Nigeria losing $1bn a month to oil theft

The Nigerian state and oil companies are losing a billion dollars or more a month to oil theft by criminal networks whose activities have expanded rapidly under the government of President Goodluck Jonathan.

According to Ngozi Okonjo-Iweala, the finance minister, the trade in stolen oil led to a 17 per cent fall in official oil sales in April, or about 400,000 barrels per day). At average April prices of $121 per barrel, this results in a loss of $1.2bn.

This is a higher estimate than that given earlier by SPDC, Royal Dutch Shell’s Nigerian subsidiary, which put theft at between 150,000 and 180,000bd.

Ms Okonjo-Iweala said the theft of oil – known in Nigeria as “bunkering” – along with fraud in the allocation of a controversial fuel subsidy, may together have cost the state $14bn in 2011.

This means that Africa’s leading oil producer has a limited cushion if oil prices continue their current fall. Nigeria, the continent’s second-largest economy, depends on oil for over 75 percent of hard currency earnings and typically over 90 percent of state revenues.

“We have to get very serious about the bunkering issue,” she told the Financial Times.

“If we can stop the amount that is stolen we can beef up the excess crude account faster,” she said, referring to the rainy-day account where savings accrue above a benchmark price for oil – set at $72.

This holds more than $4bn, Ms Okonjo-Iweala says. But those funds could be targeted to supplement this year’s budget for the fuel subsidy which has already been largely depleted.

Mr Jonathan set up a taskforce this year to examine ways of staunching losses from mismanagement and fraud in the energy sector, after it emerged from a parliamentary inquiry that about $7bn of state spending on fuel subsidies may have been siphoned off last year. Nuhu Ribadu, the former anti-corruption tsar who heads the task force, says his recommendations will be ready by the end of next month.

On Tuesday, Mr Jonathan replaced the head of the Nigerian National Petroleum Corporation and three other senior officials “in furtherance of efforts to achieve greater transparency and accountability”.

The task force is also looking at bunkering. Oil theft has increased since 2009 when the government launched an amnesty for militants engaged in a campaign of sabotage in the oil-producing Niger delta region. The amnesty led to a recovery in oil production. But a policy of appeasing the delta militants coincided with growing collusion by senior political and military figures in the illicit oil trade. This resulted in a dramatic spike in theft.

Bunkering began over thirty years ago, but expanded rapidly when local gangs in the Niger delta took up arms in the late 1990s in a campaign to force the federal government to provide a greater share of the revenues earned from oil to the region where it is produced.

The trade in stolen oil now involves a sophisticated criminal network and international traders who provide oil at discounted prices to refineries in west Africa and in China and India.

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