Africa’s new oil exporting nation

Chinese companies have done in Niger what their western competitors failed to achieve since 1960. They developed oil fields near the border with Chad. Production is dwarfed by Nigeria, however, and that West African giant’s policies still have a great impact on Niger.

Niger’s government has been looking for black gold ever since this West African country became independent in 1960. Companies from Europe and the US were granted prospecting rights, but until recently not a drop of oil was pumped from the ground. The turning point came after a lengthy search by the China National Petroleum Company (CNPC). The new oil fields are in the east of the country, close to the border with Chad, near Agadem, a Saharan oasis. In January 2012, Niger joined the illustrious circle of Africa’s oil-exporting nations, albeit as a junior member. Production runs to only 20,000 barrels a day, which is just a fraction of the output of neighbouring Nigeria, the continent’s biggest oil producer.

Currently 13,000 barrels are exported, the rest serves the needs of Niger’s 15 million people. Although the volumes are modest, the Agadem oil fields inspire wild hopes among many Nigeriens. Official forecasts are exuberant as well, stating that oil revenues might jump-start the country’s economy.

Disappointment at first

Before the first local oil reached the markets, new petrol stations were mushrooming in the country’s urban areas. Private operators were buying petrol in neighbouring Nigeria and hoped to see their businesses flourish once they would purchase supplies from Soraz, a refinery that processes Nigerien crude oil in Zinder, Niger’s second largest city.
Those dreams burst when Niger’s government announced fixed fuel prices. The litre retail pump price dictated by the Ministry for Energy and Petroleum is equivalent to € 0.88, compared with € 1.03 prior to marketing by Soraz. The announcement triggered storms of protest nationwide; people found the price far too high in comparison with cheap petrol smuggled from Nigeria. According to estimates, half of Niger’s cars run on illegal fuel. The border between the two countries is 1,500 kilometres long. Before Nigeria’s government cut fuel subsidies in January, petrol was sold for less than € 0.40 a litre at Nigerien black markets.

Foumakoye Gado, Niger’s minister for petroleum and energy, justified the high prices for Soraz petrol by pointing to the refinery’s investment costs of $ 200 million. Moreover, he cited other factors as driving the petrol price, including transport costs and a hefty value added tax.

Dogged insistence on subsidies

Such explanations cut no ice with his furious people. By the end of 2011, every section of society was in uproar. In Zinder, people took to the streets, and two people were even killed during rallies. Just as Niger started to market its oil, however, the Nigerian government announced it would end petroleum subsidies.

That decision cost Nigeria’s President Goodluck Jonathan a good deal of support in his nation. However, it helped the governments of neighbouring countries, including Niger, in their long, but to date mostly fruitless struggle to stop petrol smuggling from Nigeria. According to SONIDEP (the Société des Produits Pétroliers du Niger), such smuggling reduced government revenue in Niger by around € 15 million last year.

In Niger, the end of subsidies in the neighbouring country caused fuel prices to double and even treble in some places. The black market instantly dried up; despite the earlier harsh criticism of fuel prices, queues of motorists suddenly formed at service stations. The protests subsided, so the government in Niamey, Niger’s capital, certainly benefited from policy change in Nigeria. But it is now worried about what Nigeria will do next. To stem protests in his country, President Jonathan announced in January that a partial fuel subsidy will be re-introduced.

Yahouza Sadissou

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