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John Daly

John Daly

Dr. John C.K. Daly is the chief analyst for Oilprice.com, Dr. Daly received his Ph.D. in 1986 from the School of Slavonic and East European…

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The Staggering Scale of Oil Theft in Nigeria

That corruption is associated with oil production is acknowledged to be a worldwide problem.

But the scale of corruption in Africa is in a class by itself, particularly in Nigeria. As black Africa’s largest oil producer, OPEC member Nigeria currently exports just over two millions barrels per day (bpd), and for decades this has proven irresistible to the country’s corrupt elements.

The scope of the thievery is staggering. In October 2006 Nuhu Ribadu, head of Nigeria’s Economic and Financial Crimes Commission (EFCC), stated that more than $380 billion has either been stolen or wasted by Nigerian governments since independence in 1960.  A July 2010 academic study of corruption in Nigeria noted that successive governments have mismanaged the oil wealth, “salting it away in foreign bank accounts rather than investing in education, health and other social investment and mismanaging the national economy to the point of collapse.”

And the theft goes on.

The Nigerian government of President Goodluck Jonathan has long been concerned about the rising oil thievery from both pipeline vandalism and illegal oil bunkering and last year established a Joint Military Task Force, also known as Operation Restore Hope, to protect oil installations in the Niger Delta.

Despite the government’s efforts the wide-scale theft of oil continues, and now Nigeria’s Minister of Petroleum Resources Diezani Alison-Madueke has put a price on it. According to Alison-Madueke, in 2011 thefts of crude oil topped $7 billion.

Speaking at a meeting of a round table on the Nigerian oil and gas industry convened in Lagos by the Minister of Petroleum Resources, Alison-Madueke said, "This meeting concerns the security of critical assets in the oil and gas sector particularly crude and our products as well. And this is the first time along with multinational staff and indigenous operators we have discussed the extent of impact of crude theft in terms of economic loss and environmental loss to this nation. We have spoken very openly about the issue and what can be done about it. One of the major outcomes is that a very robust and aggressive task force will be set up with representatives of all parties- multinationals, the Nigerian National Petroleum Corp. (NNPC) and of course service chiefs, to begin to address the problem in an immediate manner. In the last six months the level of oil theft in the country has become alarming and has necessitated the need for this round table with all stakeholders. We are looking at short, medium and long-term solutions to tackle the issue as oil theft is taking its toll on the nation's economy. There has been an escalation in crude theft over the last six months or so. And we have seen particularly foreign crude thieves coming into our waters as well more recently to take our crude. So we thought it was critical that we stem these abuses at this time with the involvement of all stakeholders. At the moment, we are losing approximately 180,000 barrels of oil equivalent daily at this time, if you look at the international cost of a barrel, it would be estimated at approximately $7 billion yearly."

Highlighting the importance of the issue, those in attendance at the meeting included the Chief of Defense Staff Air Marshall Oluseyi Petirin, Chief of Army Staff, Lt. Gen. Azubuike Ihejirika along with representatives of the Chief of Air Staff and Chief of Naval Staff. Inspector General of Police was also present along with Nigerian National Petroleum Corp. Group Managing Director Austen Oniwon headed the NNPC delegation, while a number of international oil company CEOS were also there. Accordingly, on 18 May the Nigerian government announced the establishment of what it described as a "very aggressive and robust task force," as part of its strategies to reverse the rapidly escalating thefts and to secure the country’s critical oil and gas assets.

So, in addition to the Joint Military Task Force, the government is to establish a Joint Oil Industry and Military Task Force with the mandate of eradicating oil thefts, but as Air Marshall Oluseyi Petirin explained, the new force would not be equivalent to setting up a parallel unit in light of the already operating Joint Task Force.

Rather than setting up yet another government entity, which will further blur lines of responsibility for coping with the issue, the government instead should strengthen its already existing institutions, notably the EFCC and the Joint Military Task Force, allowing them carte blanche to go after the major players in the corruption scandals, no matter what their office and responsibility.

But given Nigeria’s dolorous track record, this seems unlikely, and so the thievery will continue.

By. John C.K. Daly of Oilprice.com

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