February 12, 2012 5602 VIEWS


Friday February 10, 2012 / Joe Brock, Reuters
An Islamist insurgency in the north is increasingly dominating Goodluck Jonathan's presidency and stifling plans for economic reforms, while an attack on an oil pipeline last week highlighted the fragile peace in the oil-rich Niger Delta.
Jonathan has promised to transform Africa's second-largest economy, but the mainstay oil and gas industry has stalled because much-needed reforms are locked in parliament.
An attempt to scrap costly fuel subsidies was defeated by strikes and street protests, leaving the distinct impression of a beleaguered presidency.
Since late last month Islamist sect Boko Haram has sought to raise its profile with well planned, lethal attacks, including a spate of Christmas Day bombings, one targeting a church on the outskirts of Abuja that killed 37 people and wounded 57.
In its deadliest strike to date, the sect killed 186 people in a coordinated attack mostly targeting police stations in Nigeria's second biggest city of Kano.
Boko Haram, a sect seeking to overthrow parts of the government and impose stricter Islamic law, claimed the Christmas Day attacks, saying they were in revenge for attacks on Muslims during a Muslim holiday in the volatile middle belt.
The new focus on Christians raised fears the group was trying to ignite sectarian civil war, although tit-for-tat violence did not escalate and Boko Haram has since gone back to bombing police stations.
Boko Haram's insurgency used to be associated mostly with regular shootings or crude bombings of police or establishment figures in its home region in the far northeast, where Nigeria borders Chad, Cameroon and Niger.
Boko Haram has since spread throughout the north, and its attacks are growing in scale and sophistication.
Human Rights Watch estimates it has killed around 1,000 people since it launched its uprising in 2009.
Security sources say an increased security presence in its stronghold of Maiduguri is pushing the group's attacks further afield into Kano, the second biggest city, other parts of the north and the capital, Abuja.
They also say it has linked up with al Qaeda's north African wing over the past 6-7 years.
Jonathan declared a state of emergency in affected parts of the north last month, but militant attacks have if anything increased since then.
The escape of the prime suspect of the Christmas Day bomb attack on St Theresa's Catholic church in Madalla, an Abuja satelite town, raised serious questions about the complicity of some senior security officials.
Jonathan, who last month said Boko Haram had supporters in every level of government, sacked and replaced his police chief in response to that blunder.
Local and federal government have been accused of neglecting the underlying grievances of unemployment, poverty and an inequality of wealth that could help smooth a political settlement to the crisis in the north.
In an interview with Reuters on Jan. 26, Jonathan acknowledged this. He challenged Boko Haram militants to come out of the shadows and identify themselves as a basis for talks, an offer they have yet to take up.
What to watch:
- More and deadlier bombings and shootings
- Another strike on an international target
- Efforts to negotiate with Boko Haram
- Court decision on charges against a senator accused of backing them
- Further arrests of sect members
Since an amnesty for militants in 2009, attacks on oil facilities have become much rarer and less destructive, although they do still happen, like the blast that shut down Eni's Nembe Brass pipeline last week.
A statement sent to media said it was from the Movement for the Emancipation of the Niger Delta (MEND), formerly Nigeria's main militant threat and responsible for years of attacks on the oil industry until the amnesty.
The military blamed ex militants and criminal gangs that are nothing to do with them.
Many Nigerians suspect a spat between Jonathan and a former governor ahead of elections in Bayelsa state had something to do with it.
Whatever the reason, it was a reminder of how fragile the relative lull in the Delta is. Even with a fiscally draining amnesty programme, the region remains volatile. Attacks on pipelines to steal the oil in lucrative bunkering operations remain a costly headache.
Piracy off the coast of Nigeria, an offshoot of its delta militancy, continues to make the Gulf of Guinea the second riskiest shipping destination after East Africa's coast.
A week of protests over the abortive fuel subsidy cuts threw into the spotlight public anger over a lack of progress in reforming Nigeria's corrupt oil sector.
The government set up a committee to speed up the Petroleum Industry Bill, a vast piece of legislation aimed at changing everything from fiscal terms to an overhaul of the state oil company, but nothing has been heard from it in the weeks since.
The bill has been under negotiation for more than four years but shows no sign of being passed soon. Jonathan told Reuters he expects a final version to be submitted to parliament by the end of the month.
While that is on hold, Nigeria has held no significant new licensing rounds, and Africa's largest exporter will see a plateau and then a fall in oil output over the next five years.
Plans to unlock its gas reserves, the seventh-largest in the world, will not get investment until the PIB is passed.
Shell and the state-owned oil firm NNPC have come under fire for the environmental damage caused onshore in the Niger Delta, a vast wetlands region where thousands of kilometres of creeks and waterways run through poverty-stricken communities, after a U.N. report on it last year.
A spill from a loading accident in its offshore Bongo facility at the end of December was the worst in 13 years.
What to watch:
- Any comments by the new PIB legislative committee
- Any agreement to pay for a massive Delta clean up
- A resurgence of militant attacks on oil facilities in the Niger Delta
- Further piracy, hijacking incidents
After a week of strikes and protests, Jonathan reinstated the state subsidised fuel consumption regime, although he managed to lock in a 50 percent increase in retail prices.
His caving in to public opinion on this means those payments will continue to drain the treasury into the pockets of rich fuel importers. And questions have been raised about his ability to push through further economic reforms.
Finance Minister Ngozi Okonjo-Iweala is trying to implement the country's first Sovereign Wealth Fund (SWF), aimed at better managing Nigerian oil revenues. State governors are resisting it because they believe it would mean less money for them.
With the crisis in the north and the u-turn on subsidies, Jonathan is in a weak position to take on opponents.
Okonjo-Iweala has also pledged to cut government spending and keep Nigeria within a 3 percent budget deficit target, but that was predicated on scrapping of fuel subsidies, which now looks like it will not happen.
Any oil price shock will leave Nigeria in a precarious position, and force it to borrow heavily.
What to watch:
- Further progress on SWF, opposition to the plan
- Progress towards meeting budget deficit goal
- International oil prices
Pressure has eased slightly on Nigeria's naira currency , owing to good dollar supply from oil traders and a four and a half month high in forex reserves.
The central bank devalued the naira at the end of last year by shifting its target band for the currency to between 150-160 naira/$. It remains right at the bottom end of that band.
The bank kept its benchmark interest rate on hold at 12 percent on Jan. 31, saying it expects any upward impact on inflation from removing fuel import subsidies to be short-term.
Nigeria's foreign exchange reserves rose to $34.67 billion on Feb. 1, raising hopes of a more stable exchange rate on the naira, which the central bank frequently intervenes to support.
For a graphic: link.reuters.com/buq45s
The Nigerian stock market has recovered somewhat from December's near 8-year lows. Although analysts say many valuations are cheap, risk aversion is still a barrier.
What to watch
- Further pressure on the naira, CBN reaction
- Dip in foreign exchange reserves
- Further sell-off or recovery in the stock market
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