1. Brendan Riske
Nigeria, Boko Haram, and the Oil Price Decline
The year 2014 saw several positives for Nigeria. Revisions to their economic statistics
lead to them being declared the largest economy in Africa. In the midst of the worst Ebola
outbreak in history, the Nigerian government was able to quarantine the virus among a few
people and eventually rid the country of its presence. However, in my opinion, Nigeria will have
tough challenges to face in 2015. This article will address the reasons for my prediction.
The largest setbacks for Nigeria in 2014 come from the government’s ongoing battle with
a group known as Boko Haram. Nigeria has a long history of ethnic and religious tensions, and
was ruled by a strong military dictatorship for most of its modern history. One consequence of
democratization during this century in Nigeria has been the resurgence of Islam as a political
factor. Muslim groups, primarily concentrated in the north of the country, have generated support
by appealing to Islamic values and Islamic social institutions. In many areas sharia law has been
instituted. Thus regional politicians have clashed with nationalists, who support western values
and institutions brought in by the British during their colonial rule. The lack of government
support and high corruption have caused many Nigerians to reject the national government, and
the popularity of regional groups has been inversely related to that. This has been combined with
political instability, with President Goodluck Jonathan’s reelection seen as a violating of the
power sharing agreement between groups in the predominantly Muslim north and the Christian
south. Thus, I would argue that a poor functioning government was a key in building support for
Islamists in northern Nigeria.
Originally known as “Jamā‘atu Ahli is-Sunnah lid-Da‘wati wal-Jihād” or “People
Committed to the Prophet's Teachings for Propagation and Jihad”, Boko Haram has expanded
rapidly over the last 15 years. Boko Haram, which means “no to western education”, is the name
adopted by the organization. Although it was founded in 2002, it was not until 2009 that the war
between Boko Haram and the government began in earnest. That year saw the first clashes and
attacks between these organizations. The original leader of Boko Haram, Mohammed Yusuf, was
killed fleeing arrest after the government launched a crackdown called Operation Flush. This
started a gradually worsening conflict. Boko Haram began using suicide bombings as a tactic to
fight the Nigerian government. Politicians and police officers were the first targets, but the
campaign has become one of general violence and chaos over time. Then Islamists built up their
military forces in the North, where they had support. In the last several years Boko Haram rebels
have launched a military campaign in northern Nigeria, capturing towns and enforcing their
control. Thousands of civilians have been killed, and hundreds of thousands have fled to other
parts of Nigeria and neighboring counties. The year 2014 saw the worst fighting since the
conflict began. The group gained international notoriety following its capture of a large group of

2. schoolgirls from Chibok, Nigeria, in April. The leadership also declared a “caliphate” in the
territory they control in northern Nigeria. Large portions of Borno state, the region of the country
where the movement began, are considered under their control, although the capital Maiduguri
remains in government hands. Recently, the town of Baga, and its army base, was seized by
Boko Haram. This resulted in the largest killing of civilians in one place since the war began,
with claims of over 2,000 dead. It also represents a serious defeat for the Nigerian military, who
were forced to flee after running out of ammunition and supplies. They had previously retaken
the town after its capture early in the civil war by rebels. The government has thus far been
unable to retake the town.
This year has also seen another major development in Nigeria, a major decline in the
price of oil internationally. Nigeria is the largest oil producer in Africa, and a member of OPEC.
The country is estimated as the 12th largest oil producer in the world, with roughly 2.5 million
barrels produced per day and 2.3 million barrels exported. The government relies heavily on
revenue from the export and sale of oil to fund itself. It is estimated that oil revenue makes up
83% of the Nigerian government’s revenues. Exports of goods and services, including crude oil,
make up 49% of the country’s GDP, and oil is the primary source of foreign exchange. Crude oil
is also makes up 95% of the value of exports from Nigeria. Over the course of the last several
months, the average price of oil internationally has fallen by over 50%, going from over $100 a
barrel to slightly less than $50 today. The cause of this decline is currently undetermined, but it
is likely that in the short run the price will continue to decline, and that prices will stay in the
range of $40-80 dollars for at least several years.
Simultaneously, the value of the Nigerian currency, the Naira, has dropped. It has seen a
decline from 159 Naira per USD at the beginning of the year to a low of 187NGN/USD, with a
new average around 180NGN/USD. Within the last week it began to hit its upper emergy bound
of 200NGN/USD. This is the result of a lower demand for the Naira to buy Nigerian oil whose
price continues to fall. While the fall in the exchange rate in the short run helps the Nigerian
government balance its budget, as lower revenues are offset by getting more Naira per dollar,
over the long term this will have a major negative effect on Nigeria. It needs to import a large
amount of goods and services, whose cost will increase due to the exchange rate. Thus the
decline in oil prices signals a time of difficulty for the Nigerian economy and the government’s
budget. Not only could Nigeria see its GDP decline, but it could also see the government make
drastic cutbacks to services or raise taxes. Either of these methods will likely have a negative
impact on the economy, especially the raising of taxes. Services in Nigeria are already of poor
quality due to low levels of funding and corruption. It is unlikely that Nigerians will want to see
a cutback in these already meager services. It is also unlikely that productive Nigerians will be
willing to pay more taxes to support to a corrupt and poorly functioning government. Thus it is
unclear how the current crisis will be resolved, but mathematically government costs must fall or
taxes must rise to compensate for the loss of revenue from oil. To bridge the gap the country may
turn to international loans, however this is not a long term solution to an unbalanced budget.

3. As the conflict continues into the New Year, I predict the situation will take a turn for the
worse. Already, the Nigerian Military has only had mixed success against Boko Haram. During
the early years of the war they were able to drive Boko Haram fighters out of territory they
captured and back into the mountains along the Cameroon and Niger borders. However, the army
was unable or unwilling to pursue them further. The terrain of these areas and their remoteness
make operations difficult. This is combined with an overall drop in effectiveness of the Nigerian
military. Corruption has always been a problem, but now faced with a real foe it may cause the
collapse of the Nigerian military. Nigeria has a long military tradition, and military leaders have
ruled the country during most of its post-colonial existence. However, the current army is in bad
shape, in terms of equipment and morale. Reports indicate that much of the military budget ends
up lining the pockets of commanders, instead of buying new equipment or paying salaries. This
leads to a low morale, as well as a loss of fighting effectiveness as new vehicles and weapons are
not purchased. Even ammunition supplies may not be adequate. Thus when this army faces Boko
Haram militants, it is unable to successfully carry out operations. The main advantage the
Nigerian military still has is its technological superiority. The Nigerian military has many air
assets, as well as armored vehicles and heavy artillery. Using these weapons in conjunction to
support infantry advances has been the primary tactic thus far against the rebels. This tactic is
needed because the infantry has not been effective against Boko Haram on its own. Thus the
little battlefield success the Nigerians have had thus far relies on expensive high tech weaponry.
This leads me to the crux of the matter. Nigeria needs money to keep its military going. It
primarily funds its military with oil revenues. As the oil price declines, these revenues will also
decline. Already tight money for supplies and salaries will be reduced. In the recent massive
Boko Haram assault against Baga, Nigerian troops ran out of supplies and ammunition and were
forced to retreat. The attack on Baga is the largest Boko Haram attack to date, and is likely
indicative of future larger operations to be carried out by the group. It is also a harbinger of what
may happen in future battles between government forces and rebels. With low morale and few
supplies, the Nigerian military may be unable to even hold its current territory against Boko
Haram, let alone recapturing areas of the country taken by the rebels. As the government loses
revenue due to the oil price decline, these issues will only get worse. The worst case scenario
would see a Nigerian government unable to pay its military and thus losing control of the
northern section of the country to Boko Haram. I would even argue that this is likely if
international military help does not come.

4. Sources:
General Information on Nigeria
 http://data.worldbank.org/country/nigeria
 https://www.cia.gov/library/publications/the-world-factbook/geos/ni.html
 http://en.wikipedia.org/wiki/Boko_Haram
 http://fas.org/sgp/crs/row/R43558.pdf
NairaExchange Rate:
 http://www.xe.com/currencycharts/?from=NGN&to=USD&view=1Y
 http://www.zerohedge.com/news/2015-01-21/oil-producers-currency-collapse-continues-
nigerias-naira-crashes-200
 http://www.zerohedge.com/news/2014-11-25/nigeria-raises-rates-devalues-defend-collapsing-
currency-oil-price-blowback-spreads
BokoHaram:
 Name and historyinformation: http://www.un.org/News/Press/docs/2014/sc11410.doc.htm
 Name information: http://www.megatchad.net/publications/Newman-2013-Etymology-of-
Hausa-boko.pdf
NigerianMilitary:
 http://www.reuters.com/article/2014/05/09/us-nigeria-military-insight-
idUSBREA4809220140509
Oil IndustryInformation
 http://en.wikipedia.org/wiki/Petroleum_industry_in_Nigeria
 http://www.eia.gov/countries/cab.cfm?fips=ni