The Niger Delta, Nigeria's main oil producing region has been the target of violence and kidnappings from groups demanding a larger share of oil revenues for the local population. The unrest is however confined to the region and hasn't significantly affected investment in the rest of the country.
Map of Nigeria with the area considered part of the Niger Delta region in red.

The spate of kidnappings, pipeline bombings and general unrest in Nigeria’s oil producing hub, the Niger Delta creates the perception that the entire country is unfit for business. TradeInvestNigeria staff writer, Nelly Nyagah looks at what the problems in the Delta really mean for investment in the country.

It is said the best time to make money is when everybody is freaking out. For Toks Abimbola, this has turned out to be a very rewarding reality. His energy and infrastructure company Shoreline Energy International has over the past half decade acquired an impressive portfolio of investments in Nigeria.

Abimbola's reasoning is simple and compelling; Africa is growing and changing rapidly, Africa is building more factories, power and water plants. Africa's real estate is booming, and its infrastructure needs revamping. Businesses positioned to take advantage of these opportunities will become the most valuable in our era.

Shoreline through its subsidiary company Shoreline Integrated Logistics Operation Support (SILOS) recently acquired an operating base in Niger Delta's biggest city, Port Harcourt.

"...the fallacy of narrative is evident in the current view of Nigeria especially with regard to the Niger Delta. Perception is not reality and many investors are missing opportunities....had we relied on narrative we would never have made this investment, nor would our future clients who represent major international oil and gas companies." says Abimbola.

Reasons for the crisis

The Niger Delta crisis has for a long time been the monkey on the back of Nigeria's political leadership.

The area always had acrimony between the local communities and external forces. Seeds of resentment were sown way back in the 16th century when the delta served as an outlet for slave trade, which generated resentment between the locals and the trade lords.

By the 18th century it was renowned for palm oil export to Europe. Then palm oil was as important to Western emerging industrial countries as crude oil is to the global economy today. Trade in palm oil produced conflicts arising out of the struggle for control of the palm oil fields. Since the advent of crude oil explorations in the Niger Delta, armed attacks on the Nigerian oil industry by aggrieved Deltans have heightened international security concerns on the country.

In the recent past years, the activities of criminals and genuine crusaders for development in the oil-rich region have put Nigeria on the spot. Oil installation attacks, vandalisation of pipelines and the kidnapping of foreign oil workers have been the prime activities of militants in the region.

More recently, increased cases of kidnapping of young children of the rich and family members of politicians, have underscored the need to concretely address the genuine development needs of the Niger Delta. Already many expatriates are unwilling to work in the region.

About 20 million residents of the 70 000 square kilometre region of swamps, rivers and tropical forests, feel alienated because many continue to suffer the negative impacts of oil: violence, environmental degradation and poverty.

The Movement for the Emancipation of the Niger Delta (MEND), the most publicly visible militant group, is dedicated to armed struggle to object the environmental degradation and underdevelopment of the region. MEND is fighting for total control of the region’s oil wealth saying local people are not benefiting.

How it affects investment

So should potential investors in Nigeria be worried about the state of security in the Delta?

Abimbola says any investment has its attendant risks that need to be managed. "As investors in Africa we face risks that are common to all markets, but have uncommon solutions in Africa. There is oftentimes a lack of decision making information and opacity that frightens many a board room in European markets." He says these "risks" however often represent significant advantages as they create a barrier to entry for local and international competition.

The foreign media, who Abimbola accuses of weaving stories about Nigeria around ambiguous facts, have been blamed of sometimes peddling information meant to deceive investors from making profit from the fast growing economic sectors.

Nigerian President Umaru Yar'Adua says his administration is determined to stop this nightmare permanently. Last week at State House he told a delegation of Niger Delta leaders; "we shall do anything as an administration within available resources and the imperfect constitutional provisions...to solve the problems in the Niger Delta."

This year 20% of the total federal government budget was earmarked for tackling crime and restoring law and order. N444 billion (US$373 million) was specifically allocated to the Niger Delta.

The recent establishment of a full-fledged ministry to serve as the vehicle for the delivery of a rapid socio-economic development in the southern oil-region indicates a change in government's strategy of confronting the Niger Delta militants with arms.

Investors must have faith and support for the federal government's strategies to remove insecurity perceptions peculiar to the country if they want to partake in the existing investment opportunities.

Finance minister Dr. Shamsuddeen Usman believes global investors without a 'Nigeria Strategy' are missing out in a key market. According to a security report for Nigeria released this year; slow growth outlook for developed economies will continue to increase portfolio activities in the emerging markets.

Dr. Hamadoun Toure, Secretary General of the International Telecommunications Union knows Nigeria is a haven for FDI, particularly in telecommunications and ICT.

He reasons if insecurity was so rampant in the country, no investor would want to explore opportunities. Companies like Zain, MTN and Etisalat are doing roaring business in Nigeria. "Figures don't lie. They are the biggest testimonies for how conducive it is to do business in Nigeria. This is the right time to do business in Africa if you want to record good returns."

While opportunities abound in many of its main economic sectors, with abundant raw materials and a big domestic market, Nigeria is encouraging diversification to reduce reliance on oil, which contributes over 90% of its foreign revenue earnings.

The federal government recognises it must continue its present efforts at bringing peace to the Niger Delta, as a clear signal of its will to make Nigeria safer for doing business. How President Yar'Adua fares in this will determine whether Nigeria's plans to attract $600 billion in FDI by 2020 will succeed.