From Nigeria to Nauru
From the largest countries to the smallest, understanding the ocean economy requires setting (or resetting) a global mindset.
“The port of Lagos in Nigeria has one of the worst reputations for bribery, perhaps because for many years a ship required more than 130 signatures from inspectors before it could offload any international cargo.”
~ Outlaw Ocean
From Nigeria to Nauru, participants in the ocean economy - whether investors, founders, environmentalists, or wandering surfers - are going to need to take a global lens to their outlook and might even come across a few places that they’ve never heard of before.
With a background in energy, I’ve always kept one eye on what’s happening in Nigeria from an oil production perspective. Understanding its role in the demographic trends that will define the future of the African economy is a different matter.
Similarly, despite a lifelong obsession with travel, news, geopolitics, and even island hopping when a strange place called Nauru began to show up in news stories I had break out a map.
This will continue to be the case for observers of the ocean economy. After all, it was the Seychelles that launched the first blue bond and Guyana looks to become the next, and perhaps last, big winner of the petro-lottery.
So let’s take a quick look at why you need to care what’s happening in these two drastically different places as examples of how the globe tends to shrink when you’re an observer of developments in the ocean economy.
Nigeria - Regional Impact of the Recent Presidential Election
“...this part of west Africa will keep growing. By 2100, the Lagos-Abidjan stretch is projected to be the largest zone of continuous, dense habitation on earth, with something in the order of half a billion people.”
+Megalopolis: How coastal west Africa will shape the coming century - The Guardian
The recent presidential election in Nigeria was sure to be marred by flaws, corruption, and voter irregularities. Without going into the chances of the election itself being overturned (seeming less likely every day), initial thoughts in the financial community were positive.
Incoming president Bola Tinubu is giving a solid nod toward reforms that they needed to hear to put Nigeria back on the investment map.
In his inaugural speech, Tinubu stated:
“I have a message for our investors, local and foreign: our government shall review all their complaints about multiple taxation and various anti-investment inhibitions. We shall ensure that investors and foreign businesses repatriate their hard-earned dividends and profits home.”
+Foreign investors in Nigeria look forward to return to orthodoxy - FT
In addition to the lifting of currency controls, Tinubu took a shot at fuel subsidies. Instead of an expected phase out, he bluntly stated, “The fuel subsidy is gone.”
+As Nigeria scraps fuel subsidy, a vibrant black market collapses - Reuters
This sentiment matters to the holders of pursestrings that have the ability to pour billions of foreign direct investment dollars into any given economy.
Currency controls have given rise to two, distinct foreign exchange rates, a system that can’t help but be gamed (never to the benefit of the host government).
Foreign exchange restrictions have made it impossible for investors to know how they will be able to get money out of the country, even if an investment is successful.
Fuel subsidies have drained government coffers, as they always do. The critical oil industry has been so mismanaged, pillaged and strangled that production declines have crimped government revenues. Oil production has fallen by over half since its peak in 2006.
+Nigeria was the top crude oil producer in Africa, but disruptions threaten production - EIA
These controls, disruptions, and general instability have led to a stagnation of FDI in Nigeria despite its positive demographics.
Why does this matter to the ocean economy?
So why does this matter to observers and participants in the ocean economy? Simply because the region’s ability to tackle the challenges presented by its impending population growth will have global implications.
Large economies have a significant spill-over effect to their neighbors. Nigeria is the largest economy in Africa and has the largest population (which is growing at 2.5%).
Africa is also in the sights of China’s Belt and Road Initiative that is investing heavily in the Global South.
“Although it has six major seaports, more than 80% of the country’s imports are handled by just two of the ports in Lagos, where congestion has led to a massive loss in revenue as cargoes are often diverted to other West African nations.”
+Nigeria bets on China-funded port to drive economic growth - AP
From food security and energy, ports and shipping, IUU fishing and preservation (or lack of) natural blue capital, this Lagos to Abidjan stretch that will become the “largest zone of continuous, dense habitation on earth” is a critical place for impact, investment, and innovation in the blue economy.
Nigeria is an opportunity to fix problems that will scale to millions of people. It is also a place where problems can spill over to neighboring countries, economies, the environment, the oceans.
Nauru - The Commodity Curse, Part II
“I wish we’d never discovered that phosphate. I wish Nauru could be like it was before. When I was a boy it was so beautiful. There were trees. It was green everywhere and we could eat coconuts and breadfruit. Now I see what has happened here and I want to cry.”
~ Paradise for Sale
It’s hard to think of a better poster child for the so called “commodity curse” than the tiny island nation of Nauru. At one time, the tiny island nation (about 21 sq km) was known as the ‘Kuwait of the Pacific’ and boasted the highest per capita income in the world
To sum up its recent economic history very briefly, foreigners mined the island’s rich phosphate reserves into oblivion. In short order, its usefulness to the outside world was gone, resources depleted, sovereign wealth fund plundered, and natural capital destroyed.
It took eons for phosphate to accumulate in the craggy coral and the natives of Nauru lived on top of it, undiscovered, for thousands of years. It took about 60 years to destroy the island along with all remnants of its native culture.
This destroyed ecosystem has left Nauru as the least-visited country on earth despite the growing regional tourist economy that its neighbors subsist on.
So now, the nation, with few other real economic options, is about to go down a familiar path once again. This time dragging the rest of the world with it.
In 2021, Nauru notified the UN that it intended to pursue deep sea mining in partnership with Canadian mining company The Metals Company, triggering a “two-year rule” to get the rules of the game sorted out.
Deep sea mining is the extraction of metals from the sea bed, particularly from areas in the high seas outside of any national jurisdiction. The pursuit of deep sea mining has brought attention not only to the obscure nation of Nauru, but to the equally obscure International Seabed Authority (based, naturally, in Jamaica).
Just this month (July, 2023), after some tense, closed-door negotiations and plenty of international pressure, the ISA kicked the can down the road and said they will clarify everything by 2025.
+Pacific seabed mining delayed as international agency finalizes rules - NYT
The ocean economy and its geopolitical implications are going to drag you in new, fascinating, and potentially confusing directions. So strap on your geopolitical helmets, keep Google Earth loaded on your desktop, and bookmark some new news resources (and share this newsletter with some friends).
Emerging Oceans is here to be your dive master, surf coach, lifeguard, and resident beachcomber along the way.