The government of Nigeria claims that theft of crude oil is an existential threat to its economy, but an illegal 4 km pipeline which extended from a major oil export terminal out to sea operated unnoticed for nine years.
Theft is certainly crippling Nigeria’s economy, but who are the real thieves?
Nigeria: An economy of oil
Nigeria, like large swaths of Africa, is rich in natural resources. Home to the 10th largest proven reserves in the world, oil plays a central role in Nigeria’s economy; 80% of the government’s revenue comes from oil exports.
Historically, Nigeria has been the largest exporter of oil in Africa, even though lack of infrastructure has long hindered Nigeria from being able to export at 100% capacity. Oil production in the country typically varies between 1.4 and 2 million barrels per day (bpd).
However, oil production in Angola outpaced Nigeria in August of this year, when Nigerian production sank below an unprecedented 1 million bpd, a low unseen since 1990. Even attacks by militant groups in 2016, which were described at the time as “crippling,” saw production rates only sink to 1.4 million bpd.
In terms of GDP, Nigeria is the wealthiest country in Africa, but 32% of the population lives below the line of extreme poverty. This figure increases to 53% in rural areas, which include the Niger River Delta where the majority of Nigerian crude oil is both pumped and stolen.
Theft of oil in Nigeria is not a new problem, but it has been growing over the last two decades. CEO of the Nigerian National Petroleum Company (NNPC), Mele Kyari, described the increase in theft in recent times as “unprecedented” and claimed that Nigeria was losing up to 600,000 barrels of crude oil per day.
Some companies stated that 80% of the oil that was put into pipelines was being stolen.
The president of Nigeria, Muhammadu Buhari, who is also the minister of petroleum, stated that the missing oil was affecting the state finances enormously. Oil reserves have made Nigeria the largest economy in Africa, but in a mono-product economy, any disruption to the supply chain can have wide-ranging and devastating impacts.
Theft in the Niger Delta
The Niger River Delta, which makes up the southeastern half of Nigeria’s coast, is home to the majority of the country’s oil operations. The oil fields and pipelines cut through the same mangrove thickets where Nigerian people have lived for generations. Unemployment and poverty are high in these communities, even as the natural resources upon which they live create billions in wealth for international companies, very little of which trickles down to the citizens.
This disparity of wealth has created a tense animosity between the people of the delta and the oil industry in their backyard.
Oil theft is not only a livelihood, but a way of life for many of the people in these communities. It is a profitable industry that comes with all of the violent side-effects that tend to accompany criminal enterprises: kidnapping, ransom, and stealing.
Violent criminal activity notwithstanding, the men who run large operations that syphon oil away from pipelines tend to be viewed with respect within their communities. The men who steal from these exploitative corporations have become modern-day Robinhoods in the eyes of locals.
Nigeria does not have the infrastructure to refine its own crude oil, and as a result, multinational oil companies operating in Nigeria export their crude oil to be refined elsewhere. For this purpose, the oil is pumped through pipelines directly to the coast in order to be transported by sea.
Illegal operations use a similar method. Oil is syphoned away from a pipeline and stored on barges, which travel through the waterways of the delta before exiting into the open Atlantic ocean. At sea, the men meet up with buyers.
However, in order for the illegally syphoned oil to be sold on the black market in Nigeria, rather than being exported, the oil must be refined. As a result, illegal refineries have cropped up throughout the delta and have become a hazard in themselves.
By using a crude method of burning the oil at high temperatures, these illegal refineries are a threat to both the communities and the environment. Explosions are not uncommon, and gas flaring, which happens when the gas produced from the oil is burned off instead of being reused, is standard practice. This contributes heavily to air pollution in the area.
— NASA Earth (but haaaunted 👻) (@NASAEarth) March 13, 2014
Oil spills have perhaps been the most harmful consequence of this illegal industry to the community. The presence of crude oil on nearly every surface has decimated the local environment, and the Niger River Delta is now considered one of the most polluted places on earth.
Whole swaths of what used to be mangrove forest are now black and oil-stained, with roots dangling lifelessly in the slick water.
The cruel irony is that this illegal oil industry, which many locals view as the only way to feed their families, has ruined the local ecosystem and nearly all of its food sources, upon which these communities had subsisted for generations.
The lives of people in the delta historically intertwined closely with the marine ecosystems surrounding them, which provided abundant seafood and fertile land. All of this has gone, as farmlands and aquatic habitats have been destroyed by unceasing oil spills and the effects of crude refining.
For now, this illegal industry shows no sign of halting, as long as the delta is habitable and contains oil. The final drastic measure, which some companies have chosen, is to simply cease working some oil fields rather than continue funnelling oil directly into these illegal operations.
Corruption at the highest levels
Corruption is a fact of life in Nigeria, which is ranked 154 out of 180 on the Corruption Perception Index. This is evident nowhere more so than in the most profitable industry in the country.
The largest agency and most important player in Nigerian oil is the NNPC, the only entity licensed to operate within the country’s petroleum industry. One unique aspect about the NNPC is that it has two arms, one commercial and one regulatory.
As the only licensed entity in the industry, the NNPC alone performs the dual tasks of conducting oil-related business and regulating the industry, which presents an obvious conflict of interest and results in a complete lack of transparency. The problems with this arrangement have been evident for years, but attempts to amend it have never come to fruition.
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The money made from oil is supposed to become part of the state’s finances through one main channel. The corporation arm of the NNPC signs contracts with all of the multinational oil companies, and they pay taxes on their profits back to the NNPC. The NNPC is then responsible for depositing that revenue into the national treasury, but the regulatory body that is supposed to police that flow of money is also the NNPC.
Essentially, there is one central body, with its own commercial interests, overseeing the finances of the entire Nigerian oil industry.
This arrangement lends itself to corruption at the highest levels, and indeed discrepancies between reported profits and the final sum sent to the Nigerian treasury range on the order of $1bn per month. Audits are rarely conducted, but different Nigerian officials both within the government and the NNPC have been accused of stealing billions.
Diezani Alison-Madueke, a Nigerian politician and previous president of OPEC (The Organization of the Petroleum Exporting Countries) has been charged for money laundering. The current president of Nigeria also holds the position of minister in the Federal Ministry of Petroleum Resources.
In addition to this history of tax theft, the CEO of NNPC recently announced the discovery of an illegal pipeline, which runs from the Forcados export terminal 4 km out to sea and has been in operation for nine years.
In case you missed this. The CDS General Irabor and team on-site at the illegal connection point on the Trans Escravos Pipeline pic.twitter.com/vbJ9DrpAd4
— Mele Kyari, OFR (@MKKyari) October 8, 2022
The operations of this pipeline imply a level of sophistication incongruent with the illicit operations of the delta, which has exacerbated speculations of corruption within the NNPC and the government. To some, including prominent Nigerian political scientist and author, Jibrim Ibrahim, it seems nearly impossible that the NNPC would let this pipeline operate unnoticed for nine years.
The Nigerian state organises the massive theft of crude oil. Imagine construction of a smuggling pipeline from Forcados to the sea and NNPC say it took them 9 years to realise it. Equipment, engineers & parts were assembled to build it and the State saw nothing. Haba!
— Jibrin Ibrahim (@JibrinIbrahim17) October 7, 2022
This is not the only way in which money disappears from the economy. Multinational oil companies, like Shell, routinely evade paying taxes on their profits to the NNPC, choosing to underreport profits and conduct business in tax havens.
Internal corruption combined with foreign tax evasion means that revenues from the rich natural resources are rarely reinvested into education, healthcare, or any other infrastructure that would help lift the average Nigerian citizen out of poverty.
This opaque slick of corruption, which seems to cover every surface in Nigeria, makes it exceedingly challenging to sort out the thieves from the victims.
Are the delta thieves modern Robinhoods, exacting vengeance on a government that has routinely ignored the needs of the people in pursuit of lining their own pockets? Or are they environmental brigands, destroying their own communities for profit, mirroring the activities of the oil companies which they claim to be fighting?
There seems to be a lot of finger-pointing, but money and oil are both disappearing from the country. The government blames the communities that live along the oil pipelines, and the people blame the government for the corruption that oil money has fueled.
Although the resources present in Nigeria could allow wealth to flourish in the country, the battle for control over these precious natural resources has effectively hindered the country from becoming truly prosperous.
Editor’s Note: The opinions expressed here by Impakter.com columnists are their own, not those of Impakter.com — Featured Photo: Fishing boats on polluted water in Bodo in the Niger Delta, Nigeria. Featured Photo Credits: Milieudefensie/Akintunde Akinleye.