Civil unrest in the Niger Delta has increased since the conclusion of Nigeria’s controversial presidential election on April 21, 2007. In addition to civil unrest associated with the presidential election, militants have escalated attacks on foreign oil companies operating in the Niger Delta region. These civil protests and militant attacks have cut oil output by 740,000 barrels per day (bpd).
Protests Used as Negotiating Tactic
The first large-scale protest occurred on May 10, 2007, when protestors occupied a major oil pipeline hub of Royal Dutch Shell to denounce the company’s operating procedures. Niger Delta communities have longed accused foreign oil companies of “stealing” their natural resources, while failing to provide adequate compensation for production rights or reinvestment into the communities they “exploit.”
In addition, local communities accuse foreign oil companies of knowingly damaging the local ecosystem through questionable production procedures and lax safety measures. The protesters left the pipeline hub on May 16, 2007, after tribal elders negotiated with Royal Dutch Shell.
The second major protest began on May 24, 2007, when oil workers employed by Nigerian owned oil companies went on strike to demand an increase in benefits. The strike ended two days later after the government agreed to an increase in wages of 15 percent. The government also agreed to maintain a majority of shares in national oil companies. State-owned oil company employees feared the recent sale of a 210,000 barrels per day Port Harcourt oil refinery to Chinese investors for US $561 million was the first in a series of future sell-offs.
More Protests Likely
A series of protests were planned for May 29, 2007, when President-elect Umaru Yar’Adua was inaugurated. However, the government mitigated the protests by declaring a national holiday. Some small protests occurred in Lagos, but were not severe. Protestors were arrested during a rally that had marchers carrying a mock coffin of outgoing President Olusegun Obasanjo. During the rally, many participants also said they were mourning the death of democracy in Nigeria, as a means to protest the controversial election results.
Trade unions had called for a two-day strike to protest alleged electoral fraud, but these protests received little public support. As the presidential election results face continued judicial challenges—the two main opposition candidates have challenged the election results in court—public response could intensify and erupt into further public displays of protests and violence.
Additional union strikes could also occur in the coming weeks due to an unexpected 15 percent increase in gas prices that will take effect.
Future Concerns
We remain concerned that local populations will increasingly seek to occupy foreign oil company productions in the Niger Delta in protest over their operations. These disruptions can negatively impact the global oil markets, curtailing significant production capabilities in the Niger Delta and increasing global crude oil prices.
Attacks by militants belonging to the Movement for the Emancipation of the Niger Delta (MEND) have eliminated nearly 740,000 bpd of production, from a 2.5 million per day capacity. A May 8, 2007, bombing of three oil pipelines belonging to an Italian oil company operating in the Niger Delta Region temporarily halted production of a 150,000 bpd export terminal (Attack). Such attacks disrupt the oil supply and reduce operating capabilities as a whole. We believe these attacks will continue in the near-term, as they have proven effective in disrupting oil ventures in the region.
Civil and political unrest in combination with increasing militant activity in the Niger Delta will continue to degrade Nigeria’s oil industry, eliminating significant oil revenue while simultaneously discouraging long-term foreign investment in the country.
