Nigeria’s Turmoil and the Outside World

Because of Nigeria’s size and predominance in West Africa, its neighbors are watching events unfold with nervousness—but also a prudent silence. Large numbers of Nigerians live outside their country in West Africa, and economic links between Nigeria and its neighbors are strong. In the past – and perhaps at present – Nigeria also supplied its neighbors with cut-rate oil. So, developments in Nigeria are bound to influence the entire West African region.

What is happening in Nigeria could start to impact  the United States, too. But not right away. Nigeria is normally the fourth or fifth largest supplier of oil to the United States. Its production exceeds two million barrels a day, and about half of it goes to the U.S. There are no choke points like the Straits of Hormuz between the Nigerian oil fields and the refineries in Baltimore and Philadelphia.

The general strike called Monday to force the Jonathan government to reinstate the fuel oil subsidy from the beginning has involved workers in the domestic oil and gas distribution system. Oil tankers throughout the country accordingly are idle, and domestic fuel supplies are drying up.

In a new development yesterday, some unions involved in oil and gas have joined the strike, with others threatening to do so, possibly on Sunday. There is now the prospect that Nigeria’s oil production will cease. If so, that would remove Nigeria’s usual contribution of two million barrels a day from the world market and could causes a worldwide fuel price spike, with consequences for the fragile economic recovery in the United States and Europe.

However, even in the event that all of the oil production workers go out, it will be several days before the effects are felt. A significant portion of the oil is now pumped offshore, and the production side of the industry is highly automated and requires few workers. Perhaps more important than shutting down the oil pumps would be the closing of the oil ports, which still remain open.

Oil and gas are normally more than ninety percent of Nigeria’s exports by value, and profits, taxes, royalties, etc. from oil provide Nigeria’s government with more than eighty percent of its revenue. Deprived of oil revenue for a significant period of time, it is hard to see how Nigeria’s political economy could continue in its present form.