Top leaders' feud threatens oil-rich Nigeria's stability

As Nigeria's president and vice president hurl charges of corruption at each other in a vicious public quarrel, Nigerians and foreign investors can only wonder what it all means for the future of Africa's top oil producer.

Ask Nigerians in political circles where the face-off might lead and you get answers ranging from business as usual to a cataclysmic scenario involving widespread ethnic and religious violence followed by a military coup.

The only point of agreement is that the feud between President Olusegun Obasanjo and Vice President Atiku Abubakar is doing no good to Nigeria's fledgling democracy as it prepares for landmark elections next April.

"The situation is very unfortunate. What is happening is not in the best interests of the country. I'm worried about how far it's going," Ken Nnamani, president of the Senate, told Reuters.

"If a father and a son have a disagreement, they should be able to resolve it between themselves without endangering the whole family," he said.

The crisis stems from Obasanjo's determination to stop Abubakar from running for president. He has sent two reports to the Senate accusing his deputy of corruption.

Abubakar hit back with counter-accusations of graft against Obasanjo which have been splashed all over the front pages. He has also challenged the validity of the reports in court and written to the Senate denying the charges against him.

The row has increased uncertainty ahead of elections that should mark the first democratic handover of power in Africa's most populous country, which returned to civilian rule in 1999 after three decades of almost continuous army dictatorship.

From dire predictions of chaos to fears of fixed elections

It is an anxious time for Nigerians, with some politicians making dire predictions of violence, hung elections that would prevent an orderly handover of power, or even military takeover.

Others say all that will happen is that Abubakar will eventually be forced out of the race and Obasanjo will designate a successor who will easily win the election thanks to the well-oiled machinery of the ruling party.

For foreign investors, one key question is whether Obasanjo's free-market changes, which have stabilized the country's previously collapsed public finances, will continue after the elections.

"If you're an investor, you want to know if the virtuous cycle of reform we've seen over the past three or four years will continue, with or without high oil prices, and right now there's a huge question mark over that," said Stephen Bailey-Smith, emerging markets strategist at Standard Bank.

But he and other economists said investors had assumed for a long time that the build-up to the elections would be messy. The Obasanjo-Abubakar spat was just one element in a general picture of uncertainty already priced in by financial markets, they said.

As for the all-important oil sector, which accounts for more than 90 percent of Nigeria's foreign currency earnings, it is already in crisis following a wave of militant attacks in the Niger Delta that have shut down a sixth of production capacity.

Antony Goldman, an independent risk analyst with clients in the oil industry, said the turmoil ahead of the elections was a headache for oil companies in that it could lead to further unrest in the delta and disruptions to output. But the industry had seen a lot worse in 50 years of oil extraction in Nigeria.

"All of the big oil companies have a track record of establishing an effective working relationship with administrations of sharply different backgrounds," he said.

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