Nigeria elections raise the possibility of energy sector reforms

02 January 2019

Atiku Abubakar, the main opposition challenger, is likely to defeat incumbent Muhammadu Buhari in the February 2019 presidential election. If elected, Abubakar is likely to pursue oil and gas reforms that could improve the energy infrastructure outlook. However, Nigeria has made limited progress in tackling security threats, and the risk of Boko Haram attacks on commercial assets will rise in the lead-up to the elections.


Abubakar, a former vice-president and the candidate for the centre-right People’s Democratic Party (PDP), is expected to focus his campaign on the tepid performance of the economy. Buhari will meanwhile focus on corruption issues, particularly as his opponent has faced a number of fraud allegations. Buhari was elected in 2015 on a pledge of cracking down on criminal and terrorist groups, but he has made only limited progress and is likely to lose the election.

Militant groups in the northeast of Nigeria and in the oil-rich Delta region will continue to pose a prominent risk to infrastructure projects. A ceasefire agreed between the Niger Delta Avengers (NDA) and the government in September 2016 remains in place, but transmission stations and valve platforms in the Niger Delta remain at risk as the NDA has threatened to end the truce. Boko Haram’s stronghold is in the northeast of the country, but the risk of an attack on infrastructure assets in major cities such as Kano and Abuja is likely to increase in the run-up to next year’s elections. International employees across Nigeria face a high risk of kidnap for ransom, particularly in the Delta region and in the state of Kaduna.

Inter-communal violence in the Middle Belt states is growing in intensity. In the first half of 2018, 1,300 people are estimated to have been killed in clashes between Nigerian farmers and herders, and these attacks are likely to increase as the election approaches. The growing scope of these conflicts will fuel the risk of urban protests, which are unlikely to cause significant property damage but will pose a risk of business disruption.

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Nigeria emerged from recession last year as oil prices recovered, but economic growth remains modest. Real GDP growth is set to rise from 0.9% in 2017 to 2.4% in 2018, supported by a forecasted 4.3% rise in crude oil production to 2.06 million barrels per day. Despite low general government debt-to-GDP of around 19%, interest payments account for almost 50% of federal government revenues. Nigeria’s fiscal position is vulnerable to energy price fluctuations as the country’s narrow tax base is heavily dependent on the oil industry.

The currency inconvertibility and transfer risks facing companies operating in Nigeria have moderated since 2016, when a lack of access to dollars led United Airlines to withdraw from the country. Foreign exchange reserves have risen from USD 24 billion in October 2016 to USD 47.2 billion in July 2018, equivalent to 10 months of import cover. Buhari is likely to preserve Nigeria’s multiple exchange rate system if re-elected, whereas Abubakar has said that he is in favour of liberalising the currency regime. However, political opposition and vested interests would be likely to limit the scope of these reforms.


The construction industry is forecasted to maintain a robust average annual growth rate of 8% between 2018 and 2022. The election of Abubakar would be likely to support public-private initiatives for the construction of oil and gas infrastructure, particularly as he has pledged to privatise oil refineries and aspects of the Nigerian National Petroleum Corporation. There is also significant demand for power and transport infrastructure in Nigeria. In November 2018, a consortium of Bolloré Ports and PowerChina International Group Ltd won a tender for the development of the USD 4.2 billion Ibom deep-sea port.

However, international companies in Nigeria will continue to face an elevated risk of tax increases or large back-dated regulatory fines. In March 2018, the Nigerian government opened a dispute with the China National Offshore Oil Corporation in the Federal High Court of Lagos for allegedly under-declaring exports, claiming USD 12 billion in compensation. In August 2018, the Nigerian government ordered South Africa-based telecoms firm MTN to pay USD 8.1 billion for allegedly taking money out of the country illegally.

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In this month's Risk Outlook, we also provide a detailed forward looking assessment of developments within the security, trading and investment environments for India, Viet Nam, Angola and Ethiopia all of which have been the subject of recent enquiries from JLT's client base.

World Risk Review January 2019

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