Recent events indicate that this may not be the best time in the history of Nigeria. Despite the ongoing war to root out insurgents in the North Eastern part of Nigeria, the Niger Delta militants are relentlessly holding the nation to ransom via attacks on oil facilities. The activities of these militants come at a cost to Nigeria and its oil buyers from United States, India and other parts of the world.
Since the resurgence of militant attacks in the Niger Delta region, confidence in Nigerian oil has depreciated. This is as a result of the uncertainty that comes with the delivery of oil. In the past few weeks, the Qua Iboe oil stream, Nigeria’s largest crude stream, among others, has been forced to declare force majeure – a legal clause that allows companies to cancel or delay deliveries due to unforeseen circumstances.
Due to the activities of militants in the Niger Delta region, especially the Niger Delta Avengers, it has become difficult for oil workers to continue production and this has led to a drastic reduction in the volume of crude oil exported daily. Nigeria currently produces 1.6 million barrels per day (bpd), the lowest production in 20 years – this is far below the targeted 2.2 million barrels per day production projected in the 2016 budget.
“Not everybody wants to be caught up in that, so they will avoid it,” said Olivier Jakob, managing director of PetroMatrix in Switzerland. “The refineries will walk away from it,” Reuters reported. Also, according to Reuters shipping data, refineries on the US East Coast, which have been purchasing an average of 240,000 bpd in April and May, are starting to turn away. The same data revealed India’s state-run Indian Oil Corp. Ltd – a major buyer of Nigerian oil over the past year, has stated in its recent tenders that it would not take grades under force majeure.
Yesterday, Ventures Africa reported that the Niger Delta Avengers have ruled out negotiations with the Nigerian government signalling no immediate end to the attacks that have adversely affected the major revenue-generating business of the country. Now, that Nigeria’s major oil buyers are pulling out, the revenue expected from the sales of crude in order to fund the 2016 budget may only be a mirage. This indicates that there is an urgent need for the Nigerian government to actively diversify the nation’s economy in order to stop its dependence on crude, even as it remains committed to ending the current crisis in the restive oil region.
