Nigeria is the largest oil producer in Africa and the world’s fourth-leading exporter of liquefied natural gas (LNG), despite continuing instability and corruption that frequently disrupt at least some of Nigeria’s energy industry activities. The country is the most populous nation and largest economy in Africa, as well as a member of OPEC. For these reasons, Nigeria is among the most influential countries in its region.
At 2 million barrels of oil per day, Nigeria is Africa’s largest oil producer, and its proven crude oil reserves are second only to Libya’s on the continent. The majority of Nigeria’s reserves are located along the Niger River Delta and offshore. Continued expansion of deepwater offshore production in Nigeria has contributed to the upward trend in oil output. To promote deepwater exploration, the Nigerian government has matched increasing water depths with offers of greater revenues for international oil companies.
The ups and downs in Nigerian oil production due to instability and theft of crude oil (often called “bunkering”) would seem to present a serious problem for Nigeria’s government, which depends on oil revenues for most of its income. However, the Nigerian government has been able to handle the fluctuations in the oil market by relying on its excess crude account (ECA). The ECA allows Nigeria to set aside revenue in good years to cover shortfalls at other times, insulating Nigeria from temporary shocks to oil prices or supply.
Nigeria is a regional leader in coordinated counterterrorism and peacekeeping efforts, as well as a leader in several regional organizations. With the largest army in Africa, Nigeria is one of the major forces in African Union military operations and one of the top contributors to U.N. peacekeeping operations.
Nigeria has experienced security issues in its northeast and south. In the southern oil-rich Niger Delta, militant groups such as the Movement for the Emancipation of the Niger Delta have disrupted oil production by attacking oil infrastructure and kidnapping oil workers. Starting in 2009, the Nigerian government offered cash payments and training to militants who were willing to demobilize, and some turned in their weapons and halted their attacks.
Separately, Nigeria also contends with the violent Islamic extremist group Boko Haram in the country’s northeast. Boko Haram’s activities are generally unrelated to the energy sector, since the group operates far from Nigeria’s oil and gas fields. In a general sense, Boko Haram ideologically opposes Western influence in Nigeria, and such influence might be loosely associated with the energy sector, but that link is at most very loose and indirect. Boko Haram seems to focus more on Western education and cultural influences than on corporate and economic ties. Perhaps the most important connection between the energy sector and Boko Haram is through the level of state capacity in Nigeria. Oil and gas revenues may help the Nigerian government invest in military and counterterrorism capabilities to combat Boko Haram; on the other hand, Nigeria may be subject to the “oil curse” weakening its governance because so much of the country’s revenue comes from oil. Weak governance could be a key enabling factor for certain challenges to Nigerian security, such as Boko Haram.