In the past, violence in the Niger Delta has hurt production and fueled a spike in global oil prices. While there was plenty of anxiety about post-presidential election unrest, calm prevailed. And the Niger Delta has taken second fiddle to Nigeria’s Northern front, where the Islamist terror group Boko Haram has kidnapped or murdered thousands and captured territory.
But oil revenue, on which Nigeria’s economy relies, may not recover soon. Can the new president from the north, Muhammadu Buhari, who is known as a forceful general who ruled the country following a military coup, bridge the divide? In his acceptance speech, Buhari pointed to the dual scourges of corruption and Boko Haram, and vowed to battle them. The peaceful transfer of power from the longtime governance of President Goodluck Jonathan, who is from the south, has surprised many.
- Associated Press
- Nigerian President-elect Muhammadu Buhari.
With this backdrop, some reading on Nigeria’s oil history:
A free Google book collecting academic thought on the subject , “Fresh Dimensions on the Niger Delta Crisis of Nigeria,” edited by Victor Ojakorotu and published in 2009 by IASS.org, includes chapters on: “From Political Mercenarism to Militias The Political Origin of Niger,” “Niger Delta Ruling Elite and the Under Development of the Niger,” and “Standoff between Shell and the Ogoni Turnaround Strategy.” The intro notes the big oil discoveries of the 1950s, which transformed Nigeria’s agrarian economy into an energy machine.
“Nigeria’s Delta Is Where Western Oil Giants Meet Local Militants.” The Telegraph, circa 2008, mentions Royal Dutch Shell (RDSA), Chevron (CVX) and ExxonMobil (XOM) operations. In March, Shell completed the sale of oil assets in Nigeria valued at $1.7 billion, Reuters reports. Exxon committed to long-term investing in Nigeria, allAfrica.com reports.
If Boko Haram’s power is obliterated, and oil prices recover at all, power brokers in the southern Niger Delta may take a different tack. For now, troops from neighboring Chad, backed by South African mercenaries, have taken back areas held by Boko Haram in the Northeast, The New York Times reports in its recent post-election feature. The article also says “Human rights abuses against civilians by the Nigerian military have also been disturbingly common, with soldiers killing and detaining residents en masse.” See “Nigerian President-Elect Buhari Sets Out His Agenda.”
From Analyst Andrew Howell at Citi Research, there is more to Nigeria than oil. He observes that Nigerian equities — especially banks — boast attractive valuations, but there’s much risk:
Given the oil price has come off significantly over the past month, from $63 to $55 per barrel, and is just $5 above its 4-year low, this fundamental challenge to the Nigerian outlook remains in place. A dose of austerity is likely to be required of the incoming team, which could complicate the transition. … Relative to its own history and other markets, on trailing and forward multiples, Nigerian equities have rarely been cheaper. The discount is most visible among the banks … As David Cowan has written, [Buhari] faces ‘a relatively stark policy choice: either place further structural reforms at the centre of the economic policy agenda; or succumb to greater political infighting over a much reduced revenue pot. And it is this decision which will likely drive the medium-term growth path for the country.’ “
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