Oil theft costs Nigeria $1 billion monthly

July 6, 2012 at 1:31 PM
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ABUJA, Nigeria, July 6 (UPI) -- Nigeria reportedly loses $1 billion a month to massive oil theft by criminal gangs, militants and corrupt officials, crippling Africa's top oil and gas producer amid political turmoil that many fear heralds trouble between the Christian south and the Muslim north.

Finance Minister Ngozi Okonjo-Iweala says in April this trade, known as "bunkering," led to a 17 percent fall in official oil sales, the equivalent of about 400,000 barrels per day for Africa's most populous state and the continent's second-largest economy.

She said in June these increasingly sophisticated operations in the oil-rich Niger Delta in the south resulted in losses of $1.2 billion based on average April oil prices.

Industry sources say police officers take huge payoffs from the perpetrators who are widely believed to be linked to what one observer called "the gangland politics that informs everything that happens in the Niger Delta."

All told, according to Okonjo-Iweala and other officials, bunkering that's now being conducted on an industrial scale costs corruption-riddled Nigeria as much as $14 billion in 2011.

President Goodluck Jonathan has taken steps to combat the illegal trade, but political rivals claim his links to militants in the southern state of Baylesa in the Niger Delta undermine the high-profile crackdown.

Jonathan, a Christian who hails from Baylesa and was once its governor, has come under intense pressure to clean up the energy sector after public fury over corruption and waste of the country's much-squandered oil wealth came to light during January protests against rising fuel prices.

Jonathan set up a government task force earlier this year to find ways to curb the oil theft and widespread fraud in the energy sector, Nigeria's economic lifeline.

That followed a parliamentary commission's report that as much as $8 billion of state fuel subsidies may have been siphoned off in 2011 by corrupt civil servants.

It named several highly placed political figures it alleged had their fingers in the pie.

On June 26, Jonathan sacked the managing director of the Nigerian National Petroleum Corp., Austen Oniwon, and three other senior directors in a major shakeup aimed at muting the national outcry.

"It is not only the loss to the treasury that is worrying him and others, but the way bunkering is infecting government at all levels, with senior military and political figures staking out a leading role," the Financial Times observed June 26.

"They've been sponsoring local government chairmen," NNPC's Oniwon commented shortly before he was axed.

"The chairmen have been sponsoring governors. These people, if not checked in time, will one day produce the president of Nigeria."

There's currently little sign that Jonathan's drive to halt the snowballing oil theft from pipelines and wellheads, primarily at onshore oil fields in the Niger Delta, and the large-scale fraud within the industry and government is having much impact.

"No effective measures have yet been taken to halt the trade," the Financial Times commented.

"This may be because the networks profiting from stolen oil now have tentacles deep within the state, financing the patronage system that keeps the political system afloat."

The surge in oil theft has accompanied signs that a long-running insurgency in the Niger Delta, in which foreign oil companies who produce most of Nigeria's oil were constantly attacked, is being revived amid the collapse of a 2009 government amnesty.

That insurgency, launched in 2005 by Ijaw tribesmen demanding a more equitable share of oil revenues for their impoverished and environmentally degraded region, at one point slashed oil production by 1 million barrels a day, one-third of national output.

Under the amnesty, militants who turned in their weapons were to be given cash stipends, job training and other benefits.

An estimated 25,000 did so -- although thousands did not -- and now complain they've been cheated by the government and regional political bosses -- some double as local warlords -- and pocketed most of the funds.

In recent months, attacks by the main insurgent group, the Movement for the Emancipation of the Niger Delta, on oil installations have been rising again.

The Financial Times mused that one reason the government has been unable to stamp out bunkering is that "some politicians consider the theft of oil a price worth paying for the relative peace that has returned to the Niger Delta" under the amnesty.

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