What’s Next for Nigeria?

Sure, the elections were rigged, but the economic future is relatively rosy.

President-elect of Nigeria Umaru Musa Yar’Adua

Nigeria’s April elections were neither free nor fair. Defeated presidential candidates have called on supporters to hit the streets, and the threat of violence continues to spook foreign investors. But those betting on the country’s economic stability can take heart: Whatever the political turmoil generated by the elections, too many players within the country now have an interest in bringing Nigeria’s closed-down crude-oil production back on line.

That’s important, because Nigeria earns 86 percent of its export revenue from oil, focusing its new leaders on the challenge of pacifying the country’s oil-rich Niger Delta region. In coming months, the new leadership will likely restore the flow of substantial amounts of Nigeria’s crude by approaching local militia leaders, who are only too glad to be rid of outgoing President Olusegun Obasanjo, with a mix of carrots and sticks. Obasanjo spent more of Nigeria’s resources on fighting the rebels than on investments in new infrastructure. But the rebels have good reasons to cut a deal with his successor.

For the moment, it’s the bad news that’s making headlines. Umaru Musa Yar’Adua, plucked from obscurity by Obasanjo, won a landslide presidential victory. As with the gubernatorial and state assembly elections held a week earlier, observers—both Western and African—charge that the outcome resulted from widespread vote rigging. Deadly violence punctuated both the election campaign and the balloting itself. More will likely follow.

Obasanjo’s willingness during the campaign to use the so-called Independent National Electoral Commission and other state institutions as political weapons on behalf of his (and Yar’Adua’s) People’s Democratic Party has given the PDP a much tighter grip on power. The party now controls three-quarters of the nation’s governorships and about two-thirds of seats in the National Assembly. In addition, many of the new PDP lawmakers were handpicked for their loyalty, not their political skills, giving Yar’Adua what may prove a rubber-stamp legislature.

As Yar’Adua works to assert his legitimacy and consolidate political power, reforms begun under his predecessor, such as centralization of the banking sector and several rounds of privatization, will surely face political challenges. But delta oil production should increase substantially over the next several months as a new cast of political characters seek to finance spending projects meant to bolster their popularity.

The new president will offer the delta’s various rebel groups new incentives, such as new investments and guarantees of good treatment for jailed militia leader Asari Dokubu, to let the oil flow—and the concentration of political power he will enjoy will give him the means to deliver. To realize his plans for increased spending on national infrastructure projects, agriculture, and an expansion in electricity generation, his government will need all the oil revenue it can produce.

Six newly elected governors in the delta provinces, whose own legitimacy is suspect and who hope to win new friends by spending public funds, will forge local deals to reduce tensions in the region. The various militia groups, which have shut down as much as 30 percent of Nigeria’s oil output, can earn cash only by allowing more oil to flow. Organized crime organizations cannot steal oil from empty pipelines.

Militia attacks on oil pipelines in the delta on May 8 halted the production of around 150,000 barrels per day of crude output. But claims of responsibility included an explanation that the intent was to “send Obasanjo off in shame” and to deliver the incoming government a message. These and other recent attacks represent more of an open negotiating position than any new declaration of war.

Many of the delta communities that depend on the presence of foreign oil workers and production facilities to fuel their economies have dispatched local leaders to plead with Royal Dutch Shell to reopen operations closed for security reasons. The effort has paid off. Shell, the delta’s largest onshore oil producer, has announced plans to reopen the 380,000 barrels-per-day Forcados oil fields as soon as June or July.

Short of a dramatic and unlikely attempt by the outgoing National Assembly to impeach Obasanjo, annul the elections, and install an interim government, Nigeria will mark the country’s first (relatively) peaceful handover of power from one elected civilian government to another on May 29. Beneath that story, however, is a slide toward a kind of democratic authoritarianism, a system in which “managed” elections are used to give one-party rule a veneer of democratic legitimacy. Only the country’s judiciary, which foiled Obasanjo’s efforts to exclude his vice president and personal rival Atiku Abubakar from the presidential ballot, retains some independence.

But while democracy advocates will rightly condemn this authoritarian trend, the country’s economy will draw near-term benefits from it. With tighter control of Nigeria’s fractious political environment, Yar’Adua will have a freer hand than his predecessor to push through politically controversial reform measures and to deliver on promises to delta rebels.

What’s more, there is another source of near-term stability. In a state as socially and culturally diverse as Nigeria, most of the political players recognize that only mastery of the art of the stability-enhancing deal can ensure long-term personal prosperity. The new president knows he must find common ground with some of his rivals to ensure that Nigeria’s have-nots do not pursue political and economic goals through violence and that the military remains on the political sidelines.

Atiku Abubakar and his Action Congress party have called for public protests and a judicial reversal of his electoral fortunes. Unless Yar’Adua moves to strike a deal with him, offering positions in his government to Abubakar allies and dropping corruption charges against him, for example, he may find himself forced to up the stakes in Nigeria’s elite infighting by jailing or exiling him.

Nigeria’s longer-term stability may well depend on Yar’Adua’s ability and willingness to make the right deal. Obasanjo is set to become chairman of the ruling party, a position from which he can protect his political and financial interests and ensure that Yar’Adua doesn’t give his rivals too much slack. If he objects to any rapprochement between Yar’Adua and the opposition, the new president will have to either abandon the deal or risk alienating the still-influential Obasanjo, the man who made him president. Whichever deal Yar’Adua makes, he may have to resort to authoritarian tactics to ensure it can be enforced.

But in the meantime, the United States, India, China, and others will continue to import Nigeria’s light, sweet crude oil. As global demand for energy increases, foreign direct investment in Nigeria’s energy sector will grow. Whatever the longer-term risks Yar’Adua’s deal-making may generate, Nigeria’s near-term economic outlook is poised to defy low market expectations.