By Malachy Onummadu
JUST as economic turbulence is exacerbating in Nigeria, grand oil theft in the Niger Delta by local vandals and international criminal networks is gaining momentum. Essentially, Nigeria, the 11th largest oil-producing country in the world, cannot meet the quota assigned to it by Organization of Petroleum Export Countries (OPEC) because of unparalleled oil theft. Incidentally, Africa’s largest economy is losing billions of dollars at a time its external reserves are low. Oil theft has remained stubbornly intricate, a chronic menace in Nigeria. It thrives on corruption and the weakness of the union and its institutions; eradicating it demands a workable strategy and strong political will.
Nigeria’s oil economy is in a complete mess. According to the Nigerian Upstream Petroleum Regulatory Commission, Nigeria lost $3.27 billion to oil vandals in the 14 months to February 2022. In a depressed economy, which is also hamstrung by poor infrastructure, that is a lot of money. Due to its inability to refine locally, the country imported petrol worth N3.97 trillion, gas oil worth N568.5 billion, and lubricating oil for N272.3 billion in 2021, says the National Bureau of Statistics. There are hefty bills for other petroleum products.
All this paints Nigeria’s oil economy in an ironic moment; the paradox enhanced by the Russia-Ukraine war that has caused a price upsurge in the global energy market. Instead of profiting from this, as other oil producers are doing, Nigeria is falling headlong into an economic hole as oil prices soar above $100 per barrel, exceeding Nigeria’s $62pb 2022 budget benchmark.
The twin menace of oil theft and importation of refined petroleum products is the primary cause. In contrast, Norway, Western Europe’s largest oil producer, is making an extra income of $5,680 every second, and is projected to rake in $170 billion extra revenue because of the war, say analysts at Nordea Bank, the largest financial group in the Nordic countries.
It is a shame that Nigeria is suffering losses when global oil prices are rising because of petrol subsidies, estimated at N3 trillion annually. This headwind is aggravated by the grand larceny from the recent lamentations of industry players. Apart from Tony Elumelu, the CEO of Heirs Holdings, who has consistently demanded strong action against oil theft by the government, Austin Avuru, the founding CEO of Seplat Energy, an oil union leader, Festus Osifo, and Central Bank of Nigeria(CBN) Governor, Godwin Emefiele, have all decried the worsening robbery.
Calling for the declaration of a ‘state of emergency,’ Avuru said 80 per cent of the oil being pumped does not make it to the terminal. For Elumelu, the loss reaches up to 90 per cent. Osifo, president of the senior oil workers’ union, PENGASSAN, declared: “For every act of vandalism suffered by members, 10 days worth of production was lost.” Emefiele voiced the CBN Monetary Policy’s “grave concern” over the unprecedented rate of oil theft and its debilitating impact on government revenue and accretion to external reserves.
Consequently, Nigeria has been unable to meet the 1.8 million barrels per day production quota assigned to it by oil cartel, OPEC. Government data for the past few years suggest that Nigeria is doing 1.2 million bpd to 1.4 million bpd. This is a huge revenue loss. It implies that up to 400,000 bpd is being lost to theft. This has two legs: Nigeria loses $2 billion yearly to domestic vandals, the Nigerian Extractive Industries Transparency Initiative(NEIT)says. On the international front, Nigeria loses $4 billion annually to the entrenched criminal gangs operating in the international waters.
These are huge resources in the hands of non-state actors. They use it to purchase weaponry and entrench themselves further in oil theft. Dismantling these networks is a Herculean task, but it can be done. It demands iron resolve and willingness to deploy all resources to protect national assets. Saudi Arabia, the world’s largest oil exporter, foiled attempts on March 19 that targeted its energy infrastructure in Yanbu, Khamis Mushait and Dhahran al-Janoub using a ballistic missile and several armed drones. Its forces also intercepted other attacks on its oil assets between March 20 and March 23, Al Arabiya, a Saudi TV station, reported. By deploying technology, it curtails sabotage on its prized assets. Nigeria should do likewise.
Oil theft on a grand scale surfaced early in the Fourth Republic when agitating Niger Delta militants turned to kidnapping and vandalism of oil assets. Leaders of the militant groups became exceedingly rich in the process, while Nigeria’s income nosedived. It forced the Federal Government to implement an amnesty programme under the Umaru Yar’Adua/Goodluck Jonathan governments. Despite this, the majors are pulling out, with an estimate saying Shell, Chevron and ExxonMobil recently divested from 21 blocks.
After ignoring the outcry of the stakeholders for long, the lame response of the President, Major General Muhammadu Buhari (retd.), is to “order” the Minister of State for Petroleum Resources, Timipre Sylva, the Chief of Defence Staff, Lucky Irabor and Mele Kyari, the NNPC Group Managing Director, to “go and halt the crude theft.” Buhari is playing the ostrich. His fiat is worthless, having issued several of such in the past without any tangible result.
Unfortunately, oil theft requires more than such lame pronouncements. To eradicate militancy, the late Yar’Adua implemented a comprehensive strategy that involved critical stakeholders. If Buhari desires an end to it, he should include the oil-bearing communities, whose land has been degraded, and who feel alienated, in the plan. Additionally, mining derivation should increase to 50 per cent. This will enable the Niger Delta states to jealously guard their own resources and source of revenue.
Beyond that, the security architecture needs a complete overhaul. Buhari should withdraw the current crop of security agents in the Niger Delta because they have failed. Many are known to be complicit in the larceny. The new set should be given specific mandates. The NNPC should implement technology solutions that can detect spills, leakages and vandalism in real time.