Nigeria's oil sector is mired in a dispute between two major groups: the federal government, which supervises the industry, and the smugglers, who steal billions of dollars in oil. Successive government administrations have strived to change this trend with little success. For example, in 2021, the Federal Government formed an inter-ministerial group that included all security services in the nation. This committee's specific mandate was to recover crude oil and illegally processed petroleum products from the Niger Delta Creek. President Muhammadu Buhari also signed the Petroleum Industry Act (PIA), which seeks to reform the sector after 20 years. While the PIA is yielding significant results, the challenge of crude oil theft persists. In 2022, Nigeria’s Auditor General announced that 22,929.84 litres of petrol pumped to the Ibadan-Ilorin and Aba-Enugu depots between June and July were interrupted.

For the tenth consecutive month in 2023, Nigeria failed to reach its 1.8 million barrels per day crude oil production quota from the Organisation of Petroleum Exporting Countries (OPEC). Oil production fell from 1,572,315 million barrels per day in September 2023 to 1,562,072 million barrels per day in October 2023, a trend that continued in 2024.

According to a report, Nigeria's output fell to 1.32 million barrels per day in February 2024, down from 1.42 million barrels in January 2024, reflecting a daily loss of 104,000 barrels. Notably, Nigeria was among several countries assigned a lower crude oil output target after years of failing to reach prior ones. Nigeria’s 2024 target has been decreased to 1.38 million from 1.74/8 million the year before. As a result, Nigeria is not maximising its production capacity. This situation is compounded by environmental degradation, which has negatively impacted the livelihood sources of host communities.

Revenue Loss

Nigeria is Africa's largest oil producer and the world's 12th largest overall. It also has the continent's largest natural gas reserves. The oil and gas industry is vital to the Nigerian economy, accounting for over 65% of government revenue and more than 85% of total exports. Given this background, crude oil is Nigeria's economic lifeblood, and the consequence of oil theft is severe revenue loss. A report by the Nigerian National Petroleum Corporation (NNPC) estimates that between 2009 and 2018, the country lost approximately $41.9 billion to oil theft. Subsequent revenue losses were recorded in 2021, 2022 and 2023 (See the Table below)

Oil theft causes both short and long-term revenue losses. In some cases, the operationality and functionality of essential oil infrastructure limits production. According to an August 2023 report, the Trans-Niger Pipeline, which produces 180,000 barrels of crude per day, was shut down for a year, leading to the loss of about 65,700,000 barrels of oil. The revenue loss incurred is approximately $5.45 billion, or N2.3 trillion, based on an average oil price of $83 per barrel. This loss also impacts Nigeria's gas supply, as the pipeline accounts for 60% of Nigeria’s gas supply. Upon investigation, it was discovered that about 460 illegal connections were made on the Trans-Niger Pipeline.

The Nigerian government has resorted to massive borrowing to survive the revenue losses due to these activities. The Debt Management Office reported that Nigeria's total public debt stock increased from ₦32.92 trillion in 2020 to ₦39.56 trillion in 2021.  

Methods of Theft

Pipeline clamping, illegal connections to significant pipelines, exploitation of abandoned oil wellheads, pipeline breakages, and vandalism of critical national assets are the most common methods of unlawfully siphoning crude into waiting vessels stationed at strategic terminals. This stolen oil is then sold through legitimate channels, denying the state vital funds that could be allocated to social services, public infrastructure, and economic growth.

The rising incidence of illegal operations best conveys the magnitude of oil theft. For example, in a 2023 Nigerian National Petroleum Company Limited report, 131 crude oil theft incidents occurred in one week. These included 24 illegal connections, 43 illegal refineries, 19 pipeline vandalism acts, 23 vessel Automatic Identification System (AIS) infractions, five wooden boat arrests, ten vehicle arrests, four oil spills, and three illegal storage sites.

Oil Theft Triggers

Several factors trigger oil theft. Some key drivers include:

• Economic Disproportion: The oil sector's enormous wealth contrasts sharply with the widespread poverty in host communities. While oil companies make high profits, locals struggle to meet basic needs. This stark disparity in wealth has driven some people to extreme means. As a result, oil theft has emerged as a dangerous but alluring way to augment livelihood sources. According to a report, over 47% of the population in the Niger Delta region live below the poverty line.
• Corruption: There have been allegations of collusion between security forces and government officials in carrying out oil thefts. This  collusion allows for the brazen theft and illegal sale of oil, sustaining a cycle of corruption that erodes governance integrity and weakens public trust. For example, a report alleged that some security operatives who mount sentry on waterways collect levy from bunkers, while many other officers lobby to serve in such areas. The subtle impact of entrenched interests hampers efforts to curb oil theft while eroding the social contract between the government and its citizens, perpetuating a culture of impunity.
• Transparency Deficiency: The lack of transparency surrounding the oil sector's activities and the opaque process of allocating oil blocks provide a fertile ground for misconduct and exploitation. Due to a lack of strong accountability measures, these opaque procedures foster rent-seeking behaviour and backroom transactions, allowing vested interests to prosper at the expense of public benefit. The lack of openness weakens attempts to combat oil theft and erodes public trust in the integrity of the oil business and the institutions overseeing it.
• Security Inadequacies: Despite military and navy surveillance, oil theft continues within ostensibly guarded zones, alluding to systematic security inadequacies. The brazenness with which oil criminals operate beneath the noses of armed forces highlights the necessity for a thorough re-examination of security operations.
• Sophisticated Crime: Oil theft has evolved into a sophisticated criminal business with complicated networks and covert activities. Armed with superior technology and deep knowledge of oil infrastructure, the offenders use innovative strategies to avoid discovery and steal oil undetected. This shift from opportunistic stealing to organised crime highlights the importance of a diversified approach to address this illicit economy's symptoms and underlying causes.

How Is the Government Responding?

The Nigerian government has considered many approaches to combat the epidemic of oil theft. One of these is signing the Nigeria Upstream Petroleum Measurement Regulations, 2023. This regulation will close the metering gap in upstream petroleum operations, support expedited meter rollout, and promote the creation of independent and competitive meters for the upstream oil sector. It will also encourage private investment in the supply of metering services, regulate the measurement of petroleum produced, and assure accurate measurement of petroleum as a foundation for calculating petroleum income owed to the government. It will also include the requirements for designing, fabricating, producing, testing, calibrating, operating, and maintaining upstream metering equipment.

The government also claims to have created a strategy or road map to reduce oil theft. The plan aims to pinpoint leaky locations and track incidents that led to theft.

Indigenous companies have been awarded pipeline surveillance contracts to prevent oil theft. For example, Tantita Security Services Limited was awarded the initial and three-year renewal of the pipeline protection contract. Although this has remained controversial, there are success stories that support the action.

Recommendations:

• The government should implement laws promoting a more equitable distribution of oil income. This could involve increasing investments in local infrastructure, education, and healthcare to benefit host communities and introducing monitoring and evaluation mechanisms to check interventions.
• To prevent illicit collaborations between security personnel, government officials, and oil business interests, the government should tighten anti-corruption measures by introducing oversight procedures and whistleblower protections. Strict consequences for corrupt conduct in the oil business should be implemented, including prosecution of violators regardless of status or influence, to send a clear message that corruption will not be allowed.

• The government must enforce legislation requiring transparency in the oil sector's operations, including public disclosure of contracts, revenues, and payments to government agencies. This would likely boost transparency in the allocation of oil exploration blocks by implementing transparent and impartial procedures, public disclosure of allocations and bidding processes to decrease the opportunity for backroom transactions.
• The security organisation tasked with protecting Nigeria’s maritime border must be held responsible for the grand theft of Nigeria’s oil resources. The government must introduce measures to improve the integrity and professionalism of security personnel in aspects such as ethics, human rights, and anti-corruption training.

Conclusion

Despite successive governments' attempts, addressing Nigeria's oil theft crisis remains complex. The country's oil sector, essential to its economy, faces a paradoxical position in which immense wealth contrasts with widespread poverty, exacerbated by a structural failure to distribute oil income equally. This discrepancy has fuelled a hazardous practice of oil theft, driven by desperation among poor people looking to supplement their meagre wages. Resolving the numerous challenges of oil theft requires political will, institutional reform, and a genuine commitment to equitable development. Failure to do so jeopardises Nigeria's economic growth while continuing a cycle of poverty, corruption, and insecurity, harming the country's long-term stability and well-being.

References

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Nwuke, K., 2022. Nigeria’s Petroleum Industry Act: Addressing old problems, creating new ones. [online] Brookings. Available at: https://www.brookings.edu/blog/africa-in-focus/2021/11/24/nigerias-petroleum-industry-act-addressing-old-problems-creating-new-ones  [Accessed 28 March 2022].

Akowe, T., 2022. 107.2m barrels of crude missing. [online] The Nation Newspaper. Available at: https://thenationonlineng.net/107-2m-barrels-of-crude-missing-says-augf  [Accessed 26 March 2022].

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Bodo, T., Gimah, B. and Seomoni, K., 2020. Illegal Oil Bunkering in the Niger Delta Region of Nigeria: A Challenge to Nigeria’s Development. European Scientific Journal ESJ, 16(29).

Popoola, N., Olatunji, S., Ikpoto, E. and Egole, A., 2022. Nigeria borrowed N6.64tn serviced debt with N2.93tn in 2021. [online] Punchng.com. Available at: https://punchng.com/nigeria-borrowed-n6-64tn-serviced-debt-with-n2-93tn-in-2021-says-dmo  [Accessed 28 March 2022].