The recurring oil theft is an intractable challenge, which the central government and security agencies must quickly resolve. Consequently, Nigeria has lost so much money to oil theft in recent times. The Vice President, Prof Yemi Osinbajo, and the Minister of State, Petroleum Resources, Timipre Sylva, have decried the increasing cases of oil theft and pipelines vandalism. According to the Vice President, those managing the nation’s oil and gas sector should be held accountable for crude oil theft and pipelines sabotage. The opaque nature of our oil and gas sector has not helped matters in addressing the problems besetting the sector.
On his part, Sylva harped on government’s determination to end the trend through improved investments and security along the major oil and gas pipelines in the Niger Delta region. He said measurement inaccuracies have little to do with the volumes of crude oil losses. They believe that oil theft is undermining the economy and creating distortions in the oil value chain. It also prevents the country from meeting its estimated production plans.
Nigeria has recorded an astonishing increase in oil theft in recent times. The Nigerian National Petroleum Company Ltd revealed that as of September 2022, the country lost 470,000 barrels of crude oil monthly due to oil theft. This represents $700 million every month. Also, Nigeria’s crude oil production recently plunged to a 13-year low of 800,000 bpd, even though the production level is reported to have started picking up again.
In 2021, estimated monthly revenue loss was about $1.9billion due to the activities of oil thieves. Its attendant effect on environmental pollution remains devastating. Available figures show that Nigeria rarely meets her OPEC production quota of 1.99 million barrels per day as a result of oil theft and illegal refineries. It was only last month that Nigeria was able to increase its production level to 1.6 million bpd.
Since 2021, Nigeria’s oil production quota was reduced to 1.2 m bpd. This means that Nigeria has an idle economic capacity shortage of about 500,000 barrels per day. Despite the soaring prices of oil in the international market, Nigeria has not been able to meet its projected revenue target. The revenue loss is so much, especially at this time that the government is facing acute financial crisis. If the activities of oil thieves are not checked, government may not meet its revenue generation projections. Oil theft is a threat to the economy. According to the Nigeria Extractive Industries Initiative (NEITI), the economy lost in excess of $3.5billion in revenue in 2018. This accounted for 10 per cent of the nation’s foreign reserves.
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, tackling oil theft requires the collaborative effort of all stakeholders in the sector. This must involve the relevant security agencies, the oil companies and the host communities. Some security experts opine that crude oil theft has become an organised crime and one of the most lucrative businesses in the country. It involves powerful individuals and some unscrupulous government officials. Those entrusted with managing Nigeria’s oil must account for crude oil theft. Apart from the economic consequences of oil theft, the image of the country is also at stake.
However, it is comforting that the government is taking a new offensive against oil theft. No investor will risk investing where there is frequent insecurity and vandalism of the infrastructure. In spite of the recent uptick in oil prices in the international market, there is still fear that the oil industry in Nigeria faces some infrastructure challenges and divestment of offshore assets by some foreign oil companies. This is due to security challenges and the impact of oil theft on their profits.
To contain the menace, government must come up with policy initiatives that will deal with the factors responsible for the illegal activity. Recently, the National Economic Council (NEC) set up an ad-hoc committee to ascertain the magnitude of oil theft and revenue losses and recommend some remedial actions. Instructively, some of the recommendations are contained in the Petrol Industry Act (PIA) 2021.
The measures are essentially aimed at revitalising the oil and gas industry. The provisions of the PIA should accommodate the needs of the oil-bearing communities that bear the brunt of the hazards of oil exploration in the Niger Delta region. A review of the security architecture in the Niger Delta has become expedient. Let the government deploy technology to protect oil pipelines. We call for stiffer sanctions against oil thieves.
Beyond that, the government should be circumspect in using private security contractors to guard oil pipelines. Security checks will be carried out before engaging them. Nigeria needs to build a robust diversified economy outside oil with emphasis on non-oil exports.