Nigeria bleeds as pipeline bombings, vandalism wreaks economy

The recent spate of bombings of oil facilities in the Niger Delta has put
the Nigerian economy in dire straits, plunging the country further down the
road to a financial crisis. Latest data released by the National Bureau of
Statistics, NBS, said the Nigerian economy is teetering on the brink of
recession and the increase in bombings is throwing the country deeper
into the abyss. The situation becomes worrisome when viewed against
the backdrop that crude oil exports account for about 70 per cent of
Nigeria’s revenue and 90 per cent of Nigeria’s foreign exchange earnings.
In the wake of the return of hostilities in the Niger Delta, Minister of State
for Petroleum Resources, Mr. Ibe Kachikwu, had a few weeks ago, stated
that Nigeria’s crude oil output had dropped to 1.4 million, but analysts are
of the view that the country’s crude oil output would have dropped
significantly to about 900,000 barrels per day as at today. What is this
means that the country is currently losing about 1.3 million barrels of
crude oil daily due to the bombing. This is exclusive of the huge volume of
gas that is transported through the affected pipeline.
In monetary terms, with the current price of Light Crude oil at about
$48.94 per barrel, Nigeria is currently losing about $63.622 million on the
deferred 1.3 million barrels of crude it could not export. This is an
equivalent of N12.724 billion per day and N381.732 billion per
month. Already, the NBS GDP report for the first quarter of 2016 had
stated that the crude oil component of the country’s total trade decreased
by N716.7 billion or 46.6 per cent against the level recorded in fourth
quarter 2015.
In addition to the loss in revenue to the country, power supply is gradually
inching closer to zero, as the attacks have crippled almost all of the
country’s power plant. Currently, power supply is put at about 2,800
megawatts (MW), dropping to as low as 650MW within the week, from a
high of 5,074MW recorded in February. Dallas Peavey, Chief Executive
Officer of Egbin Power Plc, stated that the company’s power generating
capacity had dropped to less than 10 per cent of its 1,320 megawatts
capacity. “We are just sitting idle here,” he told newsmen.
In addition, he stated that until the violence ends and gas supplies resume
unhindered, the company has suspended plans to double the capacity of
power plant, saying that “We cannot double the capacity if we cannot find
fuel.” Desmond Ogba, Managing Counsel and Head of Energy Projects at
Templars, a Nigerian law firm, also warned that if the vandalism is not
addressed urgently and comprehensively, electricity will continue to
deteriorate and the government’s aspiration to significantly increase power
generation by 2019 would be a mirage.
As a result of all these negatives, economic analysts are of the view that
the future for the Nigerian economy appears bleak, and it is expected that
the country’s Gross Domestic Product for the second quarter would be
negative, meaning that the country is officially in recession. The situation
worsened further for Nigeria, especially with the low oil price, as revenue
accruable to the Federal Government would drop drastically. Already, the
amount shared by the Federal, state and local government, had over the
months been dwindling.
Even with the slight rebound recorded in the price of crude oil in the last
couple of days, the country would still be at a disadvantaged, as its low
oil output would further worsen the situation.
Reacting to the bombings, Acting Director-General of the proposed
Maritime Security Agency (MASECA), Mr. Jacob Ovweghre, said the
actions of the Niger Delta Avengers, NDA and other militant groups would
wreak the Nigerian economy and cause even greater pain to the people of
Niger Delta, who would bear the direct burden of the crisis and not the
government.
According to him, the destruction of the pipelines in the Niger Delta will
reduce the states’ revenue bases and bleed the nation’s economy,
increase environmental degradation, pollution, poverty, hunger, school
drop-out, unrest, insecurity, under-development and economic loss. He
called on the NDA and other militant groups to desist from bombing crude
oil facilities in the Niger Delta and from engaging in other acts of
economic sabotage. Ovweghre advised the NDA to have a rethink of their
action and use intellectual agitation within the ambit of the law to pursue
their demands, so as to gain credibility. It is hoped that the Federal
Government resolve the crisis amicably so as to prevent the economy of
the country from being brought to its knees.