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Shell In Nigeria

PROBLEMS
Benjamin Aaron, consultant to the Royal Dutch Shell group is facing a major decision on recommending the appropriate way to grow its operations in Nigeria. The Nigerian environment has been highly volatile considering the economic, social and political conditions persisting there. However its oil resources were too attractive for Shell to discard the Nigerian project. Hence Shell needs to carve out a suitable strategy for operations in Nigeria since its political costs of continuing business in Nigeria was increasing compared to other regions of operations.

Shell’s prime motive for business in Nigeria was achieving competitive sustainability and profitability in the oil industry. To achieve that, Shell maintained a very cordial relationship with the government for which it had to resort to unscrupulous means involving bribery and corruption. Hence its strategy of operation was not always aligned to interests of common people. Thus the main issues comprised – operational viability and institutional legitimacy.

The issue of operational viability arose from the fact that the rising domestic fuel prices resulted in labor unrest and also caused student unrest and militancy. This environment resulted in a very difficult environment for Shell to operate. There were threats of strikes which could harm Shell’s operations considerably. Also conflicts between Nigerian troops and ethnic militia caused oil workers to evacuate thus affecting production.

The issue of institutional legitimacy stemmed from the fact that the National Labor Congress (NLC) stood as an opposition entity against the government. The removal of fuel subsidies was not acceptable to the NLC since such an action was associated with a higher cost of living for common people. This move of the government was in support of the oil companies like Shell. These companies found it easy to pay bribes to the government officials to receive such favors. Thus in a country like Nigeria which was high...