Nigeria’s crude oil thieves are showing the world how to steal

Nairametrics

Since the latest disruption in crude oil prices, using the advent of COVID-19 as the base period, for the most part, the higher the production quota allotted to Nigeria by the Organisation of Petroleum Exporting Countries (OPEC), the lower the country’s production has been.

Although poor infrastructure, lack of investments, among others can be attributed as reasons for dwindling production, the major factor for this is crude oil theft.

The country’s total crude oil output dropped to a 25-year low of 972,394 in August, according to data from the Nigerian Upstream Petroleum Regulatory Commission (NUPRC).

…Putting 2022 under the spotlight, Nigeria’s crude production has suffered a sustained fall in the first eight months of 2022 from just over 1.4 million barrels a day in January to 972,394 million in August, based on statistics obtained from the OPEC.

…The Nigeria Extractive Industries Transparency Initiative (NEITI) had stated that in 2019, the country lost 42.25 million barrels of crude oil to oil theft, valued at $2.77 billion.

A year earlier, in 2018, about 53.28 million barrels of crude vanished from Nigeria’s resources. Naturally, the loss to the country depends on the price and volume of oil at the moment. From all indications, Nigeria’s loss to oil theft is increasing with the appreciating price of crude oil on the international market.

The menace did not start yesterday. As far back as 2014, Nigeria was losing 400,000 bpd to oil theft.

What is worrying is the fact that oil thieves seem to be more sophisticated in their craft. Speaking about the level of sophistication in perpetrating the acts, the thieves seem to be ahead of regulators.

The managing director of NNPC Limited, Mele Kyari, in a recent statement said, “The pipeline taps are so sophisticated that they ran for 3-4 kilometres and would have involved cranes, industrial equipment and at least 40 workers. I can tell you that in one line just less than 200 kilometres we had 295 illegal connections.”

As it stands Nigeria is losing 95% of oil output to criminals at oil hub Bonny, the town after which its premium oil grade Bonny Light is named and a key export point for the country.

The country can only secure 3,000 barrels out of 239,000 barrels injected into the pipeline from Bonny Terminal, Kyari said.

The development bodes dire consequences for Nigeria. The 2022 federal government budget reflects 31% of expected federal government revenue generation from oil, even as oil exports continue to supply 90% of Nigeria’s foreign exchange and half of federal government revenues.

With the increasing shortfall in oil production, Nigeria loses one of its most traditionally secure sources of revenue to other countries that have the capacity to fill in the vacuum.

On the other hand, the government loses potential tax revenue to criminal elements that do not only deny the country of royalties, but also do not pay taxes from their loots.

The development also leaves many states gasping for finance for development. It also leaves months of unpaid salaries to state government civil servants, all of which have inevitable long term downward spiraling effects on the national economy.