Nigeria allegedly lost as much as $100 billion in revenue last year as attacks by militants in the oil-rich Niger Delta cut crude output to a record low. ‘Production fell by 1M to 1.2M barrels a day at the peak of the attacks,’ Emmanuel Kachikwu, minister of state for petroleum, said Tuesday in a video clip on his Facebook page. This resurgence of armed conflict in the delta last year, combined with lower oil prices, blighted the economy and Nigeria suffered its first full year of recession since 1991. While recent peace efforts have curbed the frequency of attacks on oil infrastructure, the West African nation has struggled to boost output as one of its largest export terminals remains closed. “We continue to engage,” Kachikwu said; referring to peace talks between the government and local leaders from the delta. “It is a difficult undertaking to try to embark on trying to resolve it once and for all, but we’re very bullish about this.” So it was, that on February 15, Kachikwu told the House of Representatives Committee on Petroleum Resources (Upstream) that crude oil production had risen to 2M barrels per day. This means the country now produces an additional 200,000 barrels per day, up from the 1.8 million bpd recorded in recent times.
The Federal Government may have made a u-turn in its Niger Delta policy by announcing an intention to work with illegal oil refiners. Acting President Yemi Osinbajo said during a visit to Rivers that Nigeria needs to provide work for people who make a living from the illegal refining of oil in the Niger Delta in order to achieve peace. “Our approach to that is that we must engage them (illegal refiners) by establishing modular refineries so that they can participate in legal refineries. We have recognised that young men must be properly engaged,” he said, without giving details. He also said that the government will make additional provisions for the amnesty scheme for former militants who laid down arms in 2009 in exchange for cash stipends and job training. Illegal refining is one of the few businesses flourishing in an otherwise poor region, as petrol is scarce due to the country’s derelict state refineries. Authorities had originally cut the budget for cash payments to militants to end corruption but later resumed payments to stop surging pipeline attacks crippling vital oil revenues.
Nigeria’s military on February 9 said seven of its soldiers were killed and 19 others injured in a Boko Haram ambush. This is the latest incident against troops and the security services in the country’s north-east. Lieutenant Colonel Kingsley Samuel, a spokesman for the Nigerian Army 7th Division in Maiduguri, said the ambush happened on Thursday evening on the road to Dikwa during ‘routine rotation’ of troops. “The gallant troops fought their way through, killing many of the terrorists. Unfortunately, seven soldiers paid the supreme price… while 19 soldiers sustained various degrees of injuries,” he said in a statement. A military source told AFP that at least eight soldiers were killed in the attack and that it happened at about 9:00 am (0800 GMT) on Friday at Ajirin village, in the Mafa area of Borno state. A civilian vigilante involved in helping the military with security in the region also confirmed the account but said as many as 10 soldiers may have been killed. At least 20,000 people have been killed in the Boko Haram conflict since it began in 2009. More than 2.6 million have been made homeless.
Soldiers have reportedly sacked six villages in the Agatu Local Government Area of Benue State, killing six persons, including a pregnant woman, following the killing of a soldier by youths in the area. The Punch cites sources from Agatu who said that six villages — Olegadakolo, Ikpele, Otugologwu, Iwali, Okpanchenyi and Egba — were sacked by soldiers on the weekend of February 10 to 12. The paper further stated that a pregnant woman in Egba community was hit by a stray bullet. The council’s sole administrator, Mike Inalegwu, denied the killing of people in Agatu communities but admitted to the increased security presence. The military also contradicted the report. Brigade Commander of the 707 Special Force, Brig. Clement Apere, denied that soldiers attacked the people and that only one person was arrested. “The operation we conducted in the area was carried out in a professional way,” he said.
The World Bank has agreed to give Nigeria a $2.5 billion loan to support the budget. According to a tweet by Business Day, the first tranche of $1.5 billion will be released following forex reforms by the Central Bank of Nigeria. The federal government has been in talks with the bank, for this loan, for over one year. After a meeting with executives of the bank in Washington DC in May 2016, Kemi Adeosun, Nigeria’s minister of finance said the loan was required to bridge the ₦1.8 trillion deficit in the budget and fund some infrastructural projects. “We had discussions with the World Bank around our budget support request and we have been able to have very productive meetings to understand what the next steps are in the process and we are very positive of a good outcome,” she had said. The country, however, appears not to have decided yet how much it wants to borrow from the World Bank. According to the budget and national planning minister; “we are waiting for the passage of the budget by the National Assembly so that we will know the budget gap or the actual deficit before we can go to the World Bank for a loan.”
- OPEC, in its monthly Oil Market Report for February 2017, put crude oil production from Nigeria at 1.604M barrels per day in January. This is an improvement on the 1.37M bpd which we recorded in January, based on direct self-reporting. Production from Angola stood at 1.615 mbpd in January, down from the 1.639 mbpd it closed at last year. This implies that we have lost that top oil producer in Africa status which makes our government officials ecstatic but more worrying, is the problem of simple mathematics. Kachikwu’s figure makes no sense. Nigeria’s budget for 2016 was roughly $30 billion. If we’d had a really good year based on an assumption of $38 per barrel and 2.2 million barrels production per day, then from oil production, we’d have made about $30.514 billion. Removing the royalties, which is roughly 35% of revenues, the best we could have made from oil in a good 2016 would have been $19.834 billion. And one is yet to discount the cost of production… No, either the oil minister’s calculator or his arithmetic, must be faulty.
- The Vice President’s visit to the Niger Delta states is more than welcome. We have in the past talked about how important it is for the government to continually engage the region. We find the proposal to legalise modular refineries heart-warming. First, the continuous destruction of those refineries has contributed, in no small measure, to further polluting an already devastated environment. But, a note of warning – the authorities must enact, and ensure that modular refinery operators adhere to strict environmental guidelines. Also, a change in their economic model from refining stolen crude to refining purchased crude will lead to a bit of upheaval in the practice. If this transition is managed well, it will mean additional revenue for the government, crude oil producers, and the people of the region. Plus extra protection for the environment creates a win for all concerned. This is a win-win situation if followed through.
- There have been rumours of a fresh attack in Baga, also in Borno, this week. Conflicting death tolls and accounts are not uncommon in a region renowned both for its remoteness, and the fact that access is strictly controlled by the military and government thus making independent verification of news difficult. While the reported attack in Baga remains as yet unconfirmed, the Mafa attack points to an increased boldness on the part of a rejuvenated Boko Haram willing to directly confront the military on its own terms. This is a worrying turn in the fight to end a bloody and costly insurgency. The influx of hardened fighters from the Sahel and Libya has bolstered the ranks of the insurgents. We urge the government to face this threat squarely before it escalates further.
- In many previous versions of this weekly editorial, and in some of our special reports, we have warned that more communities will take the option of self-help. Our military authorities and the government, need to learn that perception is far more important than reality, and countless denials will not solve the problem of dwindling trust, which leads to the self-help option becoming more attractive to various peoples. Information from SBM assets indicates that the incident which led to the alleged retaliation by the soldiers was a disarmament exercise gone wrong. It went wrong because the community, rightly or wrongly, believed that the army planned to disarm them, in order to pave the way for another attack, almost a year after the Agatu Massacre, for which no one has been brought to justice. The way forward is to solve last year’s mass-murder, before attempting to impose a seemingly one-sided peace on the population.
- After almost two years in office, the Buhari administration is yet to embark on the huge stimulus spending it promised Nigerians during the campaign. Since inauguration, government spending has dwindled on the back of the oil price drop and production decline. 2016 was a poor year but the government does appear set for 2017 having finally passed the MTEF and secured some funding. However, unlike the previous government which had a coordinating minister for the economy, this government appears to lack such coordination leading to a seeming disarray in communicating simple economic issues. The World Bank loan is contingent on reforms in the exchange rate policy of the government, while IMF loans have been tied to submitting an economic plan that is largely reform driven. The message is clear: Nigeria will need to reform and show policy seriousness before it can access concessionary multilateral financing.