Disasters in the Delta: Oil Spills, Externalities, and Militant Competition in Nigeria

Oil infrastructure near water March 5, 2019 Black Market Crude

The aims of this study are twofold: 1) to combine data on oil spills and economic outcomes to estimate the effects of spills on investment and productivity, and 2) to study the dynamics of oil-related violence in the context of a 2009 policy in which the Nigerian Federal Government granted militants of the region amnesty from prosecution in return for ceasing attacks on the oil industry. This analysis is guided by a model of Cournot competition between militant groups, which predicts that amnesty may actually increase attacks and decrease production by increasing competition between militants for oil fields. Taken with estimates of the externalities, we can understand how the incentives created by amnesty affect the oil industry and the extent of environmental damage, and whether there are downstream effects on productivity and economic welfare.