THE continued loss of an average of 400,000 barrels of petroleum per day through theft and pipeline vandalism again exposes the dysfunction and institutional weakness of the Nigerian state. Given the parlous state of public finances, the latest official admission of the staggering quantum of petroleum stolen and the expenditure of N60 billion annually repairing vandalised pipelines, the seeming helplessness of the government in stopping it is stunning. With public revenues at dangerously low levels and lower production output, the Federal Government must overcome its inertia, safeguard critical infrastructure, and pull out of the downstream oil sector to concentrate on its security and regulatory roles.
Evidence of the prevailing culture of poor governance and economic mismanagement is writ large in the country’s downstream oil sector. When a country’s major export and revenue resource is being stolen amid high unemployment, poverty, and insecurity, all-out measures to protect its assets, punish crime and adopt reforms to maximise benefits are expected. Sadly, successive Nigerian governments have failed to muster the necessary political will to adopt effective policies to plug leakages, end corruption and liberalise the crisis-ridden and state-dominated oil sector. The results are disastrous.
The disclosure by the Minister of Information and Culture, Lai Mohammed, that the 200,000 barrels of crude lost per day through pipeline destruction cost the country N60 billion to repair each year is bad enough. Some 1,161 pipeline points were vandalised between January 2019 and September 2020. Combined with the spills caused by sabotage at production points, the loss rises to over 400,000 barrels per day. Over 4.5 trillion barrels were lost to theft and oil spills from 2015 to 2021, added the Minister of Environment, Mohammed Abubakar. He said 3,628 of the 4,919 oil spills recorded between 2015 and 2021 were caused by wilful sabotage of oil thieves. Over 235,206 barrels of crude have been spilled, causing severe environmental damage, ruining the economy and the livelihoods of the host communities. Meanwhile, the country’s current average production hovers between 1.34 million bpd and 1.6 million bpd though its OPEC quota is 1.51 million bpd.
The magnitude of oil theft and vandalism in Nigeria is astonishing. For context, consider the sheer volume of crude filched: it is close to the 562bpd Egypt produces, or Malaysia’s 533bpd, Ecuador’s 502bpd and Argentina’s 472bpd. It dwarfs Ghana’s 186bpd, Gabon’s 183bpd and Bahrain’s 170bpd. In Africa, only Libya, Angola and Algeria have over double of the stolen Nigerian figure. A US publication, Financial Post, said the estimated $1.7 billion the country lost monthly “represents 7.7 per cent of its GDP vanishing, or more than the country spends on health and education.” NEITI put total losses of crude and refined products at $42 billion 2009-2018.
The next biggest victim, Mexico, at a distant second, records only 5,000 to 10,000bpd daily loss. Iraq, despite years of strife, records less than 5,000bpd at third place, while Russia’s recently reported $63 million loss from its extensive pipelines is insignificant in comparison with Nigeria’s hefty haemorrhage.
The leakage has gone on for too long and should be halted. At the height of attacks on oil facilities by Niger Delta militants, OPEC estimated production losses in Nigeria of up to 800,000bpd facilitated by international syndicates working with local cartels, militants, security personnel and officials. A government-appointed committee said the country still lost $1.35 billion to oil theft in the first six months of 2019.
These are losses the country cannot afford, buffeted as it is by low revenues, dwindling reserves that declined by 5.8 per cent to stand at $33.32 billion by June 30, mass poverty, a crippling and ever-increasing debt burden at $32.8 billion, a 33.3 per cent jobless rate, and caught in the vortex of the COVID-19-induced global meltdown.
Re-strategising should be top priority. The President, Major General Muhammadu Buhari (retd.), should review the current template of the joint military/police task forces and the performance of the Nigeria Security and Civil Defence Corps that has been tasked with pipeline protection. Scrutiny should extend to the controversial pipeline protection contracts given to diverse actors, including ex-militants and dodgy companies. The fight against corruption needs to incorporate an institutionalised capacity to detect, probe and compel accountability for unexplained wealth. Individuals and officials acquiring assets well beyond their legitimate means must be legally scrutinised, illicit oil wealth recovered and erring persons prosecuted. The Department of Petroleum Resources, the industry regulator, has failed and should be overhauled for effective performance.
Modern policing is driven by intelligence, using both simple and cutting-edge technology. Drones, advanced surveillance and listening devices are deployed by security agencies to prevent, detect, and punish crime. Oil pipeline theft is a global problem. Canada’s police, intelligence services and energy companies share intelligence, conduct aerial and mounted patrols, and deploy drones to protect its 840,000 kilometres of transmission, gathering and distribution pipelines. The United States’ 2.03 kilometres of pipelines are protected by federal, state, local forces and the companies that own them. Mexico adopts a strategy of special security units that target the cartels and their leaders to disrupt their criminal activities. A new technology, “fuel marking,” featuring hard-to-detect molecular fuel markers, enables stolen fuel to be identified, “recovered, and more importantly, used as admissible scientific evidence to prosecute thieves and smugglers,” reported Forbes magazine. Ghana quickly logged on to this innovation with its Petroleum Product Marking Scheme.
Ultimately, the government should exit the downstream oil and gas sector to concentrate on providing security. In a private sector-led environment, the costs of securing economic infrastructure will be largely shared with private investors/owners where the investment exposure and profit motive would never condone the current industrial scale theft the Nigerian government so carelessly tolerates. Jobs, specialisation, foreign and domestic investment, innovation, and tax revenues will rise. The government would then focus on effective regulation with an eye on boosting the economy and protecting the environment.
Unwillingness to privatise downstream assets is hurting the economy. Buhari should muster the political will to restart the privatisation programme and transparently sell refineries, depots, and pipelines to rescue the economy.
END
Be the first to comment