News on Nigeria’s 2007 election - Expect higher oil prices
April 25, 2007

The results of Nigeria’s Presidential election, held on Saturday, were announced Monday by the EU’s poll observers. Umaru Yar'Adua, successor to Nigeria’s current President, Olusegun Obasanjo, has won the country's presidential elections, according to official results. However, the EU observers said that the election process was basically the worst they’ve ever seen. Ballots weren’t delivered, ballot boxes were stuffed, and voters were either bribed or intimidated by the government. Over 200 people have been killed in election-related violence.

As a result, oil prices (U.S. light crude) have risen to $65.33, up from $61.92 since April 10, and a 20% increase since the January low of $54.51. Oil prices will probably continue to increase throughout the summer, a result of continued uncertainty in Nigeria and demand from the summer driving season in the U.S.

What Nigeria’s 2007 elections news means:
Nigeria is the fifth largest exporter of oil to the U.S., and Africa’s largest country in oil production and population. Oil provides 90% of Nigeria's revenue, and contributes 25% of its GDP. In 2006, Nigeria's GDP growth was a healthy 5.3%, although inflation was at an uncomfortable 8.6%.

However, violence in the past year has reduced Nigeria’s oil output by 25%, costing the government $4 billion last year. Foreign oil companies operate the equipment, but must act as junior partners to the government. The insurgency has kidnapped 60 foreign oil workers in the past year as a way to force the oil companies into improving the local villages and providing jobs to neighboring workers.

Despite the high oil revenues produced in the region, many villagers have no electricity, and instead suffer from acid rain produced by pollutants from the oil rigs in the area. This pollution also destroys the fishing and agriculture villagers have traditionally used to support themselves. Since oil production is not job intensive, the local residents have actually suffered a net loss from having oil fields in their backyard.

Despite Nigeria's oil richness, 2006 GDP was only $1,400 per person, making it poorer than Haiti, North Korea or the Gaza Strip.

This is the first election held in Nigeria where a military coup was not involved. Nigeria has been ruled by cruel and corrupt military coups from its independence in 1960 to 1999, when President Obansanjo was elected.

President Obasanjo has had mixed reviews. On the plus side, he has lessened corruption. On the minus side, however, his economic reforms have caused unemployment, inflation and the violence in the oil fields. Furthermore, he had tried to extend the constitution to have his term extended another four years, but was defeated in the Nigerian Senate last year.

Action steps:
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What should the other two-thirds be in? Check out my total financial planning strategy in “Retirement Planning 101”.

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