Nigerian Economy: Oil

• Rentier State– State gains the bulk of its revenue by “renting” or

selling a resource to other states.– Received payments are “rents.”

Oil Exports as Percent of Total Export

Percent of Govt’s Total Revenue

1970 58 26

1981 97 70

1993 91 84

2001 98 79

2008 95 80

Oil Economy

• Boom and Bust (similar to Mexico)• 1970s=boom in oil revenues– Borrow money– Finance ambitious projects– Rise in corruption

• 1980s=drop in oil prices– Devastating to economy– Skyrocketing debt

Nigerian DebtTotal External Debt as a Percentage of

GDP

1976 4

1986 110

1996 72

1999 84

2000 97

2002 77

2003 73

2007 5

•IMF and World Bank Bail Out• Impose structural adjustment measures•President Obasanjo: debt relief was a top priority.

“Nigerians Protest Rise in Oil Prices”

• Government removed fuel subsidy.• Nigeria imports 70% of its refined gasoline.• Labor leaders orchestrate a nationwide strike.– Signs of civil society

“Under Pressure, Nigerian Leader Relents on Gas Price.”

• 2013 budget=31 billion (8 billion=25% of budget) • What percentage of Nigerians live on a dollar a day?• Aside from the fact that they would have to pay more

for gas, what else frustrated the Nigerians about the rise in gas prices?

• According to the IMF, who benefits the most from fuel subsidies?

• Why do the poor more keenly feel the loss of fuel subsidies than the nonpoor?

Boko Haram• “Western Education is a Sin” (“Books are Evil”)• Started in 2002: Northern Nigeria• Goal: Establish an Islamic Nigerian State• Typical follower:

– Islamic students and clerics– Unemployed– Younger

• Targets:– Corrupt Nigerian State– Government officials– Police– Those believed to be working with government (some Muslims)– Churches

Boko Haram• Notable Instances of Violence:

– 2009-2012: 164 suspected attacks– July 2011-Dec 2012: 1,600 deaths*– Christmas 2011: 37 killed in Abuja– August 2011: 25 killed at UN building bombing in Abuja– Jan. 2012: 300 killed in Kano

• Larger Significance:– Manifestation of deteriorating economic and social conditions in

North.– Increase in public support (or tacit approval) as conditions deteriorate.– Inability of government to “control the violence.”

• *Human Rights Watch (2012)

• An Urhobo woman bakes krokpo-garri, or tapioca, in the heat of a gas flare in Afiesere. Local people have worked in this way since 1961, when Shell first opened this flow station. Pollutants from the flare cause serious health problems and life expectancy is short. (www.guardian.co.uk)

• An oil spill, polluting groundwater and ruining cropland, from a well owned by Shell that had been left abandoned for over 25 years. Badly maintained equipment is the cause of many leaks, but oil operators blame sabotage, saying oil spills are caused for compensation money. (www.guardian.co.uk)

• A young girl crosses over pipelines that run directly through the town. A troubled area near Port Harcourt, factional fighting is common in Okrika. (www.guardian.co.uk)

• In the village of Kalabilema, Bayelsa, a felled mangrove forest shows the damage of a fire which killed four people in March 2004. The cause of the fire was an old oil spill from leaking pipelines. (www.guardian.co.uk)

• Old Bonny Town on Bonnie Island, where the slave trade and palm oil trade previously thrived. Now the town is in poverty while the oil and gas companies continue to grow. (www.guardian.co.uk)

• Crude oil spills from a pipeline in Dadabili, Niger state, on April 2, 2011 (www.theatlantic.com)

• An aerial view of an oil spill site in the creeks of an Ogoni community in Nigeria's Niger Delta, on July 7, 2010 (www.theatlantic.com)

• Oil flows past a sunken boat in a creek near an illegal oil refinery in Ogoniland, outside Port Harcourt, in Nigeria's Delta region, on March 24, 2011 (www.theatlantic.com)

Oil Industry

WINNERS

• Patron-client network– Those with access and

connections get contracts, leases, kickbacks, corruption.

• Oil Companies

LOSERS

• Overwhelming majority of Nigerians

• Residents of Niger River Delta

• Environment

Movement for the Emancipation of the Niger Delta (MEND)

• Began in 2006

CONCERNS• Living conditions in delta

(more oil money).• Environmental

devastation

TACTICS• Violence, kidnapping, and

terror

“Blood Oil”

• Resource Curse– LDCs that are rentier states– Fail to diversify their economy– Fail to properly invest in future– Corruption waste

• 63% of oil revenue is supposed to go to states/local government.– Embezzled by corrupt officials.

“Blood Oil”

• Ken Saro-Wiwa– Anti-Shell Oil activist.– Movement for the Survival of the Ogoni People• Precursor to MEND.

– CONCERNS• Uncompensated appropriation of land.• Environmental Damage

– Hanged by Abacha government in 1995.

Bunkering

• Stealing oil from the pipelines.• Approx. 10% of exported oil is bunkered.• Militant groups bunker to raise funds.

2009 Amnesty

• Militants who surrender would receive money and training/jobs.– (i.e., June 2011: 176 ex-militants sent to South

Africa for vocational training in marine welding).– 26,358 accepted amnesty.

• Promised investment in the Delta.• 2010: Resurgence in Violence by MEND– Oct 2010: Independence Day Bombing in Abuja• 2 car bombs: 12 dead/17 injured

Move Over Boko Haram

• What is the reason for the resurgence of MEND violence?

• REFLECT:– What are the important similarities and

differences between:• Zapatistas• Boko Haram• MEND

“A Spill Scourge 5 Decades Old”

• Assess the environmental damage caused by oil spills.• Who do the different parties blame for the

environmental damage?• Who do you think is more responsible?

• 205.8 million gallons leaked from Deepwater Horizon.*

• *http://www.popularmechanics.com/science/energy/coal-oil-gas/bp-oil-spill-statistics

Boko Haram Attacks Prompt Nigeria State of Emergency

• Describe the measures taken by President Jonathan after the Christmas bombings?

• How could the Nigerian government’s inability to “control the violence” lead to greater religious tensions?