Oil Theft and Nigeria’s Declining Crude Production By Chimaza Nonyerem Okoronkwo

One of the most significant challenges confronting President Bola Ahmed Tinubu’s administration is the pervasive issue of oil theft, which has led to a drastic decline in crude oil production and a scarcity of premium motor spirit (PMS) supplies. This has, in turn, caused a surge in prices across the country, exacerbating the current economic hardships faced by citizens.

Despite widespread discontent, the administration remains resolute in its determination to tackle oil theft and improve the nation’s economic prospects. As one of Africa’s largest oil producers and a member of the Organisation of Petroleum Exporting Countries, OPEC, Nigeria has long been a key player in the global oil market.

However, the country has been struggling to meet its daily production targets due to rampant oil theft in the Niger Delta region. This practice, also known as bunkering, involves tapping into pipelines, siphoning crude oil, and selling it illegally on local or international markets.

Oil bunkering has severe implications for the country’s economy, security, and development. It results in significant revenue losses, undermines Nigeria’s credibility as an OPEC member, and exposes the country to possible sanctions or penalties from the cartel.

The consequences of oil theft are manifold and far-reaching. For Nigeria, it means a substantial loss of revenue that could have been used to improve public services, infrastructure, and economic diversification.

Oil theft also undermines the country’s reputation, as failing to meet production quotas destabilizes the global oil market. This puts Nigeria at a disadvantage in negotiations with other OPEC members and exposes it to potential sanctions from the cartel.

In the oil industry, theft poses a major challenge for maintaining and expanding operations in Nigeria. Frequent pipeline disruptions, shutdowns, and repairs increase operational costs and risks for oil companies. Additionally, theft damages the quality and quantity of crude oil that reaches export terminals, affecting the market value and competitiveness of Nigerian oil.

The persistent theft and sabotage have also discouraged new investments and partnerships, eroding the confidence of potential investors and partners. For instance, Shell, one of the largest oil companies in Nigeria, divested from some of its onshore assets in 2020 due to ongoing oil theft and sabotage.

From an environmental perspective, oil theft is a major source of pollution and degradation in the Niger Delta. Bunkering results in frequent oil spills, fires, and gas flaring, contaminating the land, water, and air. These environmental impacts threaten the health and livelihoods of millions of people who depend on fishing, farming, and tourism in the region.

The practice also contributes to climate change by releasing significant amounts of greenhouse gases into the atmosphere. According to a report by Wood Mackenzie, oil theft in Nigeria emitted about 40 million tonnes of carbon dioxide equivalent in 2021.

Oil bunkering is a complex and multifaceted problem that requires a comprehensive and coordinated response. The Nigerian government, the oil industry, and local communities must work together to address the root causes and consequences of oil theft. Some possible measures to mitigate these challenges include:

– Improving security and surveillance of pipelines and facilities.

– Strengthening the legal and regulatory framework to prevent and prosecute oil theft.

– Enhancing transparency and accountability in the management of oil revenues and expenditures.

– Providing alternative livelihoods and development opportunities for local communities to discourage involvement in oil theft.

– Promoting dialogue and reconciliation among stakeholders to foster cooperation.

– Investing in environmental remediation and restoration to mitigate the damage caused by oil theft.

Oil bunkering is not only a threat to Nigeria’s economy but also to its stability and development. By effectively tackling this problem, Nigeria can harness its oil wealth for the benefit of its people and future generations, while also addressing the current inflationary pressures and naira depreciation.