Wednesday, February 26, 2014

Oil theft and theft of oil money

Nigeria typifies a country under a resource curse. A rich country of poor people. A country with abundant natural resources yet at the lowest rung of all development indices. The country has yet to meet any of the eight Millennium Development Goals even as we are on the eve of the 2015 target date.  In no other area is our resource curse more affirmed than in the country’s oil and gas sector. With over five decades of oil exploration, Nigeria has not been able to make optimal use of the revenue accruing from the industry. There are two broad thefts going on in that sector. The first is theft of money made from legitimate oil trade and the theft of crude oil itself.
For many years, what was in fad is the stealing of oil money. This is done through myriads of ways. One of them is the deliberate falsification of account of volumes of products explored and sold. This is very easy as multinational oil companies and even our own Nigeria National Petroleum Corporation are alleged to declare unverified figures. They are able to get away with their arbitrary claims due to the esoteric or very technical nature of oil and gas explorations. It will be recalled that when the suspended Central Bank Governor, Lamido Sanusi, wrote to the President last year that a sum of $49.8bn was not paid by the NNPC into the Federation Account, the latter claimed that the CBN governor goofed. The NNPC said Sanusi lacked the expertise to make any categorical statement on how computations were done in the oil and gas sector. The NNPC made the same claim on the recent allegation of missing of $20bn made by Sanusi, who had maintained that the NNPC account had not been audited since 2005.
When revenues from the oil and gas industry are shared by the three tiers of government and such monies are looted through over-invoicing, fund diversion, bogus, substandard or abandoned projects, “ghost” workers and pensioners, fraudulent subsidy claims on fuel import, and so on, what such public officials are indirectly doing is to steal oil money. This is because about 80 per cent of our national income come from crude oil and gas sales. Taxes, customs and excise duties and revenue from solid mineral licensing, agriculture and other sundry sources account for the remainder. The evidence of the theft of oil monies stares us in the face. It manifests in the infrastructural deficits, soaring unemployment, grinding poverty and concomitantly the high standard of living being experienced by a majority of Nigerians.
Because only a powerful few, perhaps 10 per cent of the Nigerian population have the access to loot oil money, others, particularly in the Niger Delta region where the oil and gas are being explored have decided to forcefully partake of the looting. While it is relatively easy to steal oil money, it is far more difficult and dangerous to steal crude oil. In spite of the attendant danger to lives and the environment, what started at artisanal level about a decade ago has today grown into a big industry.
Thisday of July 30, 2013 quoted the Nigeria Extractive Industries Transparency Initiative as saying the nation lost over 136 million barrels of crude oil estimated at $10.9bn through pilfering and sabotage from 2009 to 2011. According to the organisation, in addition to the total amount of products and revenue lost to crude oil theft by the country in the upstream sector, about 10 million barrels of products, valued at $894mn, were also lost to pipeline vandalism in the downstream sector within the period under consideration.
In its editorial of November 26, 2013, The PUNCH quoted a United Kingdom-based think tank, Chatham House,  September 2013 report which indicates that  the country lost  well over £2bn, twice the sum of £1bn it receives in aid from Britain each year, to oil theft alone.  “Nigerian crude oil is being stolen on an industrial scale. Proceeds are laundered through the world’s financial centres. In Nigeria, politicians, military officers, militants, oil industry personnel, oil traders and communities profit, as do organised criminal groups,” the report declares. It is also estimated that between 300,000 and 650,000 barrels of crude oil are stolen in Nigeria every day.  The country loses $40m to $60m per day to oil theft and vandalism or $1.2bn – $1.8bn per month.
The claim by Chatham House of collusion of military officers in the illegal oil trade was established by the October 2013 report of Stakeholder Democracy Network which accused top military officials and others of colluding with the oil thieves for pecuniary considerations. The report which was published after 12 weeks of field research in Rivers, Bayelsa and Delta states, a snippet of which was published in Thisday of November 22, 2013 noted that a major portion of the stolen crude oil is sold internationally, but about 25 per cent is kept back in the Niger Delta for refining and consumption. According to the report, at the apex of the oil theft chain is the tapping point, the most lucrative part of the business chain, in which some top officers of the Joint Task Force own shares alongside technicians and couriers. During the tapping process, the JTF ensures the surrounding waterways are clear so workers can install the tap without disturbance”. The report added that outside the tapping points, some members of the JTF and marine police collect cargo-by-cargo “transportation taxes” from boats carrying stolen crude or illegally refined products.
The SDN said in its report that its interviewees described illegal oil refining as an entrepreneurial, free market response to the local economic dysfunction, socioeconomic pressures and government’s failure to provide basic services. The Chatham House was on point when it observed that the greatest victims of the unending theft are ordinary Nigerians as “the (illicit) trade destroys the environment, weakens public institutions, swallows government revenue that could buy public goods, and imposes other social costs.”
Venezuela’s advice to the Nigerian government that there is the need to identify where the stolen oil is sold, track the money from the illicit trade and mobilise the public against the theft is very apt. It is in line with the solution proffered by the SDN that the Federal Government should articulate a strategy for dismantling the trade in stolen crude oil, including measures for interdicting shipments of stolen oil, following the money trail and tackling associated security and environmental concerns.
In addition, the SDN warned that, “Unless the economic and political drivers of crude oil theft are dealt with through a credible and more appropriate strategy, the stability of Nigeria’s oil sector could worsen. This risks a return to instability and the country’s primary revenue stream being locked in.”  Need I say more?