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Oil Attacks Destabilize Nigeria

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Oil Attacks Destabilize Nigeria
nigeria-oil-bomb-sabotage

Escalating violence in Nigeria's main oil-producing region is pitting the army against a new militant group determined to destroy the nation's oil industry. The group responsible for these attacks call themselves the Niger Delta Avengers. Their stated goal is to force the government to invest more money in the environmentally and economically devastated Niger Delta region, where over 28 million people live.

Attacks by this previously unknown militant organization began in February, with an attack on an underwater pipeline. It is believed that the Avengers chose a very difficult act of sabotage for their first attack as a way of presenting their "bona fides." Bombings by the group have intensified, targeting pipelines and other infrastructure vital for Nigeria's oil production, in an attempt to force the government to comply with their demands.

Early attacks were followed by an ultimatum to Western oil companies: You have two weeks to get out of the country, or "we will blow up all the locations.”  Two weeks later, they followed through with their threats by blowing up the main electric power line leading to Chevron's Escravos tank farm. This halted all of Chevron's onshore operations.

The Niger Delta Avengers followed up this attack with their most daring sabotage yet, by blowing up the heavily guarded Batan Oilfield pipeline in two places simultaneously. They later claimed that the target was chosen to demonstrate that the army poses no deterrent to their campaign of violence. The pace of attacks have intensified, and have cut Nigerian oil production nearly in half.

Economy Already Hit By Tumbling Crude

The Nigerian economy was already in peril before these attacks began. The same global oil glut that has destabilized Venezuela and Algeria has brought Nigeria's economy to the brink. This year, the government will run an $11 billion deficit on a $30 billion budget. Part of that deficit comes from production shortfalls caused by the Niger Delta Avengers.

The government's currency control structure has led to a shortage of dollars, which is hamstringing the economy. Nigeria saw inflation jump by 1.4% in one month to 12.8%, and foreign investment collapse by 74%. This shortage of dollars has also led to a fuel crisis, as Nigeria has to import gasoline. The fuel shortage has become so severe, the government has actually told importers to use the black market to get enough dollars to bring more fuel into the country. The government's recent 67% cut to fuel subsidies has Nigerians now paying 73¢/liter ($2.76/gal) for gas, putting further strain on Africa's largest economy.

Who Are The Niger Delta Avengers

nigeria-rebels

This new group of militants claim no connection with the previous militia groups that waged an intense war with the government from 2004 until 2009. Those groups, including MEND (Movement for the Emancipation of the Niger Delta,) were given monetary payments and job training in return for laying down their arms in a 2009 amnesty deal. The leaders landed lucrative ongoing "security contracts" to "protect" the pipelines they previously bombed.

The area was mostly quiet afterward (except for the usual theft of crude oil that has gone on for decades,) until the Niger Delta Avengers began their bombing campaign. The group appeared soon after President Buhari cut funding of the amnesty program by 70% because of Nigeria's economic collapse caused by plunging oil prices.

Given the timing and the sophistication of the NDA attacks, some military analysts believe the group may be composed in large part by mid-level former militant commanders who have had their monthly stipend slashed, while the leaders have retained their "security contracts". Like the leaders of many of their predecessors, the Niger Delta Avengers claim to be college-educated, well-traveled young men, which lends weight to this theory.

Armed Corruption?

Some observers also believe that the NDA may be backed by officials of the previous Goodluck Jonathan administration, eager to sidetrack Buhari's anti-corruption crusade. The Avengers seem to be sympathetic to Jonathan, who ruled Nigeria from 2010 until losing the 2015 election. Jonathan packed the government with his family and fellow tribesmen from the Niger Delta, resulting in what was termed one of the most corrupt governments in the world.

Buhari is a Muslim from the northern part of the country, elected in part on a pledge to root out corruption and recover some of the billions of dollars stolen. Jonathan is a Christian from the Ijaw tribe in the Niger Delta. This has some people successfully casting the anti-corruption campaign as religious persecution.

Nigeria's Two Front War

By Kenneth Iwelumo [GFDL 1.2], via Wikimedia Commons

The eruption of militant violence in the south has stretched the Nigerian Army. Many forces are still in the northern part of the country, fighting the Boko Haram Islamist army. This has led the Nigerian Navy to play a large role in the fight against the Niger Delta Avengers. Army offensives in the Niger Delta are backed by gunboats in the creeks and rivers of the Niger Delta and Nigerian Air Force light attack aircraft.

Avoiding the Previous Quagmire

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The Niger Delta Avengers are hoping that the army's reputation for harsh reprisals, razing of villages and mass killings during the previous insurgency will swing popular support to their side. The Buhari government is attempting a "carrot and stick" approach. Army patrols are sent out to hunt NDA militants, while initial attempts have been made to start a dialogue with the group.  Petroleum Minister Ibn Kachikwu addressed a meeting of community organizations, saying "The military barrels cannot stop of solve the problem of militancy in the Niger Delta region. I will have to go back to my brothers, they are our brothers. We will go and dialogue with them."

Advisors to President Buhari have suggested that Timi Alaibe, former right-hand man to Goodluck Jonathan and the architect of the 2009 amnesty program, be brought back to use his connections and influence in the Niger Delta attempt negotiations to stop the attacks on oil infrastructure.

crude oilBuhari himself is set this week to travel to the Niger Delta, to inaugurate a long-delayed cleanup of what the UN calls the world's worst oil spill. Some oil spills in the region are over 40 years old, and have never been cleaned up.

Little To No Popular Support

Military analysts have noted that the Niger Delta Avengers seem to have no grassroots support outside of the area around the oil hub city of Warri. The university there has a reputation as a breeding ground for militant commanders. However, the area surrounding Warri is the land of the Itsekiri tribe. It is also the scene of most of the pipeline bombings carried out by the NDA. Itsekiri leaders have demanded that the Niger Delta Avengers leave their land, and called on all Itsekiri to help officials capture any NDA militant they discover:

"We can say that no Itsekiri person is a member of this nefarious group and we call on all our sons and daughters to assist the military and other law-enforcement agencies in arresting these criminal activities."

Even the Movement for the Emancipation of the Niger Delta (MEND) have denounced the Niger Delta Avengers. In a statement announcing that MEND will continue to honor the 2009 ceasefire, the group slammed the Goodluck Jonathan administration for "pauperizing" ordinary Nigerians. They charged that the NDA have nothing to do with combating the problems of the the Niger Delta, but were instead formed to destabilize the Buhari Administration. They called on the NDA to end to the violence so that the new Buhari government can have a chance to turn the economy around.

Adding Murder To The Bombings

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As a result of the recent denunciations by locals and a military operation that saw several of their number killed, the Niger Delta Avengers today announced that they would start targeting oil workers at Western-owned and domestic oil operations. Posting on twitter, they group said "To the international oil companies and indigenous oil companies, it's going to be bloody this time around. Your facilities and personnel will bear the brunt of our fury."

Should the Niger Delta Avengers carry out their threat to start killing ordinary working Nigerians, their support base will shrink even lower. Of course, if their goal really is to topple the Buhari government, to prevent prosecution of corrupt Niger Delta politicians, they won't care what the ordinary Nigerian thinks.

The opinions and forecasts herein are provided solely for informational purposes, and should not be used or construed as an offer, solicitation, or recommendation to buy or sell any product

About the Author

Everett Millman

Steven Cochran

Precious Metals Market Analyst
BS University of South Florida (2002)

A published writer, Steven's coverage of precious metals goes beyond the daily news to explain how ancillary factors affect the market.

Steven specializes in market analysis with an emphasis on stocks, corporate bonds, and government debt. He writes a monthly review of the precious metals markets for SurvivalBlog.com.

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