Crude Oil Theft In Nigeria; An Economic Conspiracy Or What?

Natural resources play a fundamental role in the socio-economic survival and development of any human society. Right from prehistory, classical, dark, middle, and down to the present information age of world civilisation, humans have continued to exploit and exercise their ancestral and legal rights over the natural resources domiciled in their respective geographical territories for the primary purpose of surviving economically either as individuals or groups. As natural resources have given human societies economic hope and social relevance, it has also resulted in the clash of human interests which is responsible for the tensions being experienced in many societies around the world today. Nigeria like many other African states is endowed with vast natural resources of high commercial value which can be found in multiple locations across the country. These include petroleum, natural gas, solid minerals, and precious metals, and arable lands. The Nigeria Extractive Industries Transparency Initiative (NEITI) audit report of 2012 claimed that there are about 40 different kinds of solid minerals and precious metals buried in Nigeria’s soil waiting to be exploited with their commercial value estimated to run into hundreds of trillions of dollars. The Northern part of Nigeria was reported to house 70 per cent of them. Also, the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) as of May 2022 put the country’s crude oil reserve at 37.046 billion barrels and natural gas reserve at 208.62 trillion cubic feet. In addition, the country has an arable land area of 34 million hectares: 6.5 million hectares for permanent crops, and 28.6 million hectares of meadows and pastures .

The glorious days
During the early days of independence, scholars and public affairs analysts projected Nigeria to be among the super nations of the world considering the vast natural resources available to her and their economic value. According to a Professor of International Relations, Sheriff Folarin , Nigerians at independence were high flyers in intellectual and educational endeavours, business, international diplomacy, and in military and political leadership. The Nigerian government embarked on many flamboyant diplomatic and military missions particularly on the African continent in an attempt to decolonise African territories under colonial rule and restore peace in troubled states of the continent. Also, within this period, Nigeria scaled up its industrialisation efforts. Attesting to the enormous national wealth under the control of the federal government of Nigeria then, the BBC reported that the Nigerian former military Head, General Yakubu Gowon, during the oil boom of the 1970s publicly claimed that Nigeria's problem was not money but how to spend it.

The problem
Unfortunately, decades after General Yakubu Gowon's statement, money has become Nigeria’s problem. This is evident in the incessant borrowing by the national and federating states' government from domestic and foreign sources to support public revenue shortfalls and fulfil government expenditure obligations. Nigeria like many other developing countries of Africa is facing numerous socio-economic challenges. The World Bank reported that in 2018, 40 per cent of Nigerians (83 million people) lived below the poverty line, while another 25 percent (53 million) were vulnerable. The number of Nigerians living below the international poverty line according to the institution is expected to rise by 12 million between 2019 and 2023, if adequate measures are not adopted to address the country’s socio-economic challenges. This has further worsened Nigeria’s security condition as the country was recently ranked 75th out of 141 countries surveyed on the 2022 global safety perception index of Lloyd’s Register Foundation Safety Perceptions Index (SPI), produced by the Institute for Economics and Peace. This is in addition to other numerous social challenges especially the mass migration of citizens to other countries of the world in search of greener pastures.

Petroleum or crude oil is one of the natural resources Nigeria has in large quantity and the country’s biggest export commodity to the international market. It replaced agriculture, solid minerals, and manufacturing as the mainstay of Nigeria’s economy since its discovery and exploitation ( Dutch disease ). However, the enormous wealth of petroleum that nature has bequeathed to the Nigerian state has not improved the economic condition of the country and the general well-being of the majority of the citizens ( Nigerian disease ). Unlike Nigeria, countries like Saudi Arabia, Qatar, and the United Arab Emirates among others have used their oil wealth to transform their national life, especially in the area of human capital development and modern infrastructural development within the last few decades. These countries have become destinations of tourism and business investment for people across the world. Given this, one begins to wonder what these countries have done and are doing differently to record these success stories that Nigeria has not done and is not doing. Scholars and opinion experts, however, have attributed this difference to leadership and corruption.

Corruption is a global phenomenon, but there is doubt that it is the major challenge to effective political leadership and meaningful national development across sectors and sub-sectors in Nigeria. One of the sectors in which corruption is ladened is the petroleum sub-sector of the Nigerian economy. For decades, Nigerians are yet to see the economic benefits of petroleum because of the monumental corruption going on in the sector. Given the problems facing Nigeria’s petroleum sectors such as the inability of the country to refine her petroleum locally as a result of the lack of political will and corruption among the political class, to the massive corruption surrounding petroleum subsidy and the diversion of imported and subsidised petroleum products to neighbouring countries by power elites for more economic gains. The issue of crude oil theft in Nigeria has become a monster that is not only threatening the economic survival and stability of Nigeria, but ridiculing the image of the country before the international community. In view of this ugly scenario, three questions come to mind. First, what is the economic cost of crude oil theft to Nigeria? Second, who are those behind crude oil theft in Nigeria? And thirdly, what effort is the Nigerian government making to stop the problem of crude theft?

The COVID-19 pandemic crippled the global economy as a result of the suspension of internal and cross-border economic and social activities across the globe by governments to contain the spread of the virus. The Nigerian economy which is largely dependent on crude oil export was not spared from the economic holocaust as the price of crude in the international market crashed to an all-time low.This led to budget readjustment at different times. With global economies trying to recover in the post-COVID-19 era and the price of crude oil appreciating significantly in the international oil market, the problem of crude oil theft has remained an incurable and uncontrollable disease that is crippling the Nigerian petro-economy.Different reports have surfaced on how Nigeria continues to lose millions of barrels of crude oil to the tune of millions and billions of American dollars to theft and sabotage. This type of organised crime is as old as the Nigerian petroleum sector.

Crude oil theft in Nigeria’s oil-producing region of Niger Delta has become a common scenario just as the illegal refining of stolen crude in different creeks of the region. A report by the Stakeholder Democracy Network revealed that crude oil theft cartels in the Niger Delta illegally tap from the transportation pipelines of licensed Multinational Oil Companies who carry out the actual crude oil drilling operations at the point of transporting the crude from one point to another. The report further stated that the installation of pipes by the cartel to the pipelines of Multinational Oil Companies is done with great skill using skilled welders who can successfully install taps, both on dry land and underwater. Many of these skilled welders were reported to be former contractors for Multinational Oil Companies and are now formally unemployed. This operation is believed to be mostly carried out at night. The stolen crude is transported from their point of tapping through the creeks using boats to points of commercialisation. The Stakeholder Democracy Network reported that a bulk of the stolen crude, up to 75 per cent is transported to oil tankers waiting off the coast for national, regional,and possibly, international markets while the remaining quantitiesare supplied to illegal refineries camps scattered around the creeks of the Niger Delta. All these activities are to the economic loss of the Nigerian state and continue to pose a threat to the economic future of the country, if allowed to continue.

The economic cost of crude oil theft to Nigeria
The Nigeria Extractive Industries Transparency Initiative (NEITI) in its audit report revealed that Nigeria in 2018, lost about 53.28 million barrels of crude to oil theft. In 2019, the agency reported that the country lost 42.25 million barrels of crude oil to oil theft, valued at $2.77 billion. In 2020 which was the peak of the COVID-19 pandemic outbreak, Nigeria lost $1.63 billion to crude oil theft at a time the average price of crude oil was at $41.65 per barrel. This amounted to 6.10 per cent of the year's total budgeted production. The figures rose in 2021, as Nigeria was reported to have lost $4 billion to crude oil theft on the benchmark of daily theft of 200,000 barrels of crude oil. In 2022, the condition seems to be getting gloomier. Between January and July of 2022, Nigeria was reported to have lost an average of 437,000 barrels of oil each day to criminal cartels who illicitly tap pipelines onshore and offshore in the Niger Delta region. This estimated daily quantity of stolen crude oil ifcalculated using the current official exchange rate (at N430 to the American dollar) is worth more than $10 billion . This amount is more than what is needed financially to end the lingering strike action by staff of tertiary institutions in Nigeria, which has resulted in the abysmal performance of tertiary education in the country.

This economic sabotage continues to affect the ability of the federal government to meet up with its financial obligations, particularly in the area of debt servicing and repayment, fuel subsidy, execution of various capital projects, and the ability of the country to save. The estimated total revenue from oil and gas to the federal government of Nigeria was put at N9.37 trillion for the entire 2022 fiscal yearand projected expenditure at N17.32 trillion. However, the Minister of Finance Mrs. Ahmed Zainab during the summary of the fiscal performance for the first quarter of 2022 noted that the federal government's total revenue for the quarter was N1.63 trillion, 49 per cent of the N3.32 trillion projected revenue for the quarter. Out of the realised N1.63 trillion as revenue to the federal government, actual spending as of April 30th was N4.72 trillion as debt servicing gulped N1.94 trillion, N1.26 trillion for personnel costs, including pensions, and N773.63 billion for capital expenditure.

Given the foregoing, it is therefore evident that the cost of debt servicing in the first quarter of 2022 exceeded government revenue. The economic nightmare of Nigeria is further complicated by the transformation of the Nigerian National Petroleum Corporation (NNPC) into a public limited liability company now known as the Nigerian National Petroleum Company Limited (NNPC). The implication of this is that the government can no longer subsidise the activities of NNPC Limited as it regards subsidy payment under the Petroleum Industry Act of 2021 as it has become a profit-making organisation.

Furthermore, the Minister of Finance and National Planning, Mrs. Zainab Ahmed have stated that the Federal Government of Nigeriais proposing a total expenditure of N19.76 trillion for the 2023 financial year at a projected crude oil price of $70 per barrel, and a projected daily crude oil production of 1.69 million barrels per day at an exchange rate of N435.57 per dollar. The 2023 budgetary expenditure reflects an increase of 15.37 per cent from that of 2023.The Minister claimed that the budgetary expenditure may get up to N12.42 trillion if the government should keep petroleum subsidy for the entire 2023 fiscal cycle as against June of 2023 which it is proposing as the deadline for the end of fuel subsidy because of the financial stress it has on the economy. However, the projected deficit based on the initial expenditure is put at N11.30 trillion, a 54 per cent increase from that of the 2022 budget estimated deficit. Fuel subsidy is also projected to gulp around N6.7trillion for the whole of 2023 or N3.36trillion for half of the year. The deficit is expected to be financed through domestic and foreign borrowings further compounding the already complicated debt servicingproblem of Nigeria. These economic challenges facing the country are issues that could have been avoided or minimised to the lowestlevel, if the monster problem of crude oil theft and associated criminalities going on within the Nigerian petroleum sector hadbeen addressed by committed political leadership as they should.

Unmasking the crude oil theft cartel
In view of the grave implications crude oil theft poses to the economic survival and sustainability of Nigeria now and in the near future, the million-dollar questions many Nigerians are asking are‘who are those behind crude oil theft in Nigeria?’ and ‘what is the government doing to end this menace?’ According to Stakeholder Democracy Network, crude oil theft and illegal oil refining in the Niger Delta region have grown so blatant and coordinated involving local communities, government officers, oil workers, and security agencies, that it is now challenging to properly categorise the sabotage as a crime. The Managing Director of Chevron Nigeria/Mid Africa Business Unit, Richard Kennedy during the 2022 Nigerian Oil and Gas Conference held in Abuja revealed that the problem of crude oil theft has nothing to do with host communities' issues and should not be confused with it. According to him, crude oil theft is an organised crime involving many stakeholders, and the actual financial loss to Nigeria is far beyond what is officially reported in the news media. From the angle of thegovernment, the Chief Executive Officer of the Nigerian National Petroleum Company Limited, NNPC, Mele Kyari, in August of2022 publicly claimed that high placed Nigerians, including religious, community leaders, and government officials, were fully involved in crude oil theft. He lamented that illegal petroleum products pipelines were connected to Churches and Mosques. President Muhammadu Buhari has equally lamented the ugly incident. Since the government we elected to solve our national problems is grieving before the citizens over an issue they ought to have taken care of, what then is our hope?

Logically, no stolen crude oil can leave the territory of Nigeria without the help of uniformed officers of the state with the constitutional mandate to monitor the entry and exit of persons and goods in line with the established rules. It has been argued that the biggest advantage of oil theft cartels operating in Nigeria is the involvement of the country’s uniformed men charged with the responsibility of protecting the resources of the state in criminal enterprise. A report in the Vanguard newspaper claimed that security agents under the instruction of their superiors provide security to vessels carrying stolen crude out of the country's territorial waterways to ready customers with foreign collaborators. It also revealed that security operatives who mount patrol on waterways also collect levies from small-scale oil thieves. This has resulted in many security officers lobbying to serve in such lucrative beat and make returns to their superior officers who facilitated their posting.

Similarly, a 2015 report from the Stakeholder Democracy Network (SDN) revealed that JTF members’ comprising of the Nigerian Military (Land, Maritime, and Air), Police, Department of State Services (DSS), and Nigeria Security and Civil Defence Corps(NSCDC) are actively involved in crude oil theft in the Niger Delta as they provide security to local oil thieves during their installation of taps that divert crude oil from pipelines, collect “transportation taxes” for vehicles transporting oil and demand “regional security payments” from illegal oil refineries for ongoing protection. Transparency International also claimed that many reports have accused the Nigerian armed forces of enabling and benefitting from crude oil theft and illegal refining. TI stated that security officials turn a blind eye to the illegal activities of crude oil thieves and protect them from their rivals at extraction points in exchange for financial benefits. In another event, Governor Nyesom Wike of Rivers State, in 2019 publicly alleged that senior military officials are sponsoring oil bunkering in his state. However, the leadership of the country’s security agencies have always denied and debunked these allegations.

Oil companies operating in the Niger Delta have at some points been associated with the scandal going on in Nigeria’s petroleum sector as regards crude oil theft. In 2013, the Special Assistant to the President on Amnesty, Kingsley Kuku, accused oil companies operating in the Niger Delta region of being aware of their Nigerian employees engaging in oil theft but did nothing to stop it. Mr. Kuku argued that the process of illegally extracting crude oil from the pipelines in the coastal areas requires highly technical and mechanical expertise which ordinary Nigerians or residents of the oil-producing communities of Niger Delta do not have. AiteoExploration and Production Company, an indigenous oil companyformed last year, accused the Shell Petroleum Development Company of Nigeria (SPDC) of short-changing it 1,022,029 barrels of crude, while using the Bonny Crude Export Terminal operated by SPDC between 2016 and 2018 after it acquired OML 29 for US$2.4 billion following SPDC’s 2015 divestment of its 45 per cent stake from the asset. However, Shell Petroleum Development Company of Nigeria (SPDC) described the allegations of involvement in oil theft at its Bonny Crude Export Terminal as misleading.

The Nigerian National Petroleum Company Limited formerly known as the Nigerian National Petroleum Corporation is one of the most politicised institutions in Nigeria considering the key role it plays in the Nigerian economy particularly in overseeing operations of the Nigerian petroleum industry. Given this, members of the Nigerian public have continued to question the transparency of the institution’s activities given the numerous scandals being recorded in the Nigerian petroleum industry. It is on record that the former Group Managing Director (GMD) of the Nigeria National Petroleum Corporation (NNPC), Andrew Yakubu was charged withfinancial corruption by the Economic and Financial Crimes Commission (EFCC). Correspondingly, the current Group Managing Director (GMD) Mela Kyari on the assumption of office in 2019 admitted that there is corruption in the NNPC. Consideringthe incessant nature of crude oil theft ravaging the Nigerian petroleum industry, the NNPC as the regulatory body of the sectorcannot be exempted from what is happenings.

Chatham House report of 2013 revealed what they called the ‘white collar’ branch of oil theft in Nigeria. This allegedly involves pumping illegally obtained oil onto tankers already loading at export terminals or siphoning crude from terminal storage tanks onto trucksand bills of lading (B/L) and other shipping and corporate documents may be falsified to paper over the theft. The report concluded that what happens around the export terminals is contested and largely hidden from outsiders.

Also, a report by Vanguard newspaper revealed the role of oil workers in crude oil theft. The report stated that oil bunkering cartels are collaborating with officials in the petroleum sector tosteal crude directly from major crude oil pipelines in the Niger Delta, as they provide crude oil thieves with the accurate time and duration of crude oil pumping to different terminals and the exact pipelines they will be going through. This enables the oil thieves to be better prepared and successful in their illegal operations. However, these insiders cannot be part of this criminal enterprise without being direct beneficiaries.

What is the government doing?
In view of the foregoing, it is no longer in doubt that crude oil theft is an organised crime involving stakeholders from different strata of the Nigerian society and the petroleum industry with a specialstructure of execution. As complex and coordinated as crude oil theft is in Nigeria, the onus is on the federal government by the virtue of its exclusive control of natural resources to proffer lasting solutions to it and save the country from the financial bleeding the act has caused it. However, the political and administrative will to act by the leaders concerned is a challenge. The present administration of President Muhammadu Buhari came to power in 2015 with three key mandates – ending insecurity, improving the economy, and combating corruption. While the government claim to have made progress in these areas, some parts of the Nigerian public argue that the performance of the Buhari-led federal government in tackling insecurity, improving the economy, and fighting corruptionare below what it is claiming. Assessing the administration’s performance in tackling crude oil theft using its three key mandate areas, it is fair to say that Buhari’s administration is below the bar. There is a poor security system for the country’s oil installations which makes it easy for thieves to illegally tap them. Security personnel who are sent to protect oil installations are compromised by crude oil thieves. High-ranking state actors in collaboration with other none state actors are actively involved in sponsoring crude oil theft, but have not been exposed and punished by the government. In all, the activities of oil thieves continue to hurt and weaken the Nigerian economy to the point that the country is dependent on financial borrowings to support a large scale of her annual budget.

One critical question that comes to mind is; why has the Nigerian government failed to deploy modern technology to monitor all the operations within its petroleum industry like other big oil-producing nations of the world of which the Saudi Arabia Aramco and Abu Dhabi ADNOC in the United Arab Emirates are good examples?This will reduce to the lowest or possibly end the large quantity of crude oil worth humongous amounts financially lost to oil theft.Regrettably, Nigeria’s total daily crude production up to the present time is largely based on a manual estimate.

In 2017, the former Minister of State for Petroleum Resources, Ibe Kachikwu, told pressmen that from 2019, the Federal Governmentin collaboration with the Department of Petroleum Resources (DPR)would begin tracking Nigeria’s crude oil using the Information Technology (IT) platform that would enable the government to account for every quantity of the commodity produced in the country, thereby ending the manual estimate regime. Unluckily, the minister with such a brilliant idea and many more on how to transform the Nigerian petroleum sector to be transparent and accountable to the people was not reappointed in the second term of the administration. A few years after, the old system of manual estimation which aids crude oil theft daily continues to be in use as the country continues to suffer huge financial losses. Last year, the executive secretary of the Nigeria Extractive Industries Transparency Initiative (NEITI), Mr. Ogbonnaya Orji during a courtesy visit to Mansur Liman, Director General of the Federal Radio Corporation of Nigeria (FRCN) said that the exact quantity of crude oil produced in Nigeria is still unknown as a result of the absence of meters at wellheads and the inability to monitor deep offshore fields. In many cases, there have been discrepancies between the daily crude oil production estimate of NEITI and the Department of Petroleum Resources (DPR).

As the Federal Government of Nigeria is reluctant in deploying efficient modern technology that will aid its manpower to monitor effectively all the operations within its petroleum industry for the economic benefit of the country in the midst of dwindling national revenue, it has employed the service of non-state actors to protect oil installations in the Niger Delta from the sabotage of oil thieves. Recently, the Federal Government of Nigeria awarded a multi-billion-naira pipeline surveillance contract to a former leader of the Movement for the Emancipation of Niger Delta, Government Ekpemupolo, popularly known as Tompolo. The actual worth of the contract was reportedly put at N48 billion per year (N4 billion per month). The Nigerian National Petroleum Company Limited chief executive officer Mr. Mele Kyari amid public reactions to the news explained during the 49th session of the state house briefing at the Presidential Villa, Abuja that it was not the first time that individuals within the Niger Delta region were awarded contracts for pipeline surveillance. He also stated that the present decision was necessitated by the need for Nigeria to hire private contractors to man its oil pipeline network nationwide due to massive oil theft.

However, the concern about such a government decision is itseconomic rationality considering the financial state of the country which requires prudent spending, and the fact that we have security personnel that can deliver on the same assignment with lesser resources spent. Another concern is how sustainable is the practiceconsidering the capitalist nature of mercenaries which expose the state to their financial blackmail. This is already building up as it was reported in the media that militant groups within the Niger Delta region are threatening to make the surveillance contract ineffectual because of their anger that the federal government leftthem out of the luscious contract. In all, the Nigerian people are the ones at loss as financial resources that would have been used to advance public good keep finding their ways into private pockets. Therefore, crude oil theft has become a sweet apple that those whohave tasted refused to let go of. In this era that technology hasprovided smart solutions to almost all human problems, one may not be completely out of place to say that the thriving enterprise ofcrude oil theft in a bleeding economy such as Nigeria, is an economic conspiracy of the Nigerian elites suffering from predatory material resource accumulation syndrome against the ordinary people over the commonwealth of the nation.

What should be done?
Going forward, the focus should be on what needs to be done to correct this ugly narrative. Interestingly, the solution we seek is in the problem and that is “Leadership”. Institutions do not function on their own, it is humans that give life to them. The difference between progressive and retrogressive societies are the quality, commitment to standards, and transparency of human beings manning their public and private institutions. It is therefore fair to say that leadership determines the rise and fall of any society. To turn around the ugly trend in the Nigerian petroleum industry as it regards crude oil theft, the country needs quality, committed and transparent political and administrative leadership. Politically, Nigerians must elect into positions of public leadership people of proven character and good track record, who are not afraid to make tough decisions that will be in the interest of the general public and stand by those decisions until they materialised, no matter the storm. The selection of these political leaders by the people must be based on their ability to deliver on their national assignment to the people and not on the petty issue of ethno-religious identity. The right choice of political leaders will reflect on the quality of individuals appointed to head different government ministries, agencies, and parastatals and the work ethics they will bring on board. A quality, committed and transparent political leadership will ensure that the right people are selected to manage the Nigerian petroleum industry and the best of modern technology are deployed to monitor and give accurate account to the public of every single activity within the industry. Interestingly, the 2023 general elections are around the corner and it will serve as an avenue for the Nigerian people to fix what they considered a problem to them. There is a saying that the leadership of every society is a reflection of who the people are. As the 2023 general elections draw closer, the question is how are we the Nigerian citizens shaping the politics for the politicians to follow? Are we still holding onto the traditional politics of ethno-religious bias or are we making the election and politics issues-based, where the problems of Nigerians irrespective of tribe, religion, location, or social status, will be the focus?

Daniel Uchechukwu Lawrence (Aurthor)