This is a guest post by Jim Sanders, a career, now retired, West Africa watcher for various federal agencies. The views expressed below are his personal views and do not reflect those of his former employers.
Some business persons and economists tend to portray Nigeria sunny-side up. One example is Dambisa Moyo’s Financial Times article, "Africa Can Remind the World of the Capitalist Way." She asserts that "today’s Nigeria is strong enough to avoid a protracted crisis," and cites an increase in global brands such as Kentucky Fried Chicken and Walmart in Lagos to argue that the "growing power of the African consumer" explains why the crisis over President Jonathan’s attempt to remove the fuel subsidy failed to spur a political meltdown. "Nigerian consumers want to buy their groceries and get back to work; they have too much vested in the economy."
Another example is Franklin Templeton’s Emerging Markets Group chairman Mark Mobius. He believes Nigeria represents "Africa’s biggest growth potential," that the banking sector, in particular, is especially attractive, and that Boko Haram attacks in Abuja and Kano are "isolated incidents." "You can still do business, even when you have a lot of turmoil," Mobius said.
In a similar vein, an article by Maram Mazen and Chris Kay, makes reference to a June Morgan Stanley report forecasting that Nigeria would overtake South Africa, "the region’s biggest economy," by 2025, suggesting that the country is a lucrative investment target.
But these views mask the reality of a country in deep crisis. In fact, President Jonathan’s abrupt subsidy removal initiative started to provoke a "political meltdown," and that is why he was forced to backtrack on it. It did something else, too: namely, awaken the sleeping giant that is Nigeria’s impoverished millions. The massive demonstrations in major cities marked a watershed in the country’s history. Political and economic elites are no longer in full control and this will have unpredictable consequences going forward. At a minimum, the government will have to exercise caution in its policies for fear of provoking further popular eruptions.
Anti-fuel-subsidy-removal demonstrations were largely peaceful. However, on the other end of the continuum of opposition to the government is Boko Haram’s insurgency, which views the government as corrupt, incapable of reform, and therefore wishes to sweep it away . The sect’s attacks are hardly "isolated incidents," but rather form a continuous thread of violent opposition, which is spreading within the North. "[S]uicide attacks in recent weeks on two of the north’s largest cities, Kano and Kaduna, suggest the militants’ reach is spreading, with intelligence agencies unable to keep up," the Financial Times reports.
While some observers seem to take comfort in the fact that the "violence in the north hasn’t hurt oil production or touched Lagos," the sect appears to understand that it does not have to wage attacks in Lagos to undermine the government by demonstrating that it is incompetent, unable to provide security or address the root socio-economic causes of violent opposition. Even a steady stream of daily low-grade attacks reveals government impotence.
The ongoing attacks, which the military and police have been unable to stop, are also straining Nigeria’s finances. "Nigeria’s security bill has risen to 20 percent of spending in the 2012 budget from 16 percent in 2010, leaving less money for much needed infrastructure projects and for work on reforms to the power and other social and industrial sectors," according to Chijioke Ohuocha, "Nigeria insurgency beginning to take toll on economy."
Nigeria’s economic potential is enormous--a sunny prospect given stagnation in the developed world--but at the moment the country’s stability is deteriorating and the near-term future looks stormy.