Nigeria Crisis Raises Supply Chain Disruption Risk for Western Companies

By Nicolas de Zamaróczy

Hundreds of thousands of American and European companies that rely on imported products from Nigeria’s supply chain face a heightened risk of disruption as a result of the protracted political and economic crisis gripping the country.

A presidential election held on February 25th proved contentious, with widespread irregularities in voting and significant violence. The national election commission declared on March 1st ruling party candidate Bola Tinubu as the winner with 36.6% of the votes cast. However, opposition parties have thus far refused to accept the results and called for a redo, pointing to the fact that many polling places opened late on election day. Meanwhile, the country has been reeling for months from a botched currency reform which has completely paralyzed Nigeria’s cash-dependent informal economy.

Supply Chain Management in Nigeria: Western Oil and Agricultural Firms at Risk

Many foreign companies are at risk of having their imports from Nigeria disrupted. Nigeria’s main export is petroleum, with crude oil, petroleum gas, and refined oil collectively accounting for around 86% of exports by value. However, the country’s cash cow has suffered greatly in recent years with production down to nearly half of its level in 2020.

Nigeria LNG—a natural gas joint venture between the Nigerian state and energy majors Shell, Total, and Eni—has been unable to fulfill export orders for its European customers in recent months. Nigeria’s main other exports are agricultural goods (most notably, cacao beans) and small maritime craft, both of which are at significant risk from the economic turmoil in the country.

Global relationship data in the Interos platform indicates that:

  • Roughly 700 American and 400 European companies have at least one Tier 1 (T1) supplier based in Nigeria.
  • More than 127,244 American companies have an affected Nigerian company indirectly in their supply chains at Tier 2 (T2), with almost 300,000 at Tier 3 (T3).
  • More than 236,000 E.U. and British companies have an affected Nigerian supplier at T2, with over 510,000 at T3.

As has been the case during the last three election cycles (see chart below), Nigeria’s exports to the US had been dropping in the leadup to the election, with the volatile on-the-ground situation complicating normal operations and logistics. (The one-time surge in Nigerian exports to the US in early 2022 was due to re-routing petroleum from other destinations following the breakout of the war in Ukraine.) The lack of clarity in the presidential election suggests that low exports will continue for the foreseeable future.

Nigeria's Exports to the United States (2007-2023)

Interos analysis of Panjiva data. Vertical red lines indicate prior election periods.

Nigeria’s Supply Chain Election-Related Disruptions Likely to Persist into Mid-March

Nigeria voted in a tight three-way presidential election on February 25th amidst an atmosphere of intimidation and election-related violence.

ACLED, an NGO which tracks political violence, has counted at least 193 incidents of election-related violent activity since January 1st, 2022 (see map). Human rights observers have issued warnings that Nigeria has not implemented any structural reforms since 2019, when several hundred people died during the last presidential election. These warnings have taken on new urgency following the assassination of a prominent Senate candidate on February 22nd.

Locations of Election-Related Violence in Nigeria (Jan. 2022 through Feb. 2023)

A map highlighting violent events in Nigeria.

Source: ACLED’s Nigeria Election Violence Tracker. Latest data available is February 17. The size of the circle indicates the number of violent events at that location, the color of the circle indicates the specific form of violence, e.g. orange = “violence against civilians” (Image Copyright: © Mapbox© OpenStreetMap and Improve this map).

Given that state elections will not conclude until March 11th, high levels of violence and uncertainty are likely to persist through mid-March, with a consequent impact on economic activity.

“Cash Crisis” Complicates Supply Chain Management in Nigeria

As if the political chaos were not enough, Nigeria is also suffering from the aftermath of a poorly implemented currency reform. When the Nigerian central bank announced the reform in October 2022, the hope was to combat corruption by redesigning the currency bills most used by criminal organizations. But an overly aggressive window for citizens to redeem their old banknotes combined with an extremely short supply of the new banknotes has left the entire Nigerian economy effectively without cash for several months. This has pummeled the Nigerian informal sector, which according to the IMF accounts for over 50% of GDP and over 80% of employment.

Nigerian Exports Likely to Stay Low in the Short Term

American and European firms with Nigerian suppliers in their extended supply chains should stay wary. Interos recommends taking the following actions to promote supply chain resilience:

  • Communicate frequently with key Nigerian suppliers (or suppliers you know to be reliant on Nigeria) to determine the production impacts of the election and cash crisis.
  • Identify which tier-2 and tier-3 Nigerian suppliers are critical to your direct suppliers.
  • Ascertain whether suppliers in Nigeria are prepared for the extended elections period and the likely disruptions it will entail.

Organizations looking to understand where the next big supply chain shock is coming from — and which suppliers they need to engage with to mitigate the impact — should consider investing in supply chain visibility and operational resilience solutions. In times of turmoil, knowing who you are connected to, and how those parties will be impacted by unfolding events, can make the difference between continuity of operations and disaster.


Satellite Supply Chain Concentration Risk: Starlink and the U.S. Dominate the Market

 By Geraint John

Satellites are becoming the new supply chain battleground in critical infrastructure as countries seek to bolster their military capabilities and national security against the threat of war.

However, this is not some James Bond-style plot in which rival powers vie for control of space-based nuclear weapons, as in the 1995 film GoldenEye, but something more prosaic: a quest for bomb-proof internet connectivity.

Ukraine’s success in stemming the Russian army’s advances across its territory have been credited, at least in part, to its access to Starlink, a constellation of more than 3,000 low-orbit satellites owned and operated by Elon Musk’s company, SpaceX.

Ukraine’s military relies on Starlink’s fast, reliable internet access to share battle plans, co-ordinate operations and target Russian positions.

In the words of a Ukrainian soldier quoted in a recent Economist article: “Starlink is our oxygen.” Without it, “our army would collapse into chaos”.

The Satellite Supply Chain: Low Orbit, High Potential

Other nations concerned about their vulnerability to attack and the security of their land- and seafloor-based fiber-optic cables for internet traffic, are keeping close tabs on Ukraine’s experience.

Taiwan, which has seen tensions with China escalate during the past year, is reported to be seeking private investment to establish its own satellite communications network.

China itself has submitted plans for a 13,000-satellite constellation, Russia has designs on a 264-satellite network, while the European Union agreed late last year to begin developing its own low-orbit system.

Japan, South Korea and Australia are among other countries looking to operate similar constellations of their own in the future.

Unlike traditional geostationary Earth orbit (GEO) communication satellites, which fly more than 35,000km above the planet’s surface, low-Earth orbit (LEO) satellites operate much closer to home.

Starlink’s satellites orbit just 550km from Earth, which means they can receive and transmit data much faster, making high-bandwidth internet streaming and video services possible.

Other benefits include the fact that:

  • They communicate with users on the ground via portable and easily powered receiving equipment
  • Their (stronger) signals are harder to jam
  • Russian efforts to hack them have so far been ineffective
  • Because there are hundreds of satellites serving each location, physically taking the network down – through, say, a missile attack – would require enormous scale and vast expense.


America’s World Domination May Lead to Imbalanced Supply Chains

The United States dominates global satellite ownership, with 63% of the almost 5,500 commercial, military, civil and government satellites launched to date, according to data compiled by the Union of Concerned Scientists (UCS), a U.S.-based nonprofit organization.

Its dominance in LEO satellites – which comprise 86% of the total satellite population – is even more pronounced, thanks to Starlink.

The U.S. owns almost 50 times as many LEO communication satellites as Russia, and almost 90 times more than China, according to UCS.

Building on this data, Interos has created a satellite concentration and diversification metric. The metric demonstrates the resilience the U.S. has in this area, with extremely high satellite diversification, whereas Russia and China are both rated a high concentration risk.

This is good news for supply chains in the U.S., but those in less diversified areas may increasingly be more prone to internet disruptions or complete blackouts.

Taiwan has just one GEO communications satellite, through a joint venture with Singapore’s telecoms provider, while Ukraine doesn’t own any and relies on those of its allies.

Communications Satellites Owned by Selected Countries.

While Considering Future Satellite Trends, Beware Single Sources in Space

Aside from the potential for cyber interference in this newly critical and rapidly expanding infrastructure, from a supply chain perspective the main risk is arguably the extreme concentration of suppliers.

At present, Starlink is a de facto monopoly for customers outside of China and Russia, because of its dominance of launch capacity. Its Falcon 9 rockets took off more than 60 times last year and each is capable of carrying over 50 LEO satellites.

Rivals Blue Origin, owned by Jeff Bezos, the United Launch Alliance – a joint venture between Boeing and Lockheed Martin – and France’s Arianespace are all in the process of readying new rockets.

UK-based OneWeb – which partners with France’s Eutelsat and Airbus – is currently dependent on SpaceX after its access to Russian launch facilities was scuppered last year. And Virgin Orbit last month failed in its inaugural attempt to launch nine LEO satellites from British soil using a rocket mounted below a reconfigured 747.

Interos has implemented a new satellite concentration risk score, which evaluates the concentration of accessible communication satellites in a country. A country with more satellites or increased access receives a high score and has less risk of satellite disruptions. This score currently shows France as being very high risk – even higher than Russia and China – whereas the UK is medium risk. However, diversification should be an important objective for these and other countries over the next few years.

While industry analysts expect there to be four or five active competitors in this global market eventually, for now SpaceX can call the shots.

For example, although it abandoned a suggestion in October that it would start charging Ukraine for its services, it has restricted use of its network in Russian-occupied territory such as Crimea, according to The Economist.

Government, military and commercial procurement chiefs would therefore be wise not to put all of their bets in this new space race on Mr. Musk’s satellite network, which may well become the next frontier in supply chain concentration risk.


Surging Electrical Infrastructure Attacks Pose Disruption Threat for American Businesses

By Alberto Coria and Trent Chinnaswamy

A growing number of attacks on the United States’ critical electricity infrastructure threatens to cause supply chain disruption to thousands of businesses across the country.

In 2022, the U.S. electrical grid sustained at least 103 deliberate physical and cyber-attacks – the highest level in a decade.

Two recent attacks on electricity substations in North Carolina, and four in Washington, have raised alarm among experts at the U.S. Department of Homeland Security (DHS). These attacks resulted in over 45,000 homes as well as businesses in the surrounding area losing power.

In each case, the modus operandi was similar: intruders carrying firearms gained access to the facilities and disabled them. This has led experts to believe that the attacks, which occurred within a short time of one another, may have been coordinated.

Electrical disruptions in the U.S. caused by intentional human interference are rising. Vandalism accounts for the majority of outages, but suspicious activity – where the intention is unknown – and sabotage are also on the increase (see chart).

The previous peak in vandalism was mostly caused by individuals stealing and selling copper wires. But the industry standard has since changed to use a less profitable kind of copper.

Why then are these attacks increasing and what risk do they pose to businesses?

 "US Electricity Substation Attacks are Rising, 2012-2022"

Exploring Electrical Supply Chain Issues

Regional blackouts, defined as power loss in an area, can affect not only households, but also industry and logistics operations. However, the degree to which different entities are affected varies. Owing to their typically higher demand for power, manufacturing facilities are more exposed to power surge issues and accustomed to experiencing power failures, with one in four experiencing a power failure once a month.

Manufacturing facilities are also more likely to have backup and stress-tested generators, and have a coverage plan. However, these are generally focused on short-term power outages caused by high energy demands. In the case of a physical attack on a substation, a manufacturing site may have to deal with a longer-term power outage. So they can still face moderate levels of risk in the case of a physical attack.

Non-manufacturing facilities that are part of a supply chain are also likely to be affected by power outages, with the industries most reliant on electricity at the highest risk. These include financial corporations, IT services providers, data centers, perishable item producers, control centers and medical.

Rural Substations are Key Vulnerabilities for an Electric Grid Attack

The U.S. electrical grid is broken up into three large, connected networks (Texas Interconnection, Western Interconnection, and Eastern Interconnection) that operate fairly autonomously with eight regions seen (see map).

The U.S. Federal Energy Regulatory Commission has determined that transformers in rural substations are most vulnerable to physical attacks. Substations in urban areas typically have higher levels of monitoring and protection, while rural substations are completely unguarded.

The Eight U.S. Electricity Generating Regions

A map showing the 8 regions of the US electrical grid.

While substations in rural areas are at high risk of attacks, and the surrounding areas are at risk of a power outage, only 10.8% of the U.S. electrical grid is subject to “cascading” blackouts.

This means that attacks on substations in rural areas are likely to affect only the surrounding areas, and not cause blackouts in other areas of the country. This likelihood of power outages remaining contained to smaller areas places a greater emphasis on assessing supply chain risk exposure in rural areas.

Transformers at high-voltage and rural substations are prime targets for physical attacks, as transformers are difficult to protect and replacement parts are difficult to obtain.

In many of the higher-risk rural areas, substations are considered “dead-end”. Dead-end structures are where the line ends or angles off, meaning there is no backup power connection. The pink dots on the map below indicate the propensity of dead-end substations across the US. The darker the area, the more likely there is no backup power connection in the case of disruption.

"Areas Without Backup Substations in Case of Disruption." A map of the US with pink dots to represent backup.

What Companies Should Do

To get ahead of this critical infrastructure risk, Interos recommends that companies do the following:

  • Use supply chain mapping and operational resilience tools like Interos’ Resilience platform and global relationship data to identify suppliers in industries and locations at the highest risk of being affected by potential power disruptions, and which agencies are responsible for power restoration.
  • Engage key suppliers in high-risk regions to understand what impact, if any, they have experienced as a result of physical and/or cyber-attacks.
  • Assess high-risk suppliers’ mitigation plans in the case of a regional blackout, and develop business continuity plans or workarounds for such disruptions where possible.