The rising spate of insecurity in the country poses serious challenge to the global economy as it could push crude oil price to as high as $150 per barrel.
Global analysts feel that Nigeria currently holds the ace in maintaining global oil supplies in view of the sanctions on Iran and the unrest in Libya.
David Kotok of Cumberland Advisors said the tumultuous security situation in Nigeria was his biggest fear for the world right now.
Kotok described Nigeria as "the most important oil producer in the world" and said that if unrest there got really out of hand - which he warned was a very real possibility that everyone was ignoring - oil could soar to $150 per barrel and crush the global economy.
Nigeria has been experiencing security unrest with Boko Haram insurgency in the north and armed attacks on oil pipelines in the Niger Delta.
Just last week, the Nigerian military reportedly killed Abu Qaqa, the spokesman of the Islamic militant group Boko Haram, while Boko Haram on its part struck back, murdering Zanna Malam Gana, the attorney-general of the state of Borno .
In the Niger Delta, a group of gunmen called the Movement for the Emancipation of the Niger Delta (MEND) are stepping up attacks on oil pipelines - they siphon oil from vulnerable locations and sell it to smugglers.
Though the country is currently in the world eye, with Wall Street selling at the moment, the violence caused by Boko Haram in the northeastern region is getting worse, and it's starting to cause real trouble in the Nigerian economy.
Goldman Sachs Asset Management chairman Jim O'Neill calls it one of the "Next 11" big emerging markets, and Citigroup chief economist Willem Buiter calls it one of the "3G" Global Growth Generators over the next 40 years.
A recent geopolitical risk report by Business Monitor International explained that Boko Haram's disruption of agricultural production in the north is having a bigger impact than previously anticipated.
The Central Bank of Nigeria recently downgraded its growth estimates from 7-8 per cent in 2012 to 6-7 per cent, citing security complications in the rural north for the slowdown in agricultural output. The sector, which constitutes about 40 per cent of total GDP, grew by 4.2 per cent in Q1 12, the slowest rate of growth ever recorded since the National Bureau of Statistics began publication of quarterly figures in 2001. This has coincided with declining oil production, constraining headline growth.
To make matters worse, the attacks on oil pipelines in the country strikes at the heart of the oil industry as oil is a key driver of Wall Street's rosy outlook for the country.
The managing director of Royal Dutch Shell's Nigerian unit, Mutiu Sunmonu, told the Wall Street Journal that the recent pickup in attacks on oil pipelines is "quite an escalation. If nothing is done, it will continue to increase because more and more people will just come to feel that this is a gold field."
Shell estimates that 150,000 barrels of oil are being stolen from Nigerian pipelines every single day.
According to Roubini Global Economics (RGE), this is becoming such a problem for the global economy because world oil supply is seriously tight right now when you factor in the supply outages caused by sanctions on Iran and unrest in Libya.
Many analysts hoped that Nigeria could help fill the gap. However, RGE points out that Nigeria is currently producing around 2.4 million barrels of oil a day, which is about the same as they were producing 10 years ago and is way below the government's target of 4 million barrels per day.
Now, on-the-ground reports in Nigeria are revealing another troubling sign - long lines forming at gas stations in Nigeria's most populous city of Lagos as retailers run out of gas:
The current fuel scarcity on Monday unduly influenced the price of the product in Lagos and Abuja and fast spreading to other parts of the country. This has forced motorists out of desperation to buy from the black market for as much as N200 per litre. The official price is N97 per litre.
Veteran oil trader and noted author Dan Dicker was skeptical that it's so much worse now than it was before. However, he said that if a full shutdown were to happen in Nigeria's oil industry, that would see the Brent rising another $20. Despite all of the explosive developments in Nigeria as of late, it seems like, at the moment, the situation is sufficiently under the market's radar. If Kotok's fears materialise, all of that could change in an instant.
Illegal refinery not a solution
Meanwhile, the minister of information, Mr. Labaran Maku, has cautioned Nigerians against looking at illegal refineries as solutions to problems in the downstream sector, saying the problem of refinery cannot be stopped by illegal refineries.
The minister also stated that government has a robust policy to refine oil, even as he said that once those policies were put in place, the problem would be solved.
He made this known in Abuja during the national Good Governance tour to the Nigerian Security and Civil Defence Corps, noting that the greatest threat to the Niger Delta region is illegal refineries and the puncturing of pipelines.
He however called for an end to such act, saying if it is not stopped our environment will be contaminated.
"So it is the policy infrastructure that the president is trying to put in place and, once it is done, even with the green field refinery that already the Ministry of Petroleum Resources."