Counting The Costs Of Crude Theft On Nigeria’s economy

A new report presented recently in Lagos and titled ‘revenue loss from crude oil theft and it’s impact on the economy of Nigeria and the average Nigerian’ which was commissioned by the Nigeria Natural Resource Charter (NNRC), has again highlighted the huge costs of crude theft menace across all sectors of the Nigerian economy. The report emphasised the need for urgent drastic measures to be put in place in the overall interest of the country.  e360 was there and writes…

Despite being acclaimed as Africa’s largest crude producer and one of the world’s largest, Nigeria and Nigerians have yet to fully benefit from the proceeds of its hydrocarbon resources.

Although the nations economy depends on earnings from crude oil sales for about 95percent of its foreign exchange earnings and about 80percent of government revenue, so much is lost to the menace of crude theft, thereby limiting accruals to the country.

This huge revenue loss no doubt has a trickle effect on nearly all sectors of the economy.  For example, it is estimated that about N1trillion is lost annually to crude theft in Nigeria.

To put this into better perspective,  one year of crude loss could have funded the country’s educational budget 16times more. It could also have funded the health sector budget 14times more and the water budget 10times more, the NNRC report noted.

Presenting the report,  Engr. Niyi Awodeyi,  a consultant to the NNRC,  said the activities of oil thieves is causing the country colossal losses, a challenge must be decisively and effectively handled.

Nigeria he says,  accounts for the highest case of crude loss in the world with about 400,000 barrels per day,  followed by Mexico with only 6,000 to 10,000 barrels per day.  The amount lost by Nigeria daily is higher than some countries daily oil output.

Apart from the financial losses in terms of revenue to the country,  the report highlighted other impacts of crude loss to include,  social, security and environmental.

Environmental Impacts

According to the report, the Niger Delta region which is home to active oil exploration activities is plagued with water contamination,  air pollution and health challenges.

Water in the region is proven to be contaminated with benzene at levels 900times higher than the World Health Organisation’s approved level for drinking water.

Rivers in the region, which is predominantly a fishing area, are virtually dead due to oil spillage arising from the activities of oil thieves. This has led to rise in unemployment and poverty amongst the people whose natural sources of livelihood have been destroyed.

Similarly,  the soil in the region is found to be dead up to 5meters below the ground, making farming impossible.

The activities of illegal refiners is also found to have further compounded the issue of air pollution in the area, resulting to several health related challenges.

Social Impacts

As a result of crude theft, and the ecosystem created on the back of it, the NNRC report found a decline in school enrolments and high rates of school dropouts, as school age children would rather take up jobs at illegal refineries to earn quick monies.  Many of them with the intent of supporting their parents whose natural sources of livelihoods – rivers and farmlands – have been destroyed.

There is also the issue of health risks arising from consumption of contaminated foods with high levels of traceable metals and hydrocarbons.

Increased child malnutrition was also found to be an impact of oil theft activities as children are fed with contaminated foods with little or no nutrient value.

Security Impact

As a result of oil theft and it’s associated activities,  the Niger Delta region have become highly volatile with frequent cases of unrest and violence.

The NNRC report found that gang warfare’s and arms proliferation thrive in the region due to oil theft menace.

There has also been loss of economic activities to neighbouring countries due to insecurities in the region.  Also several cases of force majures have been declared by oil companies due to breaches on their operational facilities by oil thieves.

There have also been cases of civilian displacements due to military-gang clashes. Women and children are usually most impacted whenever there are civilian displacements.

The report also noted that security operatives and highly placed civilians are complicit in the thriving oil theft business from which the nations losses billion of Naira in needed revenue.

The Report observed that higher oil prices and approaching elections are signals of increased crude theft.  This establishes the fact that proceeds from crude theft in some ways goes to fund elections.

Other factors fuelling crude theft,  according to the report are, poor infrastructure,  poverty,  unemployment and inadequate implementation of best practices by oil companies operating in Nigeria.

The report emphasised that oil theft goes beyond the ‘boys in the creeks’,  but entails a circle which involves highly placed financiers,  security operatives, barons, as well as transport, sales and operations experts and opportunists in high and low places.

The NNRC report noted that although there have been several efforts by government to curb the menace, they have proven insufficient.  These efforts and interventions include, area monitoring and early detection alert systems,  Military Joint Task Force, Amnesty programme,  host communities pipeline security contracts as well as setting up the Niger Delta Development Commission (NDDC)  and the Ministry of Niger Delta Affairs.

In its recommendations,  the NNRC urged government to consolidate actions around accountability, transparency and understanding  the use of funds from crude sales,  and to utilise high tech metering and mapping movement of crude from extraction to exportation.

It also recommended stringent penalties for oil theft perpetrators and allied practitioners and called for better overall law enforcement in the Niger Delta and the streamlining of efforts in the campaign to end oil theft in Nigeria.