Nigeria’s Niger Delta region may turn volatile again going by threats from a newly formed militant group. The group by the name War Against Niger Delta Exploitation has threatened to disrupt the 2019 elections if the Federal government fails to show commitment to the development of the region.

“Failure to meet these demands simply translates to our commencement of hostilities. We will frustrate the conduct of the 2019 general elections across the country if the demands are handled with kid gloves.

WANDE also stated that no Presidential candidate had come up with a concrete plan for the Niger Delta.

Bua group

Implications of renewed Niger Delta militant activities

Renewed Niger Delta militant activities in the country could have several implications on the government as well as the economy as a whole.

On government revenue 

Renewed militant activities could have dire consequences on the economy as a whole. The government relies largely on crude oil revenue to fund budgets. An attack on oil facilities, could lead to a drop in revenue.

On the exchange rate  

Crude oil earnings also account for a significant proportion of foreign exchange earnings in the country. A drop in foreign exchange earnings, could lead to pressure on the reserves and ultimately pressure on the exchange rate.

On the banking sector 

Disruption in crude oil production could also have a negative impact on the banking space. Lending to the oil and gas sector amounts to a significant proportion of bank loans. A rebound in crude oil prices and stable production had led to several non performing loans in that space being reclassified.

Investors will feel the pinch

Investors in listed oil and gas firms, as well as banks with significant exposure to the oil and gas sector, will be on the receiving end if attacks resume. Lower crude oil earnings for oil and gas companies like Seplat will lead to smaller dividends for investors. This also applies to banks.

On the economy as a whole 

A drop in growth in the oil sector could lead to lower growth of the economy as a whole, as witnessed in the GDP figures for the second quarter of 2018.

Q2 2018 GDP growth was also constrained by oil GDP with crude oil and gas production contracting by -3.95% compared to 14.77% in Q1 2018 and 3.53% in Q2 2017

GDP growth slowed down from 1.95% in Q1 2018 to 1.50% in Q2 2018.

 

Coronation Research

 

 

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