Following attacks on oil installations and facilities in the country, Nigeria’s oil production output has fallen to 20-year lows and slipped behind Angola as the continent’s top oil producer. The attacks are the result of a resurgent militancy in Nigeria’s oil rich Niger-Delta region where a new group, called the Niger Delta Avengers, have taken up arms, attacking pipelines and major installations.
In February, Royal Dutch Shell stopped oil shipments after an attack on a key pipeline which supplies a terminal with an export output of about 250,000 barrels a day. Shell has also been forced to evacuate a major oil field after militants issued threats of an attack. Another oil company, Chevron, shut down a facility costing the country around 90,000 barrels daily after it was “breached by unknown persons”. The attacks have also hit pipelines supplying local refineries and electricity gas lines in the country.
The Niger Delta Avengers group says its goal is to “cripple the Nigeria economy” unless the government accedes to its numerous demands one of which is the immediate clean up of Ogoniland. Another is the continuation of an amnesty programme for militants in the region. In response, Nigeria’s president Buhari has ordered the military to “crush” the group.
The disruption to Nigeria’s production output compounds the country’s woes amid low oil prices. The resource accounts for 70% of Nigeria’s earnings and at a time when the country is trying to fund a record budget deficit, timing could not be worse. Within its shores, Nigeria is still dealing with a fuel shortage crisis, triggered by the government’s insistence on avoiding a devaluation of its currency despite a steep drop against the dollar.
While the state oil company has raised its importation quota to assuage the shortage, the inability of independent importers to access foreign exchange at bank rates—thus making a profit selling at official government prices—has meant the country’s demand can simply not be met. To solve the problem, on Tuesday (May 10), the government announced a total removal of subsidies on petrol, saying marketers are “free to import” petrol subject to existing quality specifications but also set the new price of fuel at N145 ($0.73)—a 68% increase.
The move is reminiscent of a similar decision in 2012 which led to nationwide protests led by the labour union and a total shutdown of the economy. It is too early to tell if the price increase will spark similar reactions from Nigerians but if it, as the government hopes, leads to “increased supply and availability” of the petrol across the country, there will be much less for Nigerians to be angry about.
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