PETERSIDE ECONOMIC REVIEW

Chamberlain S. Peterside, Ph.DSaturday, September 15, 2007
[email protected]
New York, NY, USA
NIGER DELTA HOSTAGE CRISIS
…CURFEW WON’T CUT IT, JOBS AND JUSTICE WILL ENGENDER PEACE AND PROSPERITY

…Unending Circle of Violence

he recent spate of violence in Port Harcourt should be a major concern to any well-meaning citizen and the government in particular. Since the beginning of 2006, over 200 people have been abducted by militants in the Niger Delta, comprising not only foreign oil workers, but indigenes too; including little kids and aged-mothers. Already this nasty situation is taking a huge economic toll on local businesses and the nation at large, leading to 25% cut in oil output and flight of key personnel and capital from producing and ancillary service companies operating in the region. Total financial loss for Nigeria was estimated at over $12 billion in 2006 according to government sources.


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Anecdotal evidence suggests that Shell Petroleum and other major producers have considerably scaled-down their operations and not venturing into choppy waters as they stem award of new service-contracts. My interaction with some business executives reveal that occupancy rate in area hotels have declined significantly as general economic condition worsens.

The problem has become so intractable that accusations are flying as to who is to blame and what the solution should be. Some theory has it that in reality politicians are responsible for the problem, whereas recent news report indicate that even military personnel (including men from the Joint Task Force) are in cahoots with the rebels often aiding and abating illegal oil bunkering, proceeds of which are then funneled to procure sophisticated weapons. It has also become common knowledge (true or not) that sometime naval boats guarding Nigeria’s coastal boundaries actually escort foreign vessels to conduct these nefarious acts – how ridiculous.

The violence reached a crescendo in mid August when shooting between cult gangs broke-out in the streets of Port Harcourt township, leading to death of over 20 innocent victims. In my opinion, this whole episode is as shameful as it is stupid to see the government (at local, state and federal levels) stand by and watch the gradual erosion of law and order that threatens its own much needed revenue-base.

…Wasting Wealth of a Nation
It makes you wonder how things got so bad and why the government didn't do more earlier-on to forestall the violence. To be sure, crude oil remains the main income-earner for Nigeria; accounting for 85% of annual budget and generating over 90% of export revenue. As we speak, natural gas is gaining ground as a new income-source, what with rapid expansion of multi-billion dollar Bonny Liquefied Natural (LNG) Gas Plant, located just one hour from Port Harcourt and proposal for Brass LNG and Olokola LNG.

Over the last half-decade high crude prices have enabled the country liquidate its stifling foreign debt-burden and amass external reserves in excess of $40 billion. The resulting improved financial status is providing an impetus for continued economic transformation, setting the stage for bold new initiatives such as Nigeria’s plan to become one of the 20 largest economies by 2020.

How preposterous indeed for policy-makers to believe that Nigeria can achieve sustainable development and attain those lofty goals with such instability in the Niger Delta. The recent statement by Chairperson of Federal Inland Revenue, Ms. Ifueko Omoigui that government is considering raising taxes (because revenue targets are not being met due to falling oil production) is but a signpost to more serious consequences of a lame-dock Niger Delta strategy. Even economic growth rate has been revised downwards by the Central Bank due to cut in oil production and export.

It could be argued that Nigeria might not be in existence today without the colossal oil revenue estimated at $450 billion earned over the last four decades. Ironically, Port Harcourt, as nerve-center of the oil industry remains easily the most important city in the country, after Lagos and Abuja. Thanks to huge oil/gas reserves and infrastructures in the Niger Delta, its position as the treasure-trove of the nation is not in doubt.

…Self-destructive Approach
Which brings us to the critical questions - why will any sensible government toy with its major source of subsistence? In whose interest is it for Port Harcourt and the Niger Delta to remain unstable? What long-term strategic purpose will it serve, if Nigeria’s oil industry were to be decimated? Recent report already show a growing apathy by foreign oil/gas companies and personnel to venture into Nigerian market despite perceived huge potential rewards.

Historically, inhabitants in this region that produces such an essential commodity have lived in abject poverty in midst of abundant natural wealth, which are milked by multinational companies and squandered by successive corrupt military and civilian regimes. Frequent oil-spillage (whether by sabotage or not) have resulted in serious environmental hazard that threatens the health, livelihood and well-being of local people.

It must be realized also that unemployment and idleness remain major social vices hence economic deprivation in the face of prolonged neglect has now reached boiling-point and spilling over, in form of violent rebellion against status quo.

Unfortunately desperate politicians and criminals seeking power and money by all means have jumped into the fray, capitalizing on the situation to pursue selfish interests. The flip-side is that hapless ordinary folks are made to surfer needlessly and pay the price of ineptitude as reflected in incessant shooting, kidnapping and armed banditry.

…Unproductive Environment
The reaction by the government as usual has been less than stellar to say the least. Deploying security forces to patrol the streets and declaring curfew is simply a charade that doesn't get to the root-cause of the problem. That is a short-gun approach, which never addresses the genuine aspirations of the indigenes and can not bring lasting peace to the area. Common sense should tell you that as soon as armed forces depart, armed militants will quickly regroup and take over, not unless they are constructively engaged and disbanded ones and for all.

Funny enough, in the last three weeks, whilst the curfew remains in place there have been two kidnappings (one was a three-year old girl) and attack on a village in Port Harcourt suburb resulting in the death of 6 people. Have the government ever pondered what exactly these jobless youths will be doing after they disarm? Economic indicators in the area point to very dismal life-quality, high unemployment especially amongst able-bodied young men and women is the norm, while congestion, poor living-condition and dilapidated infrastructure is widespread. Therefore any measure that fails to tackle pressing socio-economic problems and inequitable wealth distribution pattern will not lead to tranquility.

The agitation for better share of Nigeria’s oil wealth by Niger Delta militants has now come into sharp focus in the global circuit and there is no shortage of ideas on how to elevate the people of the region, so far all that have been mere rhetoric and piece-meal effort at best. Logically, the new administration of president Umaru Yar Adua has made the Niger delta question part of his seven-point agenda, while the Niger Delta Development Commission (NDDC) has unveiled so-called Niger Delta Master-Plan, which was launched at the presidency in March this year and already widely being discussed in policy circles.

But even before the plan begins to be implemented there is already talk about tweaking and harmonizing it – harmonizing it with what? – Your guess is as good as mine. As far as I am concerned, there is no concrete signs on the ground to indicate that pent-up anger, hunger and injustice is being seriously tackled. I say this because I know Port Harcourt well and recently returned from one of my several trips to the city.

Consider These Scenarios…
You might have hoped that the curfew will be an opportune time to mobilize tractors and construction equipments, commission large-scale projects and deploy personnel to work-sites and get cranking – not at all, instead peoples’ movement are being restricted as they are deprived of daily livelihood. I could challenge anyone that if the government and contractors were to publish job-advertisements to hire skilled/unskilled laborers, carpenters, bricklayers, iron-benders, painters, etc for new construction projects, crime rate will fall precipitously in Port Harcourt and environs.

Secondly, it could be proven with econometric models that if 50% of revenue (and commensurate responsibilities) were to be allocated to the regions/localities where wealth is derived - namely Niger Delta as being agitated, Nigeria might be better-positioned to uninterruptedly bolster oil/gas production thereby generating more overall revenue, without losing too much income accruing to the federal government, especially given the favorable global energy price-trend that is forecasted to remain high into the future. Subsequently, every region will be emboldened and energized to harness or exploit their local potentials whether solid minerals or other natural resources.

…Time to Get Cranking
There are talks making rounds on major infrastructure projects such as dualizing the East-West road that cuts across the whole Niger Delta region, running from Lagos through Edo, Delta, Rivers, Aqua-Ibom up to Cross River State. There is also plans to build a ring-road around Port Harcourt to alleviate acute traffic congestion within the city, and to build an over-pass in oil-mill junction (intersection along the East-West highway leading to Port Harcourt refinery, petro-chemical plant, Onne ocean terminal/free-trade zone, fertilizer plant and host of other industrial complexes) in other to curb the worst traffic snarl in the city. Re-developing the water-fronts that have become hide-outs for cult members is also in the cards.

Such ambitious public-works scheme (in concert with aggressive law-enforcement) could transform any economy as it engages the army of unemployed youths and keeps everyone busy, except that in the usual Nigerian style no major activity is in sight and who knows for sure when anything will happen? As an illustration of this complacency, Port Harcourt international airport that served as a critical hub to the region has remained shut-down two years after it was decommissioned for repairs.

How can there be reasonable progress under this circumstance? Any government that allows such a situation to fester will virtually be creating building-blocks for anarchy that could render the territory ungovernable and economically unviable. Unfortunately Port Harcourt (and by extension Niger Delta) is not just another sub-Sahara African back-water, begging for hand-out, it is an area rich in resources (crude oil and gas deposits) that is in high demand globally and serves as the mainstay of Nigeria’s economy, hence the need for equity, commitment and speed in sorting out the lingering injustice.

Chamberlain is the Founder & President of New Era Capital Corp. and MyCompleteFinance.com, a New York based financial services group. He was previously a Financial Advisor in the Global Private Client Group, of Merrill Lynch.


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