Nigeria’s Oil Rich Region: A Time Bomb

Published on 20th March 2007

The pendulum, powered by ethnic and political rivalry, has been swinging and beating the drums of instability, uncertainty and sad chaos in Nigeria. This is evidently demonstrated in the oil rich Niger Delta. The youths in the area operate under various groups. The most prominent is the Movement for the Emancipation of the Niger-Delta (MEND).

The group's objectives are to fight the purported environmental degradation in which they name oil companies as potential culprits. They also maintain that the federal revenue allocation is skewed against the region and demand that the current 13 percent revenue derivation principles be reviewed.

However, Nigeria information minister, Mr. Nweke Jnr, recently justified the discontent of the militants and the host communities. He said oil companies have not been living up to their social responsibilities. He noted that expatriates live in luxury and fly helicopters while their hosts experience persistent poverty, increasing inequalities and deteriorating living conditions.

While the honorable minister has listed reasons for the continued hostility to oil companies and their staff, he has failed to mention what happened to money disbursed by several administrations under the auspices of Niger Delta Development Commission, meant to ameliorate the suffering of the people in the area. Recently, Nigeria anti-graft agency chairman, Nuhu Ribadu, said the Niger Delta crisis has a direct relationship with mass corruption.

Rather than make oil companies culprits, the honorable minister ought to have designed an appropriate policy framework on how the people in the region can be made direct co-owners of the resources found within their communities. Such a policy would go a long way in stemming the persistent crisis in the region.

The crisis has taken many turns: the murder of several people including 13 traditional rulers, increased violence, kidnappings, hostage taking and attacks on oil installations leading to call for shut down of production facilities.

The militants take hostages and demand ransoms before their victims are released. In January, heavily armed militants seized nine Koreans and one Nigerian. The militants also held nine Chinese expatriates hostage just as many Filipinos became their guests.

A lot of foreign workers and professionals are consequently emigrating from the troubled zones. Oil exploration and production is getting grounded as some firms pull out of Nigeria. Recently, the Filipino government told its citizens to steer clear of the region. Willbros Group Incorporated has sold its Nigeria subsidiary to Ascot Offshore Nigeria Limited.

The pullout due to the unrest practically ended four decades of business deals. These are enough disincentives to would be investors. This, no doubt, reverses the ongoing reform in the oil sector. It also partly explains why 18 private refineries licensed some years ago have not been able to commence operations to date.

Over $4.75 billion has been lost to the crisis. For instance, between 1999 and 2003, an estimated $30billion was lost to communal unrest and theft of oil in the Niger Delta. The oil stolen was estimated at $8.5 million daily.Each time there is disruption in production, Nigeria losses about $6.8 million. These funds would have paid off Nigeria’s internal and external debt.

There are indications that the hostility in the region may not be limited to the Niger Delta. Quite recently, the militants vowed to extend hostilities beyond the area. This might create a dangerous scenario. Millions of unemployed and disillusioned youths might easily be enticed to cause a breach of public peace in large magnitudes. Consequently, anarchy may set in and economic activities grounded to a halt.

To really address the crisis and bring it to a halt, the government is usually well disposed to the use of its military might. This should, by now, be the last option on the table. Recently, a story credited to the Vice President Atiku Abubakar, alleged that the Nigeria government had approved $2 billion to procure arms to curtail violence in Niger Delta.Should this be true, it would be a counterproductive measure because it does not address the direct cause of conflict. In fact, it might even aggravate the existing fragile peace in the area, leaving sufficient resentment in the population to trigger further conflicts.

It is necessary to affirm and uphold the ruling of the Supreme Court that the present 13 percent derivation be reviewed upward without necessarily amending the 1999 Constitution. This is to be able to rebuild the oil-rich zone which has suffered environmental degradation due to neglect for a long time.

However, many are quick to say oil firms operating in Nigeria are raking in huge profits. That is what is seen. Making profit is good for business and the economy in general. What is not seen is the amount of capital that oil firms injected to the business which must be recouped. Interestingly, many oil companies have embarked on laudable projects aimed at empowering their host communities. They can also complement their efforts by offering employment to qualified youths in the area.

While this would go a long way in addressing the root cause of the crisis, what is actually necessary is to bring about a policy framework under which every citizen of oil producing community is entitled to a share of oil revenue at the end of the year. This would definitely create the sense of belonging among the oil producing communities and reduce drastically cases of vandalization of oil installations and above all the seemingly unending crisis in the region

First published in The Enterprise, Number 4, February 2007

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