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Recently, the Nigeria Extractive Industries Transparency Initiative (NEITI) disclosed that Nigeria lost 619.7 million barrels of crude oil worth N16.25 trillion or $46.16 billion from 2009 to 2020 to oil theft. According to NEITI’s report, Nigeria lost 69.9 million barrels valued at $4.31billion to oil thieves in 2009. In 2010, it lost $2.29billion; 2011, $4.31billion and $5.82billion in 2012. Also, 78.30 million barrels of oil worth $8.55billion was lost from 2013-2020.
Between 2014 and 2015, NEITI put the loss at 67.27 million barrels with a market value of $5.57billion. The highest loss was recorded in 2016 with 101.05 million barrels valued at $4.42billion. From 2017-2020, 36.46 million barrels ($1.99billion), 2018; 53.28million barrels ($3.83billion), 2019, 42.248 billion barrels valued at $2.77billion, and in 2020; 53.05 million barrels valued at $2.21billion.
No doubt, oil theft threatens the economic survival of the country. According to statistics, the total amount lost to oil theft for the 11-year period was 3.39 per cent of the 2022 budget, and N1trillion less than the 2022 budget. NEITI’s report came a year after the Federal Government reported losing about $1.9billion monthly to oil theft. According to the Ministry of Petroleum Resources, about 700,000 barrels of crude oil are lost daily. Available figure shows that Nigeria rarely meets her OPEC production quota of 1.99 million barrels per day as a result of oil theft and illegal refineries. In 2021, Nigeria’s oil production averaged 1.6 mbpd, but was reduced to 1.2 mbpd. This translates to a shortage of about 500,000 barrels per day.
In spite of the soaring oil prices in the international market, Nigeria has not been able to meet its projected revenue target. Government’s disclosure came days after oil giant, Shell Petroleum Development Company (SPDC), raised concern over the effect of illegal oil bunkering on Nigeria’s economy. It observed that oil theft would cripple the economy if not checked. In 2019, the NNPC announced a loss of $159billion due to oil theft and pipeline vandalism.
Given the level it has taken in recent times, the challenge must be quickly addressed. The rise in oil theft can be traced to the failure of security agents to secure Nigeria’s oil pipelines. The security of our oil installations must involve relevant security agencies, the oil companies and the host communities for it to be effective.
That oil theft has become the most lucrative business in the country is not in doubt. It is laudable that government is taking a new offensive against oil theft through the establishment of a Special Investigative Panel on Oil Theft. The terms of reference of the special panel include to establish the ramifications of crude oil theft and losses, ascertain the causative factors, immediate and remote causes, identify persons/entities, whether public, private or foreign, involved in the criminal activities.
Others include to ascertain the level of culpability of identified persons/entities involved, examine the specific roles of various regulatory agencies, security agencies and tiers of government and International Oil Companies (IOCs) in aiding and abetting the criminal activities, as well as assessing the efficacy of the current security arrangement in tackling the menace. The panel is expected to recommend steps, procedures and processes to prevent future oil thefts.
While this is a bold and courageous step to stem oil theft, members of the panel must carry the probe to its logical conclusion. The members need reminding that no investor will risk investing where there is frequent insecurity and vandalism of the infrastructure. When considerable volumes of oil are lost, the technical cost of manufacturing rises, making enterprises less profitable. Curbing oil theft, therefore, requires aggressive policy initiatives that will deal with the factors responsible for the illegal activity.
Government should be circumspect in engaging private security operators to guard oil pipelines. In its place, we believe that reviewing oil and surveillance contracts based on performance of contractors and engagement of the host communities will ensure effectiveness in securing the nation’s oil and gas assets.
One of the lessons to learn from oil theft is the need to grow the economy beyond oil. Nigeria needs to diversify its non-oil exports that will create jobs, earn foreign exchange and attract investments. The fact is that non-oil exports have faster growth rate that can build a more resilient economy. The state of global economy means that Nigeria can no longer afford to stick to exporting oil and hope to become a major economic hub in Africa.
