/EINPresswire.com/ LONDON, April 11, 2013 – Oil theft is an illicit trade that involves the theft of crude oil and its derivative products through a variety of different mechanisms with significant economic, social, environmental, governance and security implications. This criminal act has contributed significantly to the poverty and degradation that exists in the Niger Delta region of Nigeria today. Nearly all of the country’s primary reserves are concentrated in and around the delta of the Niger River, but off-shore rigs are also prominent in the well-endowed coastal region. The issue of oil theft in the Niger Delta has been a problem for a long time but considered by many as ‘tolerable’ however, today there is a clear recognition from the Nigeria Government that this illegal practice is now having a ‘negative impact’ on the entire economy.
THE SCALE OF THE PROBLEM
The Minister of Finance and Coordinator of the Economy Dr. Ngozi Okonjo-Iweala said the trade in stolen oil led to a 17 per cent fall in official oil sales in April, 2012 or about 400,000 barrels per day. Nigeria’s Central Bank flagged a loss in earnings in its fourth quarterly report (2012) and attributed it to a number of factors including oil theft.
The impact of oil theft activities has also begun to adversely affect the joint partnership arrangement between the Nigerian government and International oil companies (IOC’s) operating in the country. The Italian energy major ENI recently announced it was suspending its operations in Bayelsa in southern Nigeria citing an intensification of bunkering activities and sabotage of the pipelines as the reason for its action. ENI also revealed the magnitude of theft had reached levels that were no longer sustainable; emphasizing the losses due to sabotage had reached levels of up to 60% of production. In a similar development, Shell, Nigeria’s largest IOC said Nigeria is in crisis as a result of a “significant upsurge” in oil theft and pipeline vandalism in recent times, the theft levels has been described as “unprecedented” by Shell as it claims the company is now losing 60,000 barrels of oil a day as a result, the heaviest losses in three years.
POSSIBLE REASONS FOR THE SUDDEN INCREASE IN OIL THEFT ACTIVITIES?
The US Energy Information Administration (EIA)’s data on pipeline vandalism in Nigeria between 2002 and 2011 shows reported incidences fell sharply in 2010 during the introduction of the Niger Delta amnesty programme however the number of cases reported in 2011 rose sharply to almost the same levels as 2006; the year most people consider as the peak period of the insurgency.
There are so many schools of thoughts on the cause of this sudden rise in oil theft activities.
• BBC Nigeria correspondent Will Ross says “many politicians are involved with part of the proceeds being used to fund election campaigns and buy votes and the Nigerian army is supposed to stop the thieving but, although some arrests have been made, soldiers routinely take bribes of cash or fuel to turn a blind eye to the crime.” – British Broadcasting Corporation (BBC) 26 Oct, 2012.
• “The Nigerian state and oil companies are losing a billion dollars or more a month to oil theft by criminal networks whose activities have expanded rapidly under the government of President Goodluck Jonathan.” – Financial Times, 26 Jun, 2012.
• Over N5 Trillion ($31 Billion) of government funds have been stolen through fraud, embezzlement and theft since President Goodluck Jonathan assumed office on May 6, 2010 – Nigeria PUNCH 24th March, 2013.
Poor quality controls maybe one of the biggest factors contributing to the rise in oil theft activities in recent times. According to a local newspaper PUNCH dated 25.11.2012, the Trade and Investment Minister, Dr. Olusegun Aganga, in a letter to the President, said 24 million barrels of oil worth $1.6bn (N252bn) were stolen between July and September last year, it was further stated the Minister said his signature was forged on the Export Clearance Permit that was used to export the crude oil from Nigeria.
THE IMPACT OF OIL THEFT ON THE NIGERIAN ECONOMY
The International Energy Agency (IEA) estimates Nigeria losses N1.1 Trillion Naira ($6.8 Billion) yearly to oil theft activities; a loss representing about 20% of Nigeria’s budget last year (2102). Analysts and economists agree this rising trend in oil theft activities will undoubtedly affect Nigeria’s oil price predictions for 2013 budget and subsequent national fiscal budgets.
POSSIBLE SOLUTION TO THE PROBLEM
Nigeria’s Minister of Petroleum Resources, Mrs. Alison-Madueke described the problem as ‘a very complex issue’ and admitted oil theft is not a surface issue that can be addressed with superficial projects. She proposes “crude oil fingerprints” as part of a possible solution while the Nigerian Senate president David Mark advocates the death penalty for convicted oil thieves.
AAN Network believes a more holistic approach is required as the issue is now threatening Nigeria’s economy. http://www.youtube.com/watch?v=EaPj-Ulx3l4
In the North-East, the Nigeria government is fighting an insurgency from Boko Haram, an Islamic sect seeking to carve out an Islamic state in the country. There are also fears of growing insecurity in the Niger Delta region after the recent killings of twelve policemen reportedly by members of the Movement for the Emancipation of the Niger Delta (MEND).
If the government fails to curb the security concerns in the country and the rising trend of oil theft continue to escalate further, the current administration ‘may struggle’ to convince the electorate at the upcoming general elections in 2015.
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