Nigeria's not yet ready to make 'a devil's bargain'

Nigeria announced on Monday it resumed payments to former militants in its oil-rich Niger Delta region, according to a Bloomberg report.

The payments of 65,000 naira per month (about $204) to about 30,000 ex-militants were stopped back in March amid lower oil prices.

In light of the news, some folks quickly penciled in a return of Nigerian oil. Production has fallen to a near 30-year-low amid on-going attacks by the newest militant group in the region, the Niger Delta Avengers.

However, given the long-run structural issues of the Niger Delta, there are still plenty of headwinds to the commodity’s immediate return.

“We strongly caution against seeing this latest move as a sign that the tide has turned and that the latest wave of militancy will soon end,” argued Helima Croft, the Head of Commodity Strategy at RBC Capital Markets and recently appointed member of the National Petroleum Council, in a note.

“We contend that the suspension of payments was not the principal catalyst for renewed attacks, but rather it was the decision to prosecute former militant leaders for ongoing criminal activities, including large-scale oil theft.”

Back in the 2000s, armed militants in Nigeria’s oil-rich Niger Delta, including members of the
Movement for the Emancipation of the Niger Delta (MEND), routinely kept hundreds of thousands of barrels of oil off the market.

At its peak, MEND slashed Nigeria’s output by half and cost the government $19 million in daily defence outlays, according to data cited by the RBC Capital Markets team. At the same time, the group painted itself as a “political organisation that wants a greater share of Nigeria’s oil revenues to go to the impoverished region that sits atop the oil.”

In an effort to curtail the losses, the government signed an amnesty agreement in 2009 and pledged to provide monthly cash payments and vocational training programs to nearly 30,000 former militants in exchange for cooperation. Some of the more influential members, including the ex-leader of MEND, Government Ekpemupolo (known as Tompolo), received lucrative “security contracts” worth nearly $100 million a year.

The arrangment was a pretty good Band-Aid. But it failed to address the fundamental drivers of instability in the region such as poverty, corruption, and the proliferation of weapons. Plus, according to the International Crisis Group, only 151 of the 15,451 graduates from the training programs found jobs with “credible organisations” by March 2015.

Fast forward to today: President Muhammadu Buhari, who was elected on an anti-corruption platform in 2015, has been cracking down on corruption in the region by axing expensive security contracts and issuing indictments for theft, fraud, and money laundering. Earlier in the year, the Lagos High Court even issued an arrest warrant for Tompolo.

Soon after, the Niger Delta Avengers started attacking various energy infrastructure in February, which led the country’s oil production to droop by 31% to 1.4 million barrels a day, down from 2.03 million barrels a day in January.

The BBC notes that some locals in the region “believe members of the group are largely elements of previous militant groups like MEND,” while others “believe the new militants are criminal elements that want to draw attention to themselves now” that former President Goodluck Jonathan is out of office.

In light of this background, Croft told Business Insider that the resumption of payments ends up looking like a move by the Buhari administration to meet the militants half-way without completely backtracking on the anti-corruption agenda, but also to undercut the militants’ claims of being the region’s so-called “Robin Hoods.”

Plus, it’s also worth noting that the recently resumed payments worth $204 a month are significantly less than the multi-million dollar “security contracts.”

“Buhari would likely have to make a much more unsavoury deal — one that would undercut his primary reason for being in office [namely, his anti-corruption campaign] — to secure the peace in the Delta,” argued Croft in her note.

“There is nothing to indicate yet that he is ready to make such a devil’s bargain.”

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