Nigeria Economy Faces New Threats

Relative peace in the Niger Delta in the wake of President Muhammadu Buhari administration’s economic recovery and growth plan has ushered in a period of smooth and increased oil production in the region. The country’s foreign reserves have gone up to $34 billion, the highest in almost three years, and the government has projected further economic gains as oil prices begin to pick up again after a record fall. But armed groups threaten to resume attacks on oil infrastructure.

Nigeria is currently benefiting from a bullish oil market and “rampant demand”, attaining its highest production target since 2015, following a 39% rise in crude oil prices since June 2017, as the Organization of Petroleum Exporting Countries push for output cuts to continue into 2018. Production in Nigeria, which is exempted from the curbs, has risen 15% this year to 1.7 million barrels a day as militants ceased bombing export terminals and pipelines, ThisDayLive reported.

The ripple effect of the current good run in receipts from the volatile sector transcends rise in foreign reserves. It is being felt across all critical sectors. The new dawn of stability in the foreign exchange market has begun to breathe life back into the manufacturing and services sector even as government is revving up its investments in critical infrastructure.

It is also swelling investors’ confidence in the economy. Portfolio inflows have risen in the past three months with crude prices increasing above $60 a barrel and money managers are showing confidence in a new foreign exchange trading window, in which the naira has converged with the black market rate.

But the economic gains are threatened in the face of recent warnings by the Niger Delta Avengers, an armed group in the Niger Delta, that they had ended a truce reached with the federal government and decided to resume attacks on the oil facilities.  This is giving stakeholders cause for concern.

Analysts hold that resumed hostilities in the oil-rich region will hurt and halt the current good run in the sector beyond revenue generation and that portends dire consequences for the country’s oil-dependent economy, which is barely recovering from recession.

This fear is besides the latest threat.  NDA had announced an end to a ceasefire agreement it had with the federal government, in a statement recently posted on its website. The group declared its readiness to resume damaging attacks on the oil infrastructure in the Niger Delta.

NDA said the federal government’s failure to develop the region and forge a new vision for the oil producing areas in line with Buhari’s promises was behind its decision to return to attacks.