Nigeria generates more than 14% of its GDP from oil exports. Those exports account for 98% of the country's export earnings, and close to 83% of federal government revenue. Nigeria may have more than 22 billion barrels in proven reserves, according to the United States Energy Information Administration. Nigeria is the tenth-most oil rich nation on Earth, with 159 oil fields and about 1,481 oil wells in operation.
The numbers look more than promising. On paper, this country should be a prime destination for investment dollars and oil development. So why is Nigeria's natural petroleum wealth on the verge of destroying a large part of the country?
This is a troubling situation in which there's no clear bad guy. The Nigerian federal government, multinational oil companies, and disadvantaged locals are all bad actors in some way.
A Curse in a Land of Plenty
Most of Nigeria's oil lies in the Niger Delta Basin. The Niger River flows through this megadiverse land on its way to the Gulf of Guinea and the Atlantic Ocean beyond. The region is is home to about 31 million of Nigeria's 170 million people. Oil extraction started in the region in the 1950s, before the country gained its independence from the United Kingdom and accelerated thereafter. Nigeria's experiences with kleptocratic military dictatorships, under Generals Ibrahim Babangida and Sani Abacha brought a host of ills to the country. Not least of which was the generals' "mismanagement" of billions in oil revenues resulting from the Gulf War spike in world oil prices. Oil companies, such as Royal Dutch Shell plc (NYSE:RDS.A), Chevron Corporation (NYSE:CVX), Exxon Mobil Corporation (NYSE:XOM), and Total SA (NYSE:TOT) openly colluded with these brutal dictators, sending in their own private armies to secure the supply of oil, doing whatever was necessary to keep the black stuff flowing.
Many popular resistance organizations, like the Movement for the Survival of the Ogoni People, emerged to assert their right to a share of the Delta's oil wealth. Sometimes nonviolent, but just as often quite violent, these groups engaged in various acts of armed and nonviolent resistance. The world was shocked when the Abacha regime executed writer and activist Ken Saro-Wiwa, who had been among the loudest voices decrying the regime – and Royal Dutch Shell – in their destruction of the Niger Delta and the displacement and marginalization of its people.
Militants on the Warpath Again
Delta militants waged an effective war against the Nigerian government and Western oil companies for over a decade. These militants targeted Nigerian troops and police, and would kidnap oil workers from time to time. Most were scrupulously careful to avoid targeting Nigerian civilians. At the restoration of democracy, the militants' captains were paid off en masse, in mostly undisclosed sums, to lay down their arms. And they did so… for a time. The payoff never trickled down to the middling ranks, and did little to ease the plight of smallholders in the Delta. Now the militants are on the march once again.
It was thought that when democracy returned to Nigeria in 1999, oil revenues might begin to be more equitably distributed, that the environment might begin to be better protected. Nothing like this has happened, some 15 years after the restoration of popular rule. In fact, things may be worse now. Now, residents of the Niger Delta have the lowest life expectancy in all of Nigeria. The oil infrastructure of the region hasn't really been upgraded since the period ending in the 1980s. The physical realities of the Niger Delta necessitate the existence of thousands of miles of pipeline.
A Scene From Dante's Inferno
These long, untended pipelines are regularly tapped by poor residents. The stolen oil is then refined by pirates – oil pirates – in small, isolated, makeshift refineries. A recent VICE report described one of these makeshift refineries as "hell on Earth," where volatile, toxic oil flowed freely into the river, as uncontrollable flares erupted from the homemade devices. What dry ground there was was covered with a kind of tar. The result of this nasty business is homebrewed petroleum products; gasoline, kerosene, and diesel, which are taken upcountry and sold on the streets of Nigeria's teeming cities. One masked interviewee said he could make as much as $70 per day – a king's ransom in a region where most live on $1 – $1.50 a day. There is tremendous economic opportunity in oil piracy, at the cost of near-total ecocide.
And it is an ecocide, a neologism coined to describe the wholesale destruction of entire ecosystems. As noted, 31 million people live in the Niger Delta among thousands of species of plants and animals. All things being equal, the Delta would provide a generous living to those fortunate enough to live there. But the equation is madly out of balance. The illegal pipeline taps result in not-inconsiderable spills, and, on occasion deadly explosions. But that is on top of what's officially recorded as coming from the creaking infrastructure. It's been reported that there are refineries in Nigeria where permanent daylight prevails. The flaring never stops, and each flare represents lost natural gas and pollution added to the atmosphere.
Exxon Valdez Forever
It's been estimated that the cumulative spill in the Niger Delta amounts to an Exxon Valdez-scale event every year for the past 50 years or so – 11 million gallons of oil each year, for a total of 546 million gallons. Large spills routinely go unaddressed for a month or more, and the local environment dies in turn. Were this to happen in Alaska, or California, or the Gulf Coast, or Brittany, the outrage would be intense.
The response to the Deepwater Horizon disaster of 2010 brought some cutting edge oil technology to bear. The well itself used quite a few advanced techniques. And still it all failed. In Nigeria, the oil infrastructure is badly outdated, and a pointless blame game ensues. The oil companies claim they can't invest in better infrastructure until they're no longer targeted. The people claim they need to attack oil installations to make a living. The government tells the people to back off the oil companies, and the oil companies to clean up their act. Then the oil companies claim they can't… The people claim they must… The government tells… and so on and so on. All the while, the land dies, the people die, the soldiers die, and nothing much ever changes. A dreary chain of cause and effect continues unbroken, leaving bodies, a blasted landscape, and huge oil profits in its wake.
Where To Turn?
Investors looking to avoid the horrible situation in Nigeria – either for reasons of conscience or prudence or both – would be better served looking for opportunities in the United States itself. It's true that there is corruption and inefficiency. This is true of nearly anywhere on Earth where men drag oil up from the depths. But the situation in this emerging oil producer is much better. The level of transparency is higher, wages are better, infrastructure is safer, and conditions are such that oil companies don't overtly abuse the public – much.
Recent developments in the United States, for instance in the Bakken, make the country the emerging market to bet on.
- The New York Times:
Far From Gulf, a Spill Scourge 5 Decades Old
- U. S. Geological Survey:
The Niger Delta Petroleum System
- VICE (Nairaland):
Nigeria's Oil Pirates: The Curse of Oil
Nigeria: NACCIMA Says Oil Sector Is Killing The Economy