THE standard depiction of oil theft in Nigeria shows a young man, knee-deep in a swamp, with a bucket or wooden canoe full of pilfered thick black sludge. But a besuited banker in Geneva or a slick shipping trader in London might provide an equally apt image. “Oil Theft in Nigeria: A Murky Business”, a report by Chatham House, a London think-tank, unravels a complex network that arranges the theft of oil worth billions of dollars a year.
“Oil theft may cost Nigeria, Africa’s second-biggest economy after South Africa’s, as much as $8 billion a year claims the report. It says an average of 100,000 barrels a day (b/d) was stolen in the first quarter of this year. Politicians, security forces, militants, oil-industry staff, oil traders and members of local communities all profit from “bunkering” of oil, so few have an interest in stopping it. When so many are feeding from the trough, it is doubtful if anyone in Nigeria has the political will to stop it. Profits are laundered abroad in financial hubs, including New York, London, Geneva and Singapore. Money is smuggled in cash via middlemen and deposited in shell companies and tax havens. Bank officials are bribed. Cash is laundered through legitimate businesses. Some of the proceedsand stolen oilend up in the Balkans, Brazil, China, Indonesia, Singapore, Thailand, the United States and other parts of west Africa.
“At the smallest scale, telltale plumes of smoke rise from illegal refineries in the Niger Delta’s labyrinthine creeks. But larger-scale bunkering involves siphoning oil from pipelines on land or under water and loading it onto small barges, from which it is transferred to bigger ships in the Gulf of Guinea that carry the stuff to international refiners who may be unaware it is stolenthough plainly many know it is. The line between legal and illegal oil supplies is easily blurred in a country so rife with corruption. Transactions in Nigeria’s oil industry are infamous for their murkiness. The trade in stolen oil helps other transnational criminal networks to spread across the Gulf of Guinea, creating global links between oil thieves, pirates and traffickers in arms and drugs. The damage caused by thieves also often forces oil companies to shut pipelines down. As a result, Nigeria is producing oil at 400,000 b/d below its capacity of 2.5m b/d. On September 23rd Shell had to close its Trans-Niger pipeline, which should carry 150,000 b/d, because of leaks due to theft, less than a week after it had been reopened.”
For the umpteenth time since the beginning of 2012, members of the National Assembly are to commence yet another round of probe into the highly secretive petroleum industry. In the last one month, fresh allegations have dogged the management of national cash cow. First was the allegation by international watchdog group Berne Declaration that Nigerian and Swiss traders may be complicit in defrauding the Nigerian public of billions of dollars. The group declared Geneva a “haven for Nigerian fraudsters” and accused Swiss traders of involvement in “one of the most massive frauds that the African continent has experienced.”Less than two weeks after this resolution to probe the allegation, another one emerged suggesting that officials of the Nigerian National Petroleum Corporation (NNPC) in connivance with top government functionaries at the Presidency and Ministry of Petroleum Resources could have stolen up to N5 trillion belonging to the nation.
Even with decades of paying lip service to diversification of the economy, oil still accounts for about 90 percent of foreign exchange earnings for the country. A large chunk of taxes collected by the Federal Inland Revenue Service (FIRS) is also derived from petroleum profit tax. 2013 has been particularly bad for the country as various shenanigans in the management of the industry have been cited as excuse for non-implementation of budget and even the failure of the Federal Government to pay states and local governments their legitimate share of the Federation Account. An investigation into the management of oil subsidy conducted by lawmakers last year revealed that between 2009 and 2011, NNPC officials and their partners stole $6.8 billion intended to subsidize the price of fuel.
On Thursday, November 21, members of the House of Representatives again mandated the committees on Petroleum Resources (Upstream and Downstream), National Planning and Finance, to ascertain the volume and value of crude oil sales by the NNPC from January 2013 till date. The House unanimously adopted a motion seeking to verify how much revenue the corporation made during the period and how much it actually remitted to the Federation Account.
According to Section 162 (1) of the 1999 Constitution, money made through oil sales and other national businesses like the Nigerian Customs Service and Federal Inland Revenue Service (FIRS) must be remitted into the Federation Account from where it will then be disbursed. However, the lawmakers alleged massive lack of accountability and the arbitrary management of oil revenue by the NNPC. There were widespread discrepancies between information credited to the NNPC on the status and remittances to the Federation Account and the claim that the total crude oil sales from January to August 2013 were $20 billion, whereas the Corporation remitted only $7 billion to the account leading to a possible shortfall of $13 billion. It was also discovered that from September 2013, no proper accounts have been rendered by the NNPC or records kept to show the actual amount and volume of crude oil sales by it.
Early in the year, the same House of Rep had investigated a $1 billion deal involving Shell, the Federal Government and Malabu Oil and Gas Limited. According to documents filed in the US Supreme Court, Dan Etete, former Nigerian Petroleum Minister was paid more than $1 billion through his company Malabu Oil and Gas. dopting a motion on the matter sponsored by Rep. Robinson Uwak (PDP, Akwa Ibom), the House passed a resolution setting up an ad-hoc committee to probe the matter because, according to them, it has embarrassed Nigeria. “There have been Intense media attention in the last two weeks to the suspicious circumstances surrounding a tripartite transaction involving the Federal government of Nigeria, Shell/Agip companies and Malabu Oil and Gas Limited in respect of an Oil bloc refered to popularly as OPL 245. That there was a purported sale of OPL 245 to the Shell/Agip consortium for the sum of $1,092 billion and immediate transfer of the entire account to Malabu Oil and Gas Limited, an indigenous oil company as compensation for its alleged prior interest in the Oil bloc,” Uwak argued.
On January 8, 2012, the House of Representatives at an emergency session set up an ad hoc committee to probe the management of the fuel subsidy scheme. This resulted from universal lamentation about the management of oil subsidy funds which came about following the removal of subsidies on January I of that year by President Goodluck Jonathan. An eight-member ad hoc committee led by Hon. Farouk Lawan was selected to probe the subsidy regime between 2009 and 2011. Among stakeholders invited by the committee to give testimony were the Nigerian Customs Service (NCS), Petroleum Products Price Regulatory Agency (PPPRA), Nigerian National Petroleum Corporation (NNPC), the Ministries of Finance and Petroleum Resources, and all the relevant agencies of government. The Lawan Committee uncovered how in 2011 the country paid subsidy on 59 million litres of petrol per day when in fact, the daily consumption was about 35 million litres.
After sitting for three months, the committee reported on April 19 that “contrary to statutory requirements and other guidelines under the Petroleum Support Fund (PSF), Scheme mandating agencies in the industry to keep reliable information data base, there seemed to be a deliberate understanding among the agencies not to do so. This lack of record keeping contributed in no small measure to the decadence and rots the committee found in the administration of PSF. …We found out that the subsidy regime, as operated during the period under review (2009 to 2011), were fraught with endemic corruption and entrenched inefficiency. Much of the amount claimed to have been paid as subsidy was actually not actually for consumed PMS. Government officials made nonsense of the PSF Guidelines due mainly to sleaze and in some cases, incompetence.”
Even as the Lawan Committee was busy with its investigations, the executive arm of government drafted Managing Director and Chief Executive Officer of Access Bank Plc who is also member of the Economic Management Team (EMT), Mr. Aigboje Aig-Imoukhuede to lead others from the Central Bank of Nigeria (CBN), Budget Office of the Federation, Debt Management Office, PPPRA, Independent Petroleum Marketers Association of Nigeria (IPMAN), Major Marketers Association of Nigeria (MOMAN), and Office of the Accountant General of the Federation as members in another committee to probe activities in the oil sector. In July of that year, the Committee concluded that petroleum marketers and importers committed 17 infractions that cost the country N422,542,937,668.59 in overpayments.
Many marketers protested their indictment by the Committee and so, President Goodluck Jonathan set up another Presidential Committee on Verification and Reconciliation of Subsidy Payments also in July.
This new committee, which was also headed by Aig-Imoukhuede, was mandated to verify and reconcile the report of the technical committee, also headed by Aig-Imoukhuede, which was set up by the Federal Ministry of Finance. In its report, the verification panel still headed by Aig-Imoukhuede categorised the transactions examined into those it considered legitimate and those, which required investigation and recovery by the law enforcement agencies. The report noted that of 857 transactions valued at 1,112,836,823,380.43 which were examined by the committee, 661 transactions valued at N880,644,248,166.23 were verified as legitimate, while 196 transactions valued at N232,192,575,214.20 were not verified as legitimate. The 197 transactions not verified as legitimate involved 50 oil marketing and trading companies, while the 661 transactions verified as legitimate covered 71 companies.
With mounting public outcry over the management of industry and as revelations of misdemeanours occupying media space in and outside the country, government again set up a Special Task Force on Governance and Controls in the Nigerian National Petroleum Corporation (NNPC) and other parastatals within the ministry. Headed by Mr Dotun Sulaiman, it was mandated to review all management controls within NNPC and its subsidiaries; design a new corporate governance code that would ensure full transparency, good governance and global best practices in the NNPC and to design a blueprint for separating policy from operations in the corporation and its subsidiaries; set key performance indices for the corporation and its subsidiaries, and design a blueprint for eliminating all rent-seeking opportunities and arbitrage in the NNPC operations.
But by far, the most dramatic but most disappointing move by government yet over this issue was the appointment of a 16-member Petroleum Revenue Special Task Force led by Mallam Nuhu Ribadu, former Chairman of the Economic and Financial Crimes Commission (EFCC). The task force was asked to determine and verify all upstream and downstream petroleum revenue taxes and royalties due and payable to the federal government. While presenting his report on November 2, 2012, committee chairman praised the courage of President Goodluck Jonathan in setting up the committee and expressed the hope that he would also display courage in implementing the recommendations. He said all the issues raised in the report were the truth that would set the President and the country free if properly implemented because they would strengthen institutions and increase government revenue. But was the President desirous of being set free? The Committee found that many companies operating in the country fail to pay royalties and that it had become a habit to sell crude through agents rather than sell directly. Nigeria may also have lost $29billion in the sweet-heart gas deals with major oil companies, such as Shell and Total, just as crude oil theft is reaching an alarming level of 250,000 barrels daily at a cost of $6.3billion a year in the last 10 years. The 146-page study covers the year 2002 to 2012 and held that Ministers of Petroleum Resources between 2008 and 2011 handed out seven discretionary oil licences, but that $183m in signature bonuses was missing from the deals. Three of the oil licences were awarded since Alison-Madueke, took up her position in 2011.
There have also been efforts from outside government to clean the Aegean’s table but the Federal Government is obviously not interested in the subject aside paying lip service. The Chatham House report quoted in the beginning of this write-up corroborated the claim also by Ijaw activist and strong supporter of President Jonathan, Asari Dokubo who claimed a few years ago that almost every name on the list of most important Nigerians from the Presidency to military and politicians all took turns to illegally lift crude from the Niger Delta creeks. And like the Chatham Report suggested, could be responsible for why there is no political will to stop the practice.
Yet another report by the Stakeholder Democracy Network (SDN) in October 2013 based on 12 weeks of field research by a team of researchers who visited nine illegal refining operations in Rivers, Bayelsa and Delta States and supplemented with 120 key informants’ interviews with oil companies, government representatives and members of civil society groups accused top military officials and others of colluding with the oil thieves for pecuniary considerations. The report estimated that Nigeria is losing about 150,000 barrels of crude oil daily to the oil thieves and going by the computation by Shell Petroleum Development Corporation (SPDC), Nigeria loses $6 billion annually to oil theft. “This research suggests that a relatively small number of senior officers must have criminal ties to the tap point owners, unions and camps managers, as this is where most profits are made,” and that “a consortium typically made up of at least three key parties (security, technical capacity and operational access) own each tap point. During the tapping process, the JTF ensures the surrounding waterways are clear so workers can install the tap without disturbance,” it said.
But all these efforts would appear to be mere waste of resources as President Jonathan does not believe that corruption in the country is a thing to be worried about. In a much reported interview many months ago, he declared that there was no corruption in his government as is being widely held. According to him, corruption in his government is more of perception than reality. And truly, the administration has intensified a clampdown on anti-corruption crusaders in the country. Two weeks ago, police in Abuja aborted the protest organised by Stop Impunity Nigeria (SIN), and Citizens Wealth Platform (CW)P to raise awareness on the level of mismanagement in the public service. The two groups had assembled protesters at the Millennium Park, close to the Federal Secretariat, only to be ejected by armed policemen who arrived at the venue before it took off. The police officers, who arrived at about 9:14 a.m. in two vehicles with registration numbers NPF 6666 C and NPF 248, reportedly shot at a bus and fired two teargas canisters into one of the buses belonging to the Abuja Urban Mass Transportation Company, AUMTCO, which had been hired to convey the protesters. Recently a protest by former member of the House of Reps, Dino Melaye’s anti corruption group was stopped. Melaye was later arrested. Again a colloquium on FOI organized by Melaye was stopped also in Abuja.