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John Daly

John Daly

Dr. John C.K. Daly is the chief analyst for Oilprice.com, Dr. Daly received his Ph.D. in 1986 from the School of Slavonic and East European…

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Is Nigeria to become Africa's next failed nation-state?

By any yardstick, Nigeria, Africa’s most populous nation, should be black Africa’s glittering success story.

A member of the Organization of Petroleum Exporting Countries, producing 2.5 million barrels per day (bpd), making it Africa’s largest oil exporter and the world’s 14th largest oil producer. With oil running at roughly $100 per barrel, that generates $250 million in income per day, or $19.25 billion annually, give or take a few naira, probably more, as Nigeria regularly evades its OPEC quotas.

Such oil revenues should provide more than a modicum of prosperity for Nigeria’s 160 million citizens. The country’s oil sector provides 95 percent of Nigeria’s foreign exchange earnings and about 80 percent of the government’s budgetary revenues.

But in reality, more than half of Nigerians, about 57 percent, lives below the poverty line on less than $1 a day.

As for where the billions in oil revenue has gone, its disappeared down the rathole of systematic corruption,

According to the United Nations Office on Drugs and crime, of the roughly Nigeria $1 trillion the country’s energy sector has earned since independence in 1960, between 1960 and 1999 roughly $400 billion was stolen. Former Nigerian President Sani Abacha alone is estimated to have stolen the equivalent of 2 - 3 per cent of the country's gross domestic product (GDP) for every year of the five years that he was President.

Now, a perfect storm of crises, many self-inflicted, is threatening to overwhelm the administration of President Goodluck Jonathan, of which at least one is self-inflicted. The implications for Jonathan’s embattled regime extend far beyond Nigeria.

The first self-inflicted wound.

Implementing a course of action long urged upon him by the International Monetary Fund, On New Year’s Day Nigerian President Goodluck Jonathan directed his administration immediately to end fuel subsidies, which had the effect of immediately doubling the cost of fuel. Jonathan’s government maintained that it took the action because in 2011 fuel subsidies cost more than $8 billion and that the revenue was needed to improve the country's ramshackle infrastructure.

The public’s response was immediate, as many Nigerians saw the subsidies as their sole benefit from the country’s energy riches. Strikes exploded across the nation until the Jonathan administration partially reversed course, compromising on his policy after more than a week of protests and strikes by reducing petrol prices by about 30 percent.

But the damage was done, faith in the Jonathan administration and the prices of commodities that depended on gasoline for transport, such as food, skyrocketed and have yet to decline, further fueling public anger.

But Jonathan administration is also grappling with a rising Islamic insurgency in the country’s north. Nigeria is still feeling the consequences of the government's attempt to destroy the Islamic militant Boko Haram group in 2009, the year before President Jonathan assumed power. During the campaign Boko Haram's headquarters in the Borno state capital Maiduguri was destroyed and their founder and leader Muhammad Yusuf captured and then killed in custody.  After hundreds of members of the group died during the campaign, its survivors have been attacking government targets in retaliation ever since as the Jonathan administration has continued to try and quell the movement.

In consequence, on 20 January the northern city of Kano was shaken by more than 20 explosions occurring at eight locations, including police and immigration offices, which police said involved five suicide bombers, as well as widespread shootings and gun battles. Latest estimates of the death toll are at least 184 people, the vast majority of them civilians.

The Islamist militant sect Boko Haram claimed responsibility for the carnage.

Is the turmoil likely to end soon? On 23 January police in Kano discovered 10 car bombs and hundreds of other unexploded devices.

What does Boko Haram want? The organization has said that it is fighting to implement strict Islamic Sharia law across Nigeria, something that is hardly likely to sit well with the nation’s Christians, estimated to be 40 percent of the nation’s population, as opposed to the 50 percent who profess Islam.

There is an increasing clamor among Africa’s educated populace for the Jonathan administration to take prompt action to clean up the country’s hydrocarbon sector. Kenyan journalist Chege Mbitiru wrote in “The Nation,” “Nigerian President Goodluck Jonathan is treating the country’s corruption- infested and notoriously inefficient oil industry as a voodoo surgeon would a gangrened leg: sprinkling herbs instead of amputating.”

The anger and fear created by Boko Haram's random and deadly bombings are being superheated by the demoralizing inflation caused by the removal of the petrol price subsidy and the government’s half-hearted attempt to quell populist anger resulting from it.

In discussing the threat posed by Boko Haram, Nigerian Defense Minister Bello Haliru Mohammed told the BBC during an interview, "We are in a position now like the United States was in after 9/11."

Haliru did not even mention the unrest on Nigeria’s oil-rich delta, where members of the Movement for the Emancipation of the Niger Delta (MEND) have also been battling government forces for many years over what it regards as its unjust oil policies.

In such a situation the Jonathan administration should reorder its priorities, seeking a solution to the Boko Haram debacle before it spreads and forcefully tackling five decades of entrenched corruption.

To continue to inflict pain on Nigeria’s poor by removing fuels is to throw fuel on the already raging fire and if the Jonathan administration continues in its misplaced priorities, then all the herbs in Nigeria may not prevent the gangrene from reaching the capital.

By. John C.K. Daly of Oilprice.com




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  • Simon on January 25 2012 said:
    Your maths has gome awry - the total income is $91bn but spread over $160m people that comes to $570 per year or $1.5 a day, so its not surprising half the population live on less than $1 a day. If you applied the income / population profiles of the US or UK to Nigerias income and population I dont imagine much would change in terms of the % on
  • Obodo on February 15 2012 said:
    What the world does not seem to realize is that Nigeria is already a failed state. Over many years successive governments have helped themselves to easy oil revenues and provided little of substance to Nigerian people in the way of infrastructure or services.

    Today Nigeria despite 12 years of so-called democracy during which it has earned roughly around $300 billion dollars has roads worse than in war-torn countries, non-existent water supply, a collapsing electric grid and pathetically equipped and funded schools and hospitals.

    Consequently Nigeria has legions of jobless and poorly educated urban youth scrambling for a living in cities that resemble primeval hell holes. Its not a wonder that militant group have readymade soldiers to extort and battle an effectively weak state. Both MEND and Boko Haram are just the beginning and are using conventional terrorist tactics from cutting oil pipelines, kidnapping workers to creating car bombs.

    So what keeps Nigeria together? Oil prices. High oil prices today continue to maintain a toxic marriage where politicians of the major ethnic groups collude to fleece the center while denying the masses essential services. Eventually when oil prices collapse, either the politics of Nigeria will break down where the ethnic groups negotiate a separation or the lawlessness of the country will consume its looting elite. Both scenarios are not that far off from all indications. Boko Haram underscores the sentiment of the Hausa ethnic elite while MEND suggest the dangers of private militia groups.
  • Adenrele on August 29 2012 said:
    Nigeria is a failed state, and, humanly speaking, there is no hope for that country. None.
    As it stands now, corruption is cultural in Nigeria. Every fabric, every facet, every nook, crany and corner of Nigeria is submerged in rampant corruption. There is nothing you can get done in Nigeria without getting corrupted. Nothing.
    In an environment like that, nothing can and will work. The only solution to Nigeria's corruption is it's people, not the government, but it's people. Until the people demand a change in the way they do business, nothing will change. I agree with another reviewer that oil has something to do with Nigeria's continuing corruption. The greatest blessing on that country, contrary to what was initially thought, is not oil, but oil depletion, or a prolonged collapse of oil prices.
    For, with the absence of easy oil money, the government will be forced to impose significant amount of taxes on the people. In turn, taxes will force the people to hold their government accountable.
    Until then, Nigeria will continue to celebrate the survival of the most corrupt.

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