Oil theft is a huge drain on the economy

Nigeria loses 138,400 barrels of crude per day (about 7% of its total production) to theft, oil spills or shortage in production, according to a report from the Nigerian Extractive Industries Transparency Initiative (NEITI). The NEITI report further said that Nigeria has lost more than 505 million barrels of crude, and 4.2 billion litres of products, from 2009 to 2018. The deficit to the country’s economy amounts to $40.06bn and $1.84bn respectively, equivalent to $11.47m per day for 10 years. According to the report, the loss is “neither hypothetical nor episodic. It is real and endemic.”

At a very difficult period in a country almost wholly dependent on oil revenue, we cannot afford the luxury of allowing a few people to illegally corner to themselves our collective wealth. In addition to the monetary loss related to crude and products, companies must pay to repair pipelines and prevent any environmental impact. The NEITI report said companies had been forced to spend N363bn between 2014 and 2016. Closely related to the NEITI report, is a Chatham House report in 2013 that put the figure at 100,000 bpd, while some private studies have suggested the figure could be as high as 400,000 bpd. This menace persists in the oil and gas sector because of the existence of an assured off-taker market.

Oil theft or illegal oil bunkering has remained a huge drain on the economy of the nation. No doubt, these illegal funds from stealing the crude would have been channelled to other sectors of the economy like health, education or infrastructural development. The problem remains the lack of the political will to enforce actions and measures that would or could curb these nefarious acts. It is a fact that many security operatives lobby to be posted to Niger Delta because of what they will benefit with involvement in illegal oil business.

The apparent lack of transparency in Nigeria’s oil sector is reflected in the fact that government relies heavily on operators to provide data and there is no independent verification. In a report on the mismanagement of the oil and gas sector in Nigeria in 2016, the Economist wrote: “…oil is also being stolen at a record rate and traders’ figures show output at well below the government’s figures. Information about Africa’s biggest oil industry is an opaque myriad of numbers. No one knows which ones are accurate; no one knows how much oil Nigeria actually produces. If there were an authoritative figure, the truly horrifying scope of corruption would be exposed.”

To date, Nigeria has tried a number of strategies to tackle its oil loss. Some of the various laws that have been passed include the 1975 act sanctioning death penalty for pipeline sabotage, although only on lines carrying products rather than crude. Sadly, the federal government seems helpless despite the huge sum of money being thrown at the problem. Among the strategies suggested by NEITI, was calling on the Department of Petroleum Resources (DPR) to put molecular markers into products. This would allow the authorities to trace where such supplies go. But more drastic measures should include government officials involved in oil stealing to forfeit all benefits, whether in or out of service. Besides, the authorities must ensure that the perpetrators of this crime are apprehended with a view to bringing them to justice.

There is an urgent need to address this challenge if Nigeria is to derive the maximum benefit from its oil and gas resources.

Related Articles