Tag Archives: oil

Four Cases of Conflict Over Resources: #4 Social Contract Failure in Nigeria

This is the final case study of four, including Rwanda, Sierra Leone, and Liberia, that demonstrates one of many explanations for conflict. Social theory in a nutshell: We follow laws and pay taxes and do what the government says in exchange for protections, services, and good leadership by the government. When the government doesn’t follow through on its end of the deal, citizens don’t follow through on theirs. See more below on how this impacts the Niger Delta oil conflict.

Social Contract Failure Hypothesis (Stewart, 2002): This explanation for conflict derives from the view that social stability is based on a hypothetical social contract between the people and the government. People accept state authority so long as the state delivers services and provides reasonable economic conditions (e.g. employment and incomes). With economic stagnation or decline, and worsening state services, the social contract breaks down and violence results. Hence, high and rising levels of poverty and a decline in state services would be expected to cause conflict. In many African countries, social contract failure takes the form of neo-patrimonalism, which means power comes from a single leader. Corruption, often organized along kinship ties to control networks and resources, destabilizes the state and causes conflict.

The incidence of conflict is higher among countries with low per capita incomes, life expectancy, and economic growth. However, many statistical studies of the association between vertical income distribution and conflict produce differing results. It has been suggested that funding programs from the International Monetary Fund—usually associated with cuts in government services—cause conflicts, but neither statistical nor case study evidence supports this, perhaps because countries on the verge of conflict do not generally qualify for such programs.

My Relatively Quick Summary of the Ongoing Niger Delta Oil Conflict: When oil was discovered shortly before Nigerian independence in 1960, it was heralded as key to the new nation’s economic future. Nigerians living in the fertile fishing and agricultural southern region of the Niger Delta, the epicenter of oil operations and home to ¼ of the country’s population, waited decades for the newfound oil wealth to trickle down and improve their quality of life. Instead, they became slowly aggrieved by oil companies’ widespread environmental degradation in the form of oil spills on farmlands and fishing waters and gas flares that pollute the air. Oil companies also failed to fulfill the contractual promise of employment that had initially been introduced to get local support for oil extraction and the federal government (FG) did little to secure those local jobs. There was little to no improvement in community infrastructure in the form of schools, hospitals, or electricity for the average Niger Deltan, despite the government’s campaigns advertising oil as the key to a more prosperous future. The federal government entered into a joint venture with foreign oil companies such as Chevron and Shell, so oil profits went largely into the national coffer and very little revenue trickled down to benefit oil-producing southern states. This continued poverty is seen as an example of the resource curse or the paradox of plenty, in which natural resources do not lead to economic development for democratically-weak states. Niger Deltans, largely of the Ijaw and Ogoni tribes, continued to be politically marginalized while power over oil decisions and profits remained in the hands of the non-oil holding majority ethnic groups such as the Yoruba and the Igbos. So, although the issues being debated have to do with poverty and fair revenue sharing by the government, the conflict is also informed by long-standing ethnic questions of self-determination.

By the early 1990s, many Niger Deltans had concluded that the government and oil companies would not fulfill their promises of employment, infrastructure, or better living conditions. In response, a prominent Ogoni writer and intellectual named Ken Saro-Wiwa founded the Movement for the Survival of the Ogoni People (MOSOP) in 1992, and his peaceful movement came to be the face of the indigenous resistance against oil operations. They issued the Ogoni Bill of Rights, staged non-violent marches, and began to liaison with international non-profits to garner global attention to their environmental and human rights cause. In 1993, however, General Sani Abacha came to power in a violent military coup and promptly targeted the Ogonis for their oil reform efforts. The Niger Delta became a militarized zone in which soldiers and private security forces committed torture, killing, rapes and pogroms as a means of stifling the movement. Under Abacha in 1995, Ken Saro-Wiwa was falsely accused of inciting the murder of four chiefs and sentenced to death in a specially convened court widely criticized by human rights observers. He was secretly executed with eight others, known as the Ogoni Nine, in November of that year. The peaceful oil reform movement still exists today among various groups functioning under the umbrella of MOSOP, but it does not have the vigor it enjoyed under Saro-Wiwa.

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Ken Saro-Wiwa.

After 2000, the Niger Delta saw an alarming rise in domestic terrorism against the government and oil companies in the name of oil justice. The U.S. Department of State has identified the region as a “breeding ground” for ethnic militants engaged in kidnapping and ransom for profit, with victims initially being foreign oil workers but today including wealthy Nigerians outside the oil industry. Militants also engage in widespread oil bunkering, or stealing of oil, to sell it on the black market, arms dealing, and destruction of oil infrastructure through explosions. The most notorious among these militant groups are the Movement for the Emancipation of the Niger Delta (MEND), Niger Delta Avengers (NDA), Niger Delta Liberation Front (NDLF) and the Niger Delta Vigilante (NDV). Although it is often the average farmer or fisherman most endangered by militant activities, the groups claim to be ideologically committed to targeting the key companies operating there: Shell, Agip and Eni. These companies enjoy the staunch support of the military and federal security forces such as the Joint Task Force.

Companies see the militancy as a threat to their business operations while the state, with one of the highest rates of measurable corruption in the world, sees it as a threat to the national economy since 80% of national revenue comes from oil. Indeed, militants have succeeded in diminishing nation oil revenues by 25%, causing a shut in of 600,000 barrels per day. Insurgency is one of several factors that impact Nigeria’s below-capacity oil production. Nigerian oil production is of great concern to Western countries such as the U.S., which gets 5% of its total oil from the country. Since September 11th, Nigeria’s high-quality “sweet crude” has served as a great strategic alternative to more expensive oil from the Middle East.

 

Within the last decade, the government’s peace talks with militant groups have failed. MEND had a voluntary ceasefire with the government in 2006. MEND resumed attacks the following year though when its most prominent leader, Henry Okah, was arrested in Angola. The security situation became so volatile that it threatened a collapse of the oil industry, so President Yar-Ardua offered an amnesty program in 2009. In exchange for turning in their guns as part of Disarmament, Demobilization and Reintegration (DDR), fighters received university education, vocational training, and stipends. However, there are allegations of corruption and fraud within the Amnesty Office that oversees the program, charges that too few fighters were included, and a view that the very problems of environmental damage and unemployment that undergird militancy remain unsolved. These same issues currently plague the Niger Delta to perpetuate this on-going, low-level conflict.

Why Nigeria’s Credit Rating Matters More than Oil

How can something intangible (credit) matter more than a real resource (oil)?

I just finished a book that changed, or at least makes more dynamic, the way I view African development, Yuval Noah Harari’s Sapiens. Sometimes we get so ensnared in the details of social analysis that we forget to take a step back and look at the larger picture. Harari’s historical account helps us to do just that. His research deepens our understanding of the complexities of the resource course in oil-rich nations without strong democratic institutions.

He argues that one of the key turning points in human history was when we stopped viewing world resources and money as finite, and instead recognized that trust in imaginary future goods could create infinite economic expansion. These imaginary future goods were represented with a new kind of money: CREDIT.

Although we hear of the dark side of credit often—consumer credit card debt, credit on a loan to buy a home that the consumer could never pay off—credit is actually miraculous. As Harari phrases it, “credit enables us to build the present at the expense of the future.” In it, there is implicit hope that future resources will be more bountiful than current ones. That hope in the hypothetical is just so….human. And it has allowed the world’s per capita production to grow at a staggering rate over the last several centuries.

Although he doesn’t mention Nigeria specifically, a section of the book lucidly argues that a country’s credit rating, or the shared belief that a country will pay back its debts, matters more to its economic development than any other factor—including natural resource endowments.

Here is a grossly over simplified explanation using a feedback loop of why a nation’s healthy credit matters so much:

A) People have faith in the future economy —> B) credit is given out —> C) credit allows us to grow current businesses —> D) this growth is invested in new businesses —> E) businesses create goods that can be sold to pay back loans to creditors —> F) these pay backs fortify faith in the future economy.

And we are now back at the beginning of this cycle.

For those familiar with Nigeria’s economic history, any moment in this cycle can be, and has been, interrupted because of its unhealthy oil economy. In 2004, Nigeria required international debt relief after sovereign defaults on what it owed to the IMF. This was due to “heavy borrowing, rising interest rates, and inefficient trade” (see D). When the country suspended the national fuel subsidy in January 2012, no one wanted to expand their businesses that required gasoline, which is all of them since electricity is unreliable (see D). As I have mentioned in another post, oil can create a dangerous mono-economy in developing countries because it replaces the drive to produce anything aside from the oil itself (see E). Because so much of Nigeria’s economy is based on oil, its unstable pricing erodes the “faith in the future economy” that is the basis of credit extensions at all (see A).

Here is the excerpt of Sapiens that struck me as so pertinent to Nigeria:

A country’s credit rating is far more important to its economic well-being than are its natural resources. Credit ratings indicate the probability that a country will pay its debts. In addition to purely economic data, they take into account political, social and even cultural factors. An oil-rich country cursed with a despotic government, endemic warfare and a corrupt judicial system will usually receive a low credit rating. As a result, it is likely remain relatively poor since it will not be able to raise the necessary capital to make the most of its oil bounty.

Based on the description below, would you trust Nigeria to pay back money you gave it as a loan? Or as a business owner, would you trust its economy to grow, and give you returns on a new business you started with money you got from a creditor? Not many people would.

 

What is a country’s credit rating anyway?

In general, a credit rating is used by sovereign wealth funds, pension funds, and other investors to gauge the credit worthiness of a country—thus having a big impact on the country’s borrowing costs.

Standard & Poor’s credit rating for Nigeria stands at B with stable outlook. Moody’s credit rating for Nigeria was last set at B1 with stable outlook. Fitch’s credit rating for Nigeria was last reported at B+ with negative outlook. Overall, there are 11 ratings of stable, 9 rating of negative, and just rating of positive for Nigeria

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As an aside, anyone who witnessed the 2008 American economic meltdown based on home loans can appreciate that these credit ratings are hypothetical. All of those agencies above, those “experts,” failed to change their credit ratings, would could have helped alleviate the devastating U.S. housing crisis that negatively impacted every country in the world.

So, if Nigerian policy makers are to take Harari’s purely academic arguments to heart, they’ll stop writing checks they can’t cash and pay back creditors.

Trust matters.

Idrissi Artfully Addresses Perceptions of Africa

 

One of My Presentations on Women’s Protests

Below is an excerpt from part of a talk I gave on women’s role in Nigerian protests against oil extraction. Oil activities are blamed for environmental destruction, police violence, corruption, and lack of economic growth.

One of my research findings on Niger Delta oil politics was what I termed “positional arbitrage.” This means that local chiefs and male elites used their positions to help incite protests against oil companies and the government at times, as they were well positioned to gain from women’s demonstrations.

The talk also covers some other details about the oil reform movement in the region.

Nigeria of Superlatives

At a recent talk I gave on oil protests in the Niger Delta, an audience member asked me about my interest in Nigeria during the question and answer session. More specifically, he asked, “So, why Nigeria?”

If you are fascinated by social science, then a country that embodies the exaggerations of all social phenomenon is nothing short of intriguing. I am fascinated by culture, conflict, power, history, race, gender, and all social dynamics, and Nigeria demonstrates the dramatic extremes of all of these. It is the most and the least, the best and the worse, of so many measurements.

It produced the most victims of the transatlantic slave trade. It is the most populous country in Africa and is the third most ethnically diverse country in the world. Lagos is one of the top ten megacities of the world, and is growing faster than any other in Africa. It produces the most oil and has the fastest growing economy of any country in Africa. Nollywood surpasses Hollywood to be the planet’s second largest movie producer. To get more obscure in the statistics, it has the fifth highest rate of traffic fatalities in the world.  It is even has the world’s largest singing choir. A survey several years ago even ranked it as the happiest country on earth. How could I not want to learn more about a country that is such an amalgamation of fascinating facts?

In short, I love Nigeria because it is a puzzle I can never solve. 

For the PPT of the presentation, click below. Please feel free to contact me for the audio recording.

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The U.S. Travel Ban on Muslims, Nigeria, and Why It’s Such a Bad Idea

Although Nigeria has little potential (at this point) to make the U.S. travel ban, Trump’s Executive Order signed last week is bad news for everyone. There is great potential that it will last beyond the initial 90 days. I don’t believe Nigeria would ever be considered for the ban, despite the coverage of the 2012 “Underwear Bomber” and Boko Haram’s activities. The oil-based trade relationship between the countries is too important (5% of all U.S. oil comes from Nigeria). Trade in oil is also the reason that Saudi Arabia is not on the travel ban list, despite the large role of Saudi attackers in 9/11. Additionally, the travel ban gives preference to visas for Christians, which comprise a large number of Nigerian applications.

However, about a quarter million Americans claim Nigerian ancestry. Some of those may well be trying to bring family members to the U.S. There are tiers of prioritization of family-based visas, from Family First (minor children of citizens) to Family Fourth (brothers and sisters of citizens). I found a report from last year showing that Africans make up just under 4% of all family visa requests, far eclipsed by those from Central America. Here is the list by region:

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To visually show you African applications compared to other regions:

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Although this may seem like a low number of application, Yomi Kazeem points out that Nigeria “may be caught in diplomatic cross-hairs of Trump’s ‘America First’ visa policies. In 2015, Nigeria accounted for 32% of the nearly half a million non-immigrant American visas issued to nationals of African countries and received more visas than the four other countries that make up the top five in Africa when combined.”

He also argues that with the understanding of reciprocity, Nigeria and any other country has the capacity to treat American visa applicants in the same manner that the U.S. treats their foreign citizens. Securing my Nigerian visas was an incredibly difficult feat several years ago, and I can’t imagine what it will be like if there are any more demands on applicants.

Why the Travel Ban Makes No Sense At All:

Although The Executive Order currently only includes three African countries—Somalia, Sudan, and Libya—it is disastrous on so many levels across the globe.  It endangers U.S. citizens by fostering animosity among those who are already anti-American, and alienating potential Muslim allies. (Why would pro-democracy Afghanis or Iraqis support our cause on the ground now?) It stokes the irrational fears of Americans who fail to recognize that less than 70 Americans have been killed on U.S. soil by terrorism (attackers included) since 9/11. Most clearly, it denies refugee status to those who would otherwise become important actors in the U.S. economy, and instead created furthers the burden on our ally countries in already-taxed Europe. Or worse, it forces immigrants and refugees back to the very countries that are an environment that is ripe for radicalization.  It is much safer for Americans to have teenage boys from Syria trying to build a life in the U.S. than leaving them to the Aleppo streets, where their options for radicalization are infinitely greater.

Did I yet mention how the travel ban creates a “brain drain” for us as we lose thousands of talented PhDs, scientists, engineers, and technology experts from the Middle East?  The U.S. is now turning away people who could find the cure for cancer, create more energy efficient buildings, and revolutionize the way we understand the world. Even if the ban is lifted after 90 days, many may not want to return to a hostile environment.

Ethical and legal implications aside, the travel ban is inherently…irrational, in both the everyday and the economic sense.Then again, no one ever claimed that a politics of fear makes sense.

Quiz: What You Don’t Know About Energy in Africa

It’s home to millions of people who lack even one lamp, but also a frontier of great change and innovation. How much do you know about sub-Saharan Africa’s energy potential?

Source: Quiz: What You Don’t Know About Energy in Africa

Africa Oil & Gas: Mozambique and South Africa linked by new pipeline

Source: Africa Oil & Gas: Mozambique and South Africa linked by new pipeline

Quiz: What You Don’t Know About Oil Spills — National Geographic

See how much you don’t know about oil spills and oil spill technology with this quiz from National Geographic.

Source: Quiz: What You Don’t Know About Oil Spills — National Geographic

Paradise lost? Photography and oil in Nigeria

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Source: Paradise lost? Photography and oil in Nigeria