The relative peace enjoyed in Nigeria’s oil producing Niger Delta may be a thing of the past, if the latest threat by the Niger Delta Avengers is anything to go by. The militant group, in a release posted on its website, have threatened to attack Nigeria’s deep sea operations in the Niger Delta.
Possible targets mentioned in the post include Bonga Platform, Agbami, EA Field, Britania-U Field, Akpo Field; amongst others littered across the deep waters of the Niger Delta region. The avengers also threatened to attack the Egina FPSO.
What do the militants want ?
The militants are demanding the restructuring of the country, and control of crude oil resources. They also requested for the release of all militants arrested by the Federal Government. Previous ceasefires according to them, had not yielded much benefit.
How does this affect you ?
A potential militant attack could have the following effect on investments and the economy as a whole.
1. Business shut down in the Niger Delta
A militant attack could lead to the few businesses operating in the Niger Delta shutting down. Businesses tend to form clusters in areas where oil exploration and production take place. Multinationals could decide to evacuate their staff and shut down pending when peace returns.
2. Foreign exchange liquidity
A drop in crude oil revenue , in the event of an attack could lead to the Central Bank of Nigeria (CBN) tightening foreign exchange supply. Many businesses in the country are largely dependent on foreign exchange to purchase inputs and raw materials.
Multinationals that operate in the country, also require foreign exchange to repatriate their profits. A foreign exchange squeeze could lead to money being trapped in the country.
3. Cost of borrowing
A militant attack could affect the cost of borrowing externally. Nigeria ramped up her foreign exchange borrowing last year in order to take advantage of low interest rates and reduce the crowding out effect of the Federal Government on the domestic market. Several banks in the country also took advantage of the relative stability in the exchange rate to raise bonds.
Nigeria is largely depedent on crude oil income for her foreign exchange revenue. A militant attack could lead to an increased premium on foreign denominated loans for both government and the private sector.
4. A possible devaluation
If the militant attacks become a reality and are severe, the CBN may be forced to devalue the Naira. This could throw financial projections for many companies into jeopardy, as they would have to spend more Naira servicing foreign loans.
5. Power Outage
Militant attacks could also lead to power outage,as the militants could decide to attack critical gas pipelines. Militant attacks by one group,tend to lead to similar attacks by other groups. Power supply in the country had recently become more regular. A cut in power means businesses will have to spend more on alternative sources of power such as petrol and diesel generators.
