and crude theft for local refining and sale to rogue vessels offshore are undermining Africa’s biggest oil industry.

Exports still haven’t recovered from militant attacks in 2016 that at one point slashed by as much as half the West African nation’s exports and combined with lower oil prices to push the economy into its first contraction in 25 years.

Improving oil flows will require dismantling what Ledum Mitee, a minority rights activist in the delta, calls a “rogue economy” in the area. And Buhari is operating in hostile political terrain. In the presidential elections, he lost in the region to Atiku Abubakar, who’d promised to relinquish some federal control over oil resources if elected.

“While the militancy went down, there was an increase in artisanal refining and crude theft,” Mitee said. “At last count, that industry was employing about half a million youths in the Niger delta.”

Today Royal Dutch Shell Plc’s Nigerian unit and other operators of onshore pipelines face frequent breaches, with the key terminals of Bonny and Forcados often unable to meet export commitments.

The government has failed to meet its revenue targets in the past three years mainly due to lower-than-expected crude volumes, with only about 52 percent of expected income for 2018 realized by August, according to Finance Minister Zainab Ahmed.

Courtesy: www.bloomberg.com