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Political Risk Map 2021: Mid-Year Update | Nigeria

In a credible worst-case scenario, famine could occur in Nigeria, where households are cut off from humanitarian assistance that has been the population’s typical food and income source for a prolonged period. While the conflict in the northeast has persisted since 2009, nationwide violence in the first half of 2021 has become increased 15%, with 4,726 fatalities reported in the first six months, against 5,444 in the full year of 2020. This has led to further displacement, with the International Organization for Migration estimating that over 2.1 million people had been displaced solely in the northeast, as of February 2021.

Throughout the 2021 harvest season, Boko Haram’s efforts have threatened Nigeria’s agricultural activity in the northern states. The group is responsible for killing 110 farmers in Sokoto State and several more in Borno State. Attacks of this nature have exacerbated food supply chain issues, as northern Nigeria is key for the production of wheat, maize, and ground nuts. This bottleneck has led to inflation of food prices in every month of 2021, to date. Year-over-year, prices have risen 19.6% on certain food products. With violent unrest unlikely to cool down in the closing quarters of 2021, food price growth is forecast to remain in the double digits, with overall inflation anticipated to average 14.6% in 2021.

Social discontent and economic difficulties could easily translate into operational problems.

Insecurity is also likely to remain a central issue in southern and coastal areas, which could inhibit foreign investment in an ever more diminishing oil sector. Militant groups continue to threaten oil installations in the Niger Delta. Following a breakdown in January 2021 of negotiations between the militants’ representative body (the Reformed Niger Delta Avengers) and the federal government, the groups have threatened to escalate the frequency and potency of attacks on vital pipelines and shipments.

In recent months, prominent oil companies have declared force majeure following attacks on assets held in the Niger Delta. Logistics companies also face threats from pirate groups that hold bases along the coast. Unrest is likely to persist in Nigeria’s major metropolitan areas, though not at a scale that presents a profound threat to stability nationwide.

Lagos, Abuja, Port Harcourt, and Benin City experienced social unrest related to societal frustration concerning policy, police brutality, and corruption. Protests led to violent clashes between civilians and police, resulting in 80 deaths and significant business disruption. The government has since enacted a strict policy on protest activity through banning and arresting protesters, in addition to freezing several bank accounts and assets. Popular frustration is likely to persist, mandating that the government dedicate more resources to impending protests in the coming months. The societal discord, requiring a governmental response, would only serve to create a vacuum of resources which militants in the north can seek to exploit further through illicit activity. Such growing inequalities between the north and the south pose long-term political risks.

Nigeria maintains an acute risk exposure to carbon transition due to its reliance on oil, which comprises over 80% of the country’s export portfolio. Additionally, the risks tied to water scarcity and the country’s physical geography remain high, as a significant portion of the populace is exposed to unsafe water, as a result of poor waste management and pollution.

Nigeria has also been afflicted economically as a consequence of the pandemic, primarily due to the volatile oil prices of 2020, serving to stress the low revenue base of the country. Over the last five years, this has constantly remained below 10% of GDP, which — combined with an extremely high debt/revenue ratio and low tax revenues from non-oil sectors — further indicates that the government is heavily compromised in its endeavors to gather revenue. The pandemic and oil price changes of 2020 also increased government debt to around 30 percentage points of GDP last year, with the scope of this substantially unlikely to be attenuated over the medium-term outlook.

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