Democracy has had a relatively strong year-to-date in Africa. Successful transitions in Arab Spring hot spots — Tunisia and Egypt — coupled with a smooth succession of leadership in Mozambique provided high hopes.

But Nigeria’s impending election may dull the democratic shine of Africa in the near term as this emerging country — Africa’s largest economy — struggles to subdue Boko Haram, overcome a low oil price and growing capital deficit for infrastructure projects.

Growing security costs

The terrorism inflicted by Boko Haram in Nigeria is not as promulgated in the same way ISIS promotes its atrocities. But, outside the spotlight, Boko Haram causes similar chaos as government officials struggle to combat lower oil revenues and increasing delays with infrastructure in addition to the rising security costs.

Appeals for multinational forces and a concerted international effort are slowly getting attention. Yet President Goodluck Jonathan needs efforts to speed up more rapidly. His call for participation from the U.S. was neither veiled nor subtle this month when he claimed direct links between ISIS and Boko Haram.

The cost to fight the terrorist network within the country is expensive. Some experts speculate the true price to stop Boko Haram is north of $2.5 billion – a figure very believable when compared to the spending to combat ISIS in Syria and looking at President Jonathan’s recent request to borrow $1 billion.

Limited revenues

Oil accounts for approximately 70 percent of the Nigerian $500-600 billion economy. The approximate 40 percent drop in the Brent oil price directly (and indirectly) places a strain on $320-420 billion of Nigeria’s gross domestic product.

Nigerian Finance Minister Ngozi Okonjo-Iweala recently reiterated that the country faces a “serious challenge” in this price environment.

Officials have recalculated the country’s budget twice in recent months — first, based on a $78-per-barrel price and then on a $65-per-barrel price. The Brent oil price remains below $65, potentially requiring Nigeria to readjust its budget a third time (especially if the price hits below $47 as it did on Jan. 13).

A sustained low oil price ultimately could reverse Nigeria’s current account surplus and send the Nigerian Naira plummeting further. January inflation statistics show 8.2 percent year-over-year inflation with the naira down nearly 9 percent against the U.S. dollar year-to-date, and down more than 19 percent year-over-year. Low revenues and low liquidity in the near term do not bode well for a potential turnaround.

Boko Haram, in this financially dire situation, receives it strongest recruiting tools: a combination of financially struggling individuals, publicly failing infrastructure projects (as cash is not available), and a populace frustrated with the current overall situation.

The All Progressive Congress (APC) claims Boko Haram is simply a tool to overshadow the pains from a low barrel price for oil.

Some of President Jonathan’s supporters contrarily have expressed beliefs that Boko Haram is a concocted effort by insiders to paint a picture of the leader as incompetent and Nigeria as ungovernable under his rule.

Regardless of which party successfully makes the best claim to the truth, a postponed election until March 28, although likely for security, will only embolden the afflicted, fuel the annoyed and simply frustrate a majority of individuals in the country.

The exit of former Nigeria President Olusegun Obasanjo from the ruling People’s Democratic Party (PDP) manifests this frustration. Obasanjo’s public exit as a founding member – tearing his membership card up in public – signals the growing tension.

Going Forward

The hope for many Nigerians is that 2015 will bring change to the country. But whoever wins will have to operate with a budget at three-fourths the size of the 2014 budget.

The losing party will claim the winning party stole the election. An extended lack of consensus or disbelief in the political system coupled with a lack of cash will further stall post-election decisions on infrastructure projects, security efforts and overall economic growth plans.

A rising oil price could bring back the “good times.” On the other hand, a limited budget and a rising threat of insecurity could align political officials to work for Nigeria by reducing corruption, boosting security and supporting economic growth, particularly in non-oil related sectors.

Kurt Davis Jr. is an investment banker focusing on the natural resources and energy sectors, with private equity experience in emerging economies. He earned a law degree in tax and commercial law at the University of Virginia’s School of Law and a master of business administration in finance, entrepreneurship and operations from the University of Chicago. He can be reached at This email address is being protected from spambots. You need JavaScript enabled to view it..

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