Last week, history was made abroad as Nigerian voters unseated an incumbent president for the first time since military rule ended in the country 15 years ago.
Nigeria is Africa’s most populous country, its biggest oil producer, and has its largest economy, but extreme corruption throughout the government and the growing threat of insurgent violence ushered in a changing of the guard.
The country’s president, Goodluck Jonathan, had been criticized throughout his term as a nepotistic ruler who supported the corruption of high-ranking officials.
As the signs of corruption throughout the country became more and more obvious, so too did the vicious attacks and kidnappings organized by Boko Haram — a terrorist group made infamous by its kidnapping of hundreds of Nigerian girls from a school last year.
With these converging plotlines, Muhammadu Buhari won the election handily.
Buhari, a military dictator in Nigeria 30 years ago, won favor for promising a tougher stance on corruption in government and on insurgents in the country’s northern provinces.
He defeated Goodluck Jonathan by 2.5 million votes, forcing the incumbent to concede publicly, which helped avoid one of the violent clashes that have become all too common come election time in Nigeria.
In 2011, when the same candidates faced each other, Jonathan’s victory was marked by nearly 1,000 deaths in violent skirmishes in Buhari’s home province.
I tell you all of this not to offer lessons in international politics, but to illustrate the importance that oil and government corruption plays in the daily lives of people everywhere.
Plus, the new regime in Nigeria could create some investment opportunities in the U.S. energy markets…
Oil Corruption and U.S. Abandonment
Despite the headlines you may see throughout most of the western media, the main issue for voters in Nigeria’s elections was government corruption.
Specifically, the theft of oil money by high-ranking officials within the government.
It was made public last year that about $20 billion in oil revenue for an 18-month period was unaccounted for by the Nigerian central bank. The bank’s president — appointed by Goodluck Jonathan — was fired.
And as the United States abandoned Nigeria as an exporter, the country fell further into corrupt practices…
Before the fracking revolution in the United States, 40% of Nigeria’s exports went to the U.S., but as shale oil production exploded in America, Nigeria was forced to find other customers.
In some cases, Nigeria’s oil companies sold oil to Asian and European buyers, prompting Saudi Arabia and some other big producers in OPEC to cut prices to Asia and set off the current bear market in oil prices.
With oil prices low, instead of investing whatever money was available in the military, health care, and a diversified economy, government officials continued to pillage the country’s accounts. Federal employees went unpaid, reserves of foreign currency were raided, and Nigeria’s version of the dollar — the Naira — lost a lot of its value.
These gross violations by government officials led to Buhari’s victory, but now present problems for the new leader going forward: rampant oil theft, corruption, Boko Haram insurgents, and an economy dangerously reliant on oil and natural gas.
As the new regime attempts to fix these problems, investors in the U.S. and throughout the world should keep their eyes on Nigeria…
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An Important Player in Energy
Although the crisis of corruption and violence in Nigeria represents an opportunity, there are many drawbacks…
You and I know very little of Nigeria beyond what can be viewed in the markets and through diligent research.
But sometimes, such knowledge isn’t enough.
And with oil prices stuck in a crater at the moment, it’s hard to see where Nigeria will raise the money to fix its problems. Of course, if the new government maintains its promises, the situation could improve, but I wouldn’t bet my money on it.
Instead, it would be better to find a safer way to play potential changes in Nigeria.
One of the country’s largest problems is its natural gas industry…
As you can see, production is falling while consumption remains flat. That means the amount of natural gas left for export shrinks along with revenue and GDP.
But, as this production falls, flaring at oil wells in Nigeria increases.
Of all the natural gas flared in the world, Nigeria is responsible for 10%, which means that all of that wasted gas could become a revenue stream for you as well as producers in the country.
You see, there’s a company that’s developed a unique technology to reduce flare gas from oil wells and transform it to make it more profitable.
My colleague, Christian DeHaemer, has researched this technology thoroughly. He recommended it to his readers as an investment on flaring in the Bakken, but as the company grows its presence, it’ll look to expand, possibly to places like Nigeria and Russia where flaring is a growing problem.
To see what this technology is and the company behind it, access Christian’s report that details everything right here.
Good Investing,
Alex Martinelli
With an eye squarely focused on the long-term, Alex Martinelli takes the art of income investing to a higher level within the energy sector. His research has helped hundreds of thousands of individual investors identify well established companies that have a long history of paying out dividends to their shareholders. For more info on Alex, check out his editor’s page.
