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Nigeria’s Extractive Industry Grapples with Oil Theft and Illegal Mining, Hindering Revenue Potential

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Nigeria, known as Africa’s top oil producer and the 12th largest globally, continues to face significant challenges in its extractive industry. Despite its vast oil, gas, and mineral reserves, weak governance, corruption, and persistent oil theft have hindered the sector’s potential to drive socio-economic development. These issues have contributed to declining crude oil production and revenue losses for the country.

Over the past two decades, Nigeria has experienced a significant decrease in daily crude oil production. Data sourced from the Central Bank of Nigeria (CBN) reveals that between 2000 and 2010, average production stood at 2.085 million barrels per day (bpd). However, from 2011 to 2020, production dropped to 1.732 million bpd, representing a 17 percent decline. In 2021, daily production further decreased to 1.48 million bpd, reflecting a 15 percent drop. The decline in production over the years has resulted in 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 can be attributed to various factors, including divestments, lower capital expenditure, and the proliferation of oil theft and pipeline vandalism. Business leaders within the sector, such as Tony Elumelu and Austin Avuru, have expressed concerns about Nigeria consistently losing a significant portion of its oil production to thieves.

In recent years, Nigeria has witnessed numerous cases of oil theft and illegal activities in the sector. Last year, the Nigerian National Petroleum Company discovered an illegal oil connection from Forcados Terminal that had been operating for nine years, resulting in the loss of around 600,000 barrels per day. Former militant leader Tompolo also reported the discovery of approximately 58 illegal oil points in Delta and Bayelsa states. Shockingly, 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 (NEITI).

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To address these challenges, the Human Rights Writers Association of Nigeria (HURIWA) has urged President Bola Tinubu to establish an independent panel to investigate oil bunkering and related crimes as far back as 2015. This call follows accusations made by prominent Niger Delta ex-militant leader Mujahid Asari Dokubo, who alleged that the Nigerian Army and Navy were responsible for 99 percent of oil theft in the region. However, the Nigerian Army refuted the allegations, emphasizing their efforts to combat illegal oil activities.

HURIWA called for stringent action against culprits involved in oil theft and the recovery of stolen public funds. The organization demanded a thorough investigation into Dokubo’s allegations and recommended the establishment of a seven-man independent panel to identify, prosecute, and sanction the culprits involved in crude oil theft. They also emphasized the need to recover stolen funds, regardless of the perpetrators’ status.

Illegal Mining and oil theft In Nigeria

While efforts have primarily focused on curbing crude oil theft, Nigeria’s response to illegal mining of valuable resources, such as gold in Zamfara and other precious stones, has been inadequate. Despite the country’s abundant mineral wealth, the solid minerals sector has generated only $1.4 billion over a 13-year period, according to NEITI. In contrast, the oil and gas sector generated a staggering $394 billion in just 10 years, surpassing the revenue of the solid minerals sector by $392.6 billion.

oil theft and illegal mining in Nigeria
Illegal mining and oil theft in Nigeria. Photo credit- Guardian Ngr

Illegal mining activities, especially in the North West, have fueled community violence and conflicts, resulting in thousands of deaths over the past years. Collusion between politically connected Nigerians and Chinese corporations in illegal gold mining has worsened the situation. Efforts to address these issues have been made, including the recent arrest of 13 Chinese nationals by the Economic and Financial Crimes Commission (EFCC) for illegal mining activities in Kwara State.

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To unleash the revenue potential of Nigeria’s mineral resources, experts recommend amending mining laws, granting control to state governments, and addressing foreign involvement in organized crime through diplomatic means. NEITI further recommends sector reforms and improving technical capabilities, emphasizing collaboration among government entities, communities, security forces, and companies to overcome obstacles hindering the sector’s recovery and revenue growth.

As Nigeria strives to fully harness its extractive industry’s potential, addressing oil theft and illegal mining will be crucial for sustainable economic development and the effective utilization of the country’s natural resources.

 

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