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Nigeria holds elections amid oil industry uncertainty

31 march 2011, 19:09
0
Nigerian President Goodluck Jonathan. ©AFP
Nigerian President Goodluck Jonathan. ©AFP
Nigeria begins elections on Saturday amid uncertainty over a major overhaul of its oil industry that has led to a freeze in new investment despite relative calm in the restive Niger Delta region, AFP reports.

At the same time, improvements in the Niger Delta, the country's main oil-producing region hit by years of attacks, have led to suggestions that output could be further boosted to help make up for cuts due to Libyan unrest.

The legislative, presidential and governorship elections to be held over three successive weekends may have profound effects on the industry in Africa's largest oil producer.

The oil industry is vitally important to Nigeria, providing more than 90 percent of export earnings and some two-thirds of government revenue.

President Goodluck Jonathan, the first head of state from the Niger Delta and favoured to win the April 9 presidential vote, has pushed for final approval of a wide-ranging oil reform bill.

He has pledged that the bill that has been years in the making will be passed before his current term ends in late May, but the clock is ticking.

"If the (bill) gets passed, it changes the oil industry fundamentally," said Kayode Akindele of Greengate Strategic Partners financial advisers.

Major oil companies in Nigeria, including Shell, ExxonMobil, Chevron and Total, have pleaded for clarity. Substantial new investments have been held up because firms are unsure of the new financial terms.

The overhaul is aimed at allowing Nigeria's government to collect more revenue from lucrative offshore projects as well as restructuring the state oil company, widely viewed as corruption-ridden.

It also goes much further, taking in gas production and a range of other issues, and has gone through many different versions.

Some say there is added pressure to approve the bill before the new legislature comes into office since a large number of incumbent parliament members are not running in this Saturday's legislative election.

New parliament members may want again to rewrite the bill, causing further delays. The government has also acknowledged it is losing out on revenue at a time of high oil prices due to the uncertainty.

"It will be signed into law before the end of this administration (on May 29)," Oil Minister Diezani Alison-Madueke said recently.

Despite the reform hold-up, Nigeria has seen its production rebound to some 2.4 million barrels per day, with an amnesty deal offered to oil militants in 2009 credited with bringing relative calm to the Niger Delta.

Scores of attacks and kidnappings have been carried out in the deeply impoverished region by criminal gangs and militants claiming to be fighting for a fairer distribution of oil revenue.

Analysts note that there is a risk of a flare-up in violence during and after polls, with politicians in the Niger Delta having in the past armed gangs for vote-rigging.

State governorship polls to be held April 16 are of particular concern, but there is hope that this year will not result in the same level of violence as previously.

"There will be pockets of violence," said Victor Ndukauba of Afrinvest advisers.

"However, there is much better awareness to a lot of the foot soldiers a lot of those militants have ... There will be violence, but we don't think it will be as bad."

Others have warned that the relative calm in recent months is only temporary, with underlying causes of unrest such as unemployment and poverty yet to be addressed and likely to feed another wave of militancy in the future.

But partly due to the improved atmosphere, there have been suggestions that Nigeria could restart producing from idle fields to help make up for cuts in Libya and elsewhere due to unrest.

Both Nigeria and Libya produce high-quality "sweet" crude sought after for fuel production.

But elections have been a distraction in Nigeria, an OPEC member which also has not been given the green light by the cartel to further increase production.

"I think with elections going on, everyone's got their eye off the ball," said Akindele, adding that the country could boost production by between 300,000 to 400,000 barrels per day in the short term.

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