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Oil theft, illegal mining plagued Nigeria’s economy for years

Oil theft, illegal mining plagued Nigeria’s economy for years

Nigeria’s extractive industry, focusing on oil, gas, and minerals, positions the country as Africa’s top oil producer and the 12th largest globally. It boasts significant natural gas reserves as well.

This sector plays a vital role in Nigeria’s economy, contributing over 65 percent of government revenue and more than 85 percent of total exports.

However, weak governance and corruption have hindered its potential to drive socio-economic development, despite the underdeveloped mining sector accounting for less than 1 percent of the country’s GDP.

For years, oil theft has been a persistent problem in Nigeria, negatively impacting crude oil production and Nigeria’s revenue and prompting calls for a thorough investigation.

Over the past two decades, Nigeria’s daily crude oil production has significantly decreased. yoBetween 2000 and 2010, it averaged 2.085 million barrels per day, but from 2011 to 2020, it dropped to 1.732 million bpd (a 17 percent decline), according to data sourced from the Central Bank of Nigeria (CBN).

In 2021, daily production averaged 1.48 million bpd (a further 15 percent decline). This 20 percent drop in production represents a potential revenue loss of $40 billion over five years or approximately $8 billion per year. Recent estimates for 2022 suggest production has dropped even further to below 1.3 million bpd.

The decline in production has been attributed to factors such as divestments, lower capital expenditure, and proliferation of oil theft and pipeline vandalism, with business leaders within the sector, including Tony Elumelu and Austin Avuru, expressing concern about Nigeria losing a significant portion of its oil production to thieves consistently.

Last year, the Nigerian National Petroleum Company discovered an illegal oil connection from Forcados Terminal that operated for nine years, resulting in the loss of around 600,000 barrels per day of oil.

Similarly, former militant leader Tompolo reported the discovery of about 58 illegal oil points in Delta and Bayelsa states. Between 2009 and 2020, Nigeria lost a staggering 619.7 million barrels of crude oil valued at N16.25 trillion to oil theft, as revealed by the Nigerian Extractive Industries Transparency Initiative.

Of recent, the Nigerian Extractive Industries Transparency Initiative (NEITI), in its 2023 report, revealed that Nigeria spent N13 trillion on fuel subsidies between 2005 and 2021, while 619.7 million barrels of crude oil valued at $46.16 billion(N16.25 trillion) were stolen between 2009 and 2020.

volume of crude oil lost to theft and sabotage
volume of crude oil lost to theft and sabotage

In light of this, the Human Rights Writers Association of Nigeria (HURIWA) urged President Bola Tinubu to establish an independent panel to probe oil bunkering and related crimes as far back as 2015.

This comes after a prominent Niger Delta ex-militant leader, Mujahid Asari Dokubo, accused the Nigerian Army and Navy of being responsible for 99 percent of oil theft in the region although the Nigerian Army refuted the allegations, emphasising their efforts to combat illegal oil activities instead.

Dokubo, while speaking with State House Journalists after meeting with President Bola Ahmed Tinubu at the Presidential Villa, Abuja, said that ordinary Niger Delta citizens who are often blamed for the action are not responsible as they do not have the wherewithal to perform the stealing.

He said, “The military is at the centre of oil theft. 99 percent of oil theft can be traced to the Nigeria military, the army and the navy. They intimidate the Civil Defence that have the responsibility to protect the oil facilities. The main culprits are the army and the navy. There are notorious army commanders that are kingpins in the oil theft.”

In its reaction, HURIWA called for stringent action against culprits, with no exceptions, and the recovery of stolen public funds. “The allegations by Dokubo are startling and damning and these allegations must be thoroughly investigated,” said Emmanuel Onwubiko, CEO/national co-ordinator, HURIWA.

“We ask that the President set up a seven-man independent panel of criminologists drawn from reputable global fora to investigate the larger cases of crude oil thefts from 2015-2023. The panel should identify, prosecute and sanction culprits in the severest of mechanisms and recover to the last dollar public funds diverted through those stolen crude oil by these rogues no matter their statuses,” Onwubiko said.

Equally, Henry Babalola, a former spokesman of the navy, said “Oil theft in Nigeria requires a multi-faceted approach to address its scale. This includes national rebirth, attitudinal change, and strong actions against oil thieves, collaborators, security personnel, the oil sector, local communities, and international partners.

“The government’s failure to punish culprits has emboldened others, and strict laws, including the death penalty, are necessary. Traditional rulers and their collaborators must also face consequences,” he said. “Security agencies should be repositioned, and punishment for involved personnel should include confiscation of illicit funds and long-term imprisonment. Economic saboteurs must not go free while minor offenders are targeted. Oil thieves live among us, gaining power, wealth, and even political positions.”

While much attention has been focused on curbing crude oil theft in the Niger Delta, Nigeria’s efforts to tackle illegal mining of valuable resources like gold in Zamfara and other precious stones have been lacking.

In 2022, the Nigerian Minister of Mines and Steel highlighted the country’s abundant mineral wealth, with 44 different minerals found in 500 locations. The government expressed its commitment to harnessing the potential of this sector.

However, despite these vast mineral deposits, data from NEITI revealed that over a 13-year period, the solid minerals sector generated only $1.4 billion (equivalent to N624.6 billion) for the country. In comparison, the oil and gas sector, a sister industry, generated a staggering $394 billion in just 10 years, surpassing the revenue of the solid minerals sector by a staggering $392.6 billion.

Nigeria's revenue from Crude oil
Nigeria’s revenue from Crude oil
Nigeria's revenue from Solid minerals
Nigeria’s revenue from Solid minerals

“We are very displeased that the solid minerals sector currently contributes a little over 1.8 per cent to Nigeria’s GDP. This is an enormous sector that can grow the economy more than oil,” Ogbonnaya Orji, the Executive Secretary, NEITI, stated while speaking on the agency’s new strategic plan.

Nigeria’s artisanal and small-scale gold mining sector once held great development potential, employing over 600,000 people and boosting local infrastructure. However, this potential is being eroded by criminal elements profiteering at the expense of vulnerable populations.

Around 80 percent of mining in the North West is conducted illegally by local populations, leading to community violence. This conflict has been on the increase since 2014, spreading across Kaduna, Katsina, Kebbi, Plateau and Zamfara states.

Despite the government’s ban on artisanal gold mining in Zamfara State and the deployment of soldiers to enforce it, illegal mining and associated conflicts persist. Over 5 000 people have been killed in Zamfara State in the past five years.

Expanding that, collusion between politically connected Nigerians and Chinese corporations in illegal gold mining fuels rural banditry and violent conflicts, particularly in the North West, North Central, and parts of the South West regions.

Read also: In lesson for Nigeria, Saudi Arabia launches mining fund to curb oil dependency

In February 2020, soldiers killed 13 bandits during clashes in Zamfara and Kebbi states. In April, four soldiers were killed by robbers in Zamfara State, and police arrested two Chinese nationals for illegal mining.

On Wednesday, July 12, 2023, the Economic and Financial Crimes Commission (EFCC) arrested 13 Chinese nationals for illegal mining activities at the Government Reserved Area, G.R.A Ilorin, Kwara State. The suspects, comprising a female and 12 males, were arrested following credible intelligence about their activities which included but were not limited to, illegal mining and non-payment of royalties to the Federal Government as required by law.

To unleash Nigeria’s mineral resources revenue potential, Ehi Braimah, a public relations and marketing strategist said “amend mining laws, granting control to state governments and address foreign involvement in organized crime through diplomatic means.”

Also, the NEITI report also recommended furthering sector reforms and improving technical capabilities to maximize its capabilities. “While Solid Minerals offer a path to job creation and increased national income surpassing the Petroleum sector, collaboration among government, communities, security forces, and companies is crucial to tackling roadblocks hindering the sector’s recovery and revenue growth,” according to Orji, the agency’s executive secretary.