The escalating violence in the Niger Delta region by armed militant groups against multinational oil companies is a product of the social and environmental devastation that accompanied the “development” of the Nigerian oil industry.
Eco-militancy in the Niger Delta has multinational oil corporations on their back foot. Royal Dutch Shell has just announced that they are divesting from all assets in the Delta area, in favor of focusing on offshore drilling–an area less susceptible to theft and sabotage from the various militant groups that populate the region. Chevron is also making similar moves to exit the Delta. Both companies are following the example set by Exxon Mobil, the third of the three majors who operate in Nigeria, which has focused its investments almost exclusively in offshore production.
These movements in international capital provide a good window into an examination of the horrific situation of Nigeria, and understanding how Nigerian poverty isn’t just a result of underdevelopment, but forced deterioration of living standards.
International oil companies including Shell and Chevron Corp. (CVX) are shifting their efforts in Africa’s largest producer from land-based operations to offshore fields, where the risk of kidnapping, sabotage and crude theft is lower. The increased security also brings costs that are more than 40 percent higher, according to estimates from Nigeria’s national oil company.”
“Due to the increased level of oil theft and disruptions, a number of oil companies have started selling blocks in the troubled areas and moving to deep water offshore blocks,” Rolake Akinkugbe, London-based head of oil and gas at Ecobank Research, said in an e-mailed response to questions. “The move offshore is being viewed as a longer-term solution to the challenges faced onshore and in the shallow waters.”
The article also uses Exxon’s experience to contrast between the risks of onshore and offshore oil production:
Exxon Mobil, whose operations were limited to the shallow and deep offshore waters of the southeastern coast, has recorded the lowest number of output disruptions, with only three attacks in the last decade, compared with 945 recorded by Shell between 2007 and 2012.
The level of violence that oil companies in Niger Delta have to deal with might be surprising–if one is ignorant of the catastrophic conditions that the Nigerian people have had to deal with. Despite Nigeria’s growing economy, absolute poverty is increasing, as BBC pointed out last February:
Poverty has risen in Nigeria, with almost 100 million people living on less than a $1 (£0.63) a day, despite economic growth, statistics have shown. The National Bureau of Statistics said 60.9% of Nigerians in 2010 were living in “absolute poverty” – this figure had risen from 54.7% in 2004.
The bureau predicted this rising trend was likely to continue.
This is certainly an awkward narrative when juxtaposed against stories like this, which look to general world GDP growth to make claims that “the whole world is getting richer.”
We can also look to UC Berkeley’s Professor Michael Watts for a longer view of Nigeria’s economic dynamics. From his 2008 working paper on Nigerian oil insurgency:
Over the period 1965-2004, the per capital income fell from $250 to $212; income distribution deteriorated markedly over the same period. Between 1970 and 2000 in Nigeria, the number of people subsisting on less than one dollar a day grew from 36 percent to more than 70 percent, from 19 million to a staggering 90 million” (Watts 2008: 12).
So the question is, why has situation for the majority of the Nigerian people been deteriorating over the past few decades?
One key factor is the effects of oil extraction on the local environment. Much of the population of the Niger Delta is heavily dependent on the environment to sustain traditional modes of economic activity, like subsistence farming and fishing. This dependence makes the pollution and degradation from oil extraction become an extreme catalyst for social upheaval and economic stagnation, since pollution is not just acting as a source of health woe, but as a direct attack on the economic structures that sustain the livelihoods of the locals. Environmental externalities in Nigeria cause direct economic harms on the locals through the destruction of traditional income-generating activities.
Another factor emerges on the macro-scale, in the way that the national government’s focus on oil extraction leads to a developmental dynamic similar to Dutch Disease. But while I personally won’t speak here to the relationship between the inflow of capital and the decline of Nigerian manufacturing (as is the prediction of classical Dutch Disease theory), I will speak to the intuitive effects of having government revenue dominated by a single industry.
The Nigerian government’s revenue is almost entirely dependent on the exports of oil and gas. And while a government that is controlled by the people, and has the people’s interests in mind, can make effective use of such a situation and the windfall of petrodollars that it comes with (as has Norway and Venezuela), a country like Nigeria–a neocolonial creation and one whose government is dominated by multinationals–will collapse into a situation where the government’s sole purpose is to act as a proxy military to protect the investments of international capital (that is, to protect the stability of a major source of oil to the world markets). After all, why should a regime care about equalized development and investments into education, manufacturing, and general social programs, if the regime is doing just fine when doing the bidding of the oil majors? Institutions and their motivations are shaped by their source of funding; if that source of funding is almost entirely from the extraction of oil, then the institution in question (in this case, the Nigerian government) will be motivated almost entirely by the continued extraction of oil.
The Nigerian situation is bleak; and let us not forget the institutions and political dynamics that made it so. This post has been much more brief and superficial that I would like it to be, and I will make sure that I take a more in-depth look into Nigeria’s political economy and history–but nonetheless, may this serve as a good introduction for people who have not yet had the chance to be acquainted with the fascinating and depressing dynamics of Nigeria.