Inflation sky high, social budget cuts, investment dropping, unemployment growing. The consequences of the collapse in the price of oil could be “devastating” for Nigeria, Africa’s giant which will go to the polls on the 28 March. We talked with Sunny Ofehe, editor-in-chief of Inside Niger Delta.
Nigeria depends on oil. What could the long and short term consequences of the collapse in the price of oil be?
Nigeria is the world’s eighth exporter of oil, which accounts for over 90% of foreign exchange earnings. The hydrocarbons sector alone accounts for 40% of the Gross Domestic Product (GDP). This is why the collapse in crude prices will undoubtedly have devastating consequences on the economy. With oil at less than $50 a barrel, the government has been forced to review the 2015 budget and capital expenditure. Interest rates will sky-rocket, people will be laid off and unemployment will rise, due also to the drop in investments in the hydrocarbon sector. Royal Dutch Shell, the main oil multinational in Nigeria, said it will cut $15 billion of investment over the next three years. This cut will involve cancelling and deferring projects through 2017, which would represent a 14 percent cut per year. And this is just the start. The consequences will already be felt in this election period. The economic collapse and wide insecurity will have an impact on the March 28 vote.
As the elections approach, the government of President Goodluck Jonathan must convince both the Nigerian people and foreign investors that its economic policies will be able to limit the damages. Then there is Venezuela: an OPEC member nation also, like Nigeria largely dependent on oil, which has entered into recession too. Until recently, Abuja provided 10% of US oil imports. The discovery and exploitation of shale oil has however drastically reduced Nigerian oil demand. Analysts in fact predict a further drop in price. Abuja will therefore have to adopt austerity measures and diversify the economy, opening more to agriculture and manufacturing. In the long term, the challenge will be to overcome the budget deficit and the consequences of the devaluation of the naira to the dollar. This, with the awareness that it cannot count on help from the West, with the US in slow recovery and recession in key European nations.
Nigeria’s naira fell to 190 to the dollar, a record low for the national currency. What does this mean for Nigerians? And for the political scene?
Nigerians will need to prepare for public spending cuts and the higher cost of living, inevitably sparked by the rising costs of goods and services. The collapse in oil shares forced the Central Bank to devalue the naira, which in turn caused an astronomic hike in price of imported goods, with consequential inflation. Ahead of the elections, politicians acquired as many dollars as possible. While in theory the devaluation of the naira should have affected them, in reality they were spared by the immense wealth accumulated through corruption or by squandering resources destined to public interest projects. The fact that they were spared can easily be seen by the amounts of money spent in the primary elections: sums that make it difficult to even see that Nigeria is facing economic difficulties!
What are the differences in economic policies in the election agendas?
In Nigeria it is different with respect to European or North American democracies, where parties are founded around principles or ideologies, with the right, left, liberals and conservatives. I have so far not seen any clear agenda of the candidates. The manifestos of the ruling party and main opposition are very similar. The same promises are heard at every rally: from more reliable electric power supply to better roads, and a more determined fight against corruption. The only true distinction between Jonathan and his main challenger, Muhammadu Buhari, is that the first is a civilian and the second military.
Nigeria is a very complicated nation in regard to ethnic or religious belonging. These elements play a key role in every election. This is the reason why candidates choose their allies and deputies based largely on their region of origin and religion. A joint candidature of two Muslims would not obtain unanimous backing. A Muslim almost always chooses to run alongside a Christian and vice-versa. The same applies for regional origin, with the preference of north-south alliances. Buhari chose as deputy a Christian from the south, while Jonathan a Muslim from the north. The President is backed by a majority of the Delta populations, because it is his region of origin. Former armed militants, such as Alhaji Asari Dokubo, Tompolo and Boyloaf, even threatened to create unrest and block oil production if Jonathan is not confirmed. In reality, the successes obtained by the MEND (Movement for the Emancipation of the Niger Delta) between 2006 and 2009 are not repeatable. Over the past three years, the army’s Joint Task Force has seized strategic posts along the rivers, once strongholds of the militants. The former militants would actually never return to combat: they made money thanks to the government amnesty programme. In Buhari’s case, in his campaign he repeatedly vowed that if elected he would resolve the problems of the Delta communities. If he keeps his word, any destabilization attempts would not be backed by the population”.
The US is no longer Nigeria’s top oil importer, with India and China now in the lead. How are relations changing between Washington and Abuja? Deterioration in relations, primarily on an intelligence and military level…
There is tension, it is true. Many in Nigeria attribute this to an orientation more toward China by Jonathan’s administration on both an economic level and in trade. In regard to military cooperation, Abuja recently announced the cancellation of joint exercises, while the US banned the sale of military equipment to Nigeria for the fight against Boko Haram. But the Islamist group doesn’t represent only a threat to Nigeria, where thousands of people have been killed, but to the entire Sub-Saharan area and world as a whole. Nigeria today needs help from the international community, not sanctions. Like Israel and Russia, also the US and Europe should support the nation militarily. It must not be forgotten that Nigeria headed many peacekeeping operations, such as in Liberia and Sierra Leone, nations that today are democratic and politically stable. Now Nigeria is threatened. World powers must not play political games while Christians, Muslims and ordinary citizens are being assassinated each day. There is a humanitarian crisis. Thousands of people have been forced from their homes, often seeking refuge over the national borders. (V.G.)