The DESIX shows fallen scores in May for both Nigeria and Egypt due to political succession, uncertainty and violence.
By Sebastian Spio-Garbrah & Peter Khalil, analysts in Eurasia Group’s Middle East & Africa practice
Nigeria and Egypt were among the biggest movers in the May edition of the Deutsche Bank Stability Index, with scores for both slipping due to uncertainty over presidential succession and a spate of attacks affecting economically essential sectors. In Nigeria, escalating political tensions over the proposed constitutional amendment to allow President Olusegun Obasanjo and two-term governors to run for a third term jeopardized government stability. Meanwhile, militia groups affiliated with jailed leader Asari Dokubu intensified their attacks on infrastructure in the oil-rich western Niger Delta by detonating two remote-controlled car bombs, further weakening the country’s already flagging security scores. Egypt’s overall score dropped largely because of continued concerns about who will succeed the aging President Hosni Mubarak.
Uncertainty about future government stability in Egypt was compounded by fears about domestic security in the wake of the recent bombings in Dahab, a city vital to the country’s key tourism sector. Although Obasanjo finally confirmed on May 18 that he will step down after his second term when the Nigerian Federal Assembly ruled against the proposed third-term constitutional amendment, political tensions will not necessarily subside. The ruling Peoples Democratic Party has now been thrown into complete disarray. It is increasingly likely that the party will split as key party figures vie for power in 2007. In addition, the amendment’s defeat means that number would be better if the country’s 36 governors are now barred from running in 2007, including the heads of some of the Niger Delta’s key oil-producing states.
As prospective candidates emerge, they will ally themselves with competing militias, which could worsen security in the region further. Although the death toll from the remote-controlled car bomb attacks was limited to less than a dozen, the operation nonetheless illustrated the increasing sophistication of the militias’ tactics, which will keep companies operating in the economically vital Delta on edge.
The ongoing instability has forced oil companies operating in Nigeria to increasingly focus their attention on offshore production instead. Earlier decisions to focus on offshore production are now starting to pay off. ExxonMobil, for example, announced on April 28 that it had commenced production at its 150,000 bpd offshore Erha fields. Increasing offshore production together with rising global energy prices has helped improve Nigeria’s fiscal position in spite of security threats.
In Egypt, President Mubarak has already begun to hand off some of his daily responsibilities to his deputies, but he has yet to name a vice president, which is a key risk to Egyptian stability. Although his son, Gamal, is increasingly seen as the heir apparent, he has publicly denied any intention of being nominated as the next president.
Meanwhile, the Muslim Brotherhood continues to grow in power and is looking to enhance its influence in the post-Hosni Mubarak order. The party is likely to seek to exploit regime weaknesses as the uncertainty over the succession grows. The Dahab bombing was the third terrorist attack in the Sinai Peninsula in 18 months. The attack demonstrates that the perpetrators were aiming to damage more than just the Egyptian economy. By choosing tourist resorts as targets and national holidays to schedule their attacks, the perpetrators seem to be symbolically attacking the Mubarak regime.
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