…Expert advocate Stringent Policies to curb further leakage
-By Fred Ojiegbe
Oil revenue has over the years been the highest revenue earner for Nigeria, a development which has led to over-dependence of the country on the oil sector, while ignoring other key sectors of the economy.
In 2016, the country slided into over 17months of recession following the significant drop in crude prices to about $32 per barrel from over $100 per barrel. This underscores the significance attached to oil as a revenue earner for Nigeria and the role it plays as the country’s major foreign exchange earner.
Due to its juicy nature, the oil sector has been in the eye of the storm especially in the Niger-Delta region where agitations are high following marginalization of indigenes who feel shortchanged and not partaking in sharing of proceeds of oil sale in their capacity as oil producing states.
The attack on oil installations mainly perpetrated by militants in the Niger-Delta region are on critical government oil facilities in protest of being marginalized as well as engaging in illegal oil bunkering.
In a report, the Nigerian Extractive Industries Transparency Initiative, NEITI, an agency of the government empowered with the statutory mandate to ensure transparency in the extractive industries comprises mainly of the petroleum & mining sectors, raised alarm on the need for government to curb the increased level of oil theft in the country which has accounted for a $41.9 billion loss of revenue in ten years.
A breakdown by the figures showed that the nation lost $38.5 billion on crude theft, $1.56 billion on domestic crude and another $1.8 billion on refined petroleum products between 2009 and 2018.
The report also disclosed that the Ad-Hoc Committee of the National Economic Council, NEC, on Crude Theft in its findings showed that Nigeria lost an estimated 22 million barrels in the first six months of 2019.
This accounts for a $1.35 billion loss of revenue to the country, which is about 5 per cent of the 2019 budget and more than the capital allocations for education, health, defence and agriculture combined.
It also means that the country lost revenues that would have financed the proposed budget deficit for 2020 or cover pensions, gratuities and retirees’ benefits for five months in 2020 according to the 2020 budget calculations by President Muhammadu Buhari during his budget presentation to the National Assembly.
According to the report, Nigeria loses an average of $11 million daily, which translates to $349 million in a month and about $4.2 billion annually to crude oil and refined petroleum products losses resulting from stealing, process lapses and pipeline vandalism.
“While figures from government put the loss at between 150,000 and 250,000 barrels per day, data from private studies estimated the figure to be between 200,000 and 400,000bpd.
“This implies that Nigeria may be losing up to a fifth of its daily crude oil production to oil thieves and pipeline vandals,” the report disclosed.
Its assessment and implication of the revenue losses to the country’s dwindling revenue profile, NEITI reiterated its appeal to the government to curb oil theft to reduce budget deficits and external borrowing.
“We are calling attention to the fact that the problem, even in quantitative terms is much more than a 10-year $41.9 billion headache. Pipeline repairs, a direct consequence of vandalism, is a major index of losses in the oil industry.
“For three years covering 2014 – 2016, total expenditure on pipeline repairs was N363 billion. This is excluded from the data in this report as only losses of crude and products are considered,” the report says.
The transparency group stated that the value of crude oil and its allied products which has been stolen for the past ten years is equal to the current size of Nigeria’s entire foreign reserves.
Cumulatively, the total crude oil and petroleum products losses for the period under review amounts to $41.9 billion while Nigeria’s current foreign reserves size is pegged at an estimated $42 billion.
Data from the report indicates that in terms of volume Nigeria has lost 138,000 barrels of crude oil daily for the past 10 years, representing seven per cent of the average production of two million barrels of crude oil production per day.
The report also showed that 505 million barrels of crude oil and 4.2 billion litres of petroleum products between 2009 and 2018 were lost to vandals.
Other major effects of oil theft were also identified in the report which was detrimental to the nation faltering revenue which includes pipeline vandalism, criminal sabotage and illegal refineries in oil-producing communities.
“What is stolen, spilt or shut-in represents lost revenue, which ultimately translates to services that the government cannot provide for citizens already in dire need of critical public goods.
“Stemming this haemorrhage and leakages should be an urgent priority for Nigeria at a time of dwindling revenues and increasing needs,” the report concluded.
Advising the government on possible solutions to limit the bleeding of the country’s oil installations, NEITI’s November report advised the federal government to embrace oil fingerprinting technology.
Also, the transparency agency advocated for metering infrastructure of all facilities to fight crude oil theft and other refined petroleum products in Nigeria.
A financial expert Bimbola Akinkotun believes that poor policies in petroleum upstream and downstream has been the cause of huge amount of money lost to oil theft.
He said “If mechanisms have been put in place to enhance the protection of oil facilities and curb illegal oil bunkering, such huge amount of money cannot go down the drain.
“People in the Niger-Delta are suffering from marginalization and governments are not addressing their plights, so they are left with no option that to resort to crime.
“Therefore there should be carefully cut out policies that will enhance the development of the sector and end the bleeding of oil facilities,” he added.