Upcoming Election is a Lose-Lose for Nigerian Oil

on March 27, 2015 at 11:00 AM

shutterstock_197621093Continued low oil prices keep the leaders of many oil-producing states awake at night, but few feel the pressure as keenly as Nigerian authorities. Dienzani Alison-Madueke, Nigeria’s oil minister and current OPEC president, pled for an emergency meeting to discuss oil production cuts last month. Though such a meeting is unlikely to occur, Alison-Madueke’s proposed cuts might just come from Nigeria itself.

Nigeria’s postponed presidential elections are now just days away, and volatility is all but guaranteed. Falling oil prices, corruption, and multiple insurgencies will disrupt Nigeria’s oil industry no matter which candidate wins the March 28th race.

Outlined here are three potential outcomes for the Nigerian election.

The first scenario is that current president Goodluck Jonathan is re-elected, in spite of electoral fraud suspicions. These suspicions are already widely circulating – even if Jonathan reclaims office, he must confront accusations of an illegitimate voting process. The Nigerian public is rightfully frustrated with Jonathan, whose military campaigns against Boko Haram have failed so badly that some have accused him of colluding with the insurgency. Boko Haram violence continues unabated in the north, in spite of Jonathan’s assertions that voter security is a top priority for the upcoming ballot casting. On Tuesday, nearly 500 schoolchildren went missing from the Damasak region, presumed victims of the militants.

If Jonathan continues for another term, it may or may not be business as usual for Nigeria. Boko Haram will continue to oppose Abuja in an attempt to unseat the secular government and install an Islamic caliphate in its stead. Emboldened by Jonathan’s failures, Boko Haram has also made threats against the oilfields and energy infrastructure. Cutting off the Nigerian government’s economic lifeline would be a symbolic and devastating victory for Boko Haram.

The second scenario is that General Muhammadu Buhari is elected to the presidency, finally succeeding in his presidential bid after three consecutive attempts. Buhari has already promised a more hard-hitting approach to wiping out Boko Haram, though some have accused the Muslim candidate of planning a Sharia law regime.

Should Buhari be successful, a resurgent MEND militancy might very well re-launch violence against Nigeria’s oilfields. MEND has sought control of Nigeria’s oil infrastructure in the Niger Delta by bombing pipelines and kidnapping oilfield workers. Long supportive of Jonathan, MEND has threatened increased attacks in southern Nigeria should Buhari claim the presidency.

YEAR-2008 Fighters with the Movement for

Fighters with the Movement for the Emancipation of the Niger Delta (MEND) raise their riffles to celebrate news of a successful operation by their colleagues against the Nigerian army in the Niger Delta on September 17, 2008. MEND has declared a full-scale “oil war” against the Nigerian authorities in response to attacks by the Nigerian military launched against the militants. “Our target is to crumble the oil installations in order to force the government to a round table to solve the problem once and for all”, said Boy Loaf, leader of the militants. AFP PHOTO/PIUS UTOMI EKPEI (Photo credit should read PIUS UTOMI EKPEI/AFP/Getty Images)

The third scenario is both the most troublesome and the most likely. In lieu of a decisive victory by either candidate, the results of the election may not be widely accepted. Broad evidence of electoral fraud, ballot rigging, and voter intimidation could lead to a rejection of the election results by the general public. Alternatively, either Jonathan or Buhari may outright reject the victory of the opposing candidate, refusing to admit defeat after hard-fought campaigns.

If either candidate refuses to back down, we need look no further than nearby Libya to assess the failure of a governmental system in which two rival administrations claim authority. In the absence of centralized control, Libyan militant groups professing allegiance to ISIS have swept into the void. Intense confrontation in the oilfield regions has completely knocked Libya’s production capability offline. It is not difficult to envision a similar situation in Nigeria, as Boko Haram and MEND already have strong incentives to attack oil infrastructure. Given that Boko Haram has recently pledged allegiance to ISIS, the insurgency may already be considering how to use Nigeria’s crude to support the ISIS cause.

Sadly, with a glut of oil on the market, it is questionable whether fellow OPEC states will particularly care about a disruption in Nigerian oil operations. Wealthier OPEC nations and oil-exporting states might benefit from slightly higher prices should domestic instability or declaration of a “force majeure” cut into Nigeria’s oil production. Even the United States has little reason to become involved in Nigerian production cuts, given that shale energy has completely supplanted all oil imports from Nigeria that were recently as high as 1 million barrels per day.

eia nigeria crude imports

Regardless of election outcomes, the outlook for Nigeria appears bleak. Falling oil prices drastically cut into the government’s ability to combat Boko Haram and MEND insurgencies. The incoming president must make difficult decisions about how to divide smaller oil revenues among military and police forces that are already thinly stretched. Public dissatisfaction with the military’s poor track record and accusations of widespread human rights abuses by Nigerian forces will likely worsen. Accusations of election fraud will endure, leaving the Nigerian public resentful and intensifying political rivalries between the Christian South and the Muslim North. Continued violence and threats will discourage foreign investment prospects already turned off by low potential profits. Indeed, Shell has announced a huge divestment program in its Nigerian operations, citing concerns about fiscal stability and security for Shell workers.

Nigerian oil minister Dienzani Alison-Madueke correctly assumes that Nigeria can’t count on OPEC to rescue the country’s increasingly shaky oil industry. At this point, it seems unlikely that Nigeria can even rescue itself. With no good election outcome in sight, it may only be a matter of days before Nigeria’s future as a significant oil producer slips completely out of reach.

Kirstin Berndt is a graduate student at the NYU Center for Global Affairs, where she focuses her research on the geopolitics of energy and transnational security. She holds a B.A. from UC Berkeley and is a U.S. Army veteran.

Photo credit: Shutterstock