Nigeria and the Billion Dollar Dirty Slaps

By Olusegun Adeniyi

My sister, Dr Oby Ezekwesili could not have been more apt when she said Nigerians like to major in minors. Ever since the inauguration of Prof Chukwuma Soludo as the Governor of Anambra State ended on a slapping note, there has been no bigger storyline in Nigeria than the humiliation of an errant (now former) First Lady. From creative social media memes to academic disquisitions on the sociology, anatomy, and psychology of what it means to give or receive a ‘dirty slap’, we have had it all. But, given reports of recent days, Nigerians should be more concerned about those who are ‘slapping’ us in the oil and gas sector than the entertainment of two powerful women squabbling in the public arena.    

In the past week, three prominent citizens have publicly revealed the quantum of crude oil that Nigeria now practically ‘allocate’ to some financial bandits. First to raise the alarm was the Chairman of Heirs Holdings, Mr Tony Elumelu who lamented that our country is currently “losing over 95 % of oil production to thieves.” Then the former Seplat Energy CEO and top industry player, Mr Austin Avuru wrote that “the entire export pipeline network has been surrendered to vandals and illegal ‘bunkerer’ thus the phrase, ‘crude theft’ which crept into the industry about 2010 has taken on a new meaning.” He added: “There are some pipelines systems now (particularly in the East) where 80 percent of production injected therein does not make it to the terminal.” And while he may not have given any specific figure, the Central Bank of Nigeria (CBN) Governor, Mr Godwin Emefiele confirmed on Monday that oil theft has reached industrial scale in Nigeria.      

From the picture painted by the trio of Elumelu, Avuru and Emefiele, it is obvious that Nigeria is being ‘slapped’ left, right and centre by criminal cartels. Meanwhile, not only have we invited this opprobrium upon ourselves in the manner some people catwalk to their humiliation, the high and mighty also now feel the heat. To put that in the proper Nigerian language, the rich are now also crying. In his capacity as chair of the National Economic Council adhoc Committee on Oil theft, Governor Godwin Obaseki disclosed in August 2019 that in the first half of that year, 22 million barrels of crude production were stolen. That has resulted in a situation in which many states are already in serious financial crisis because of dwindling oil returns

At such a critical period as this, the implications of massive oil theft should command more attention among Nigerians than the slapping dexterity of a former beauty queen. If anything, my experience of the past 48 hours has left me deeply troubled about the future of Nigeria. Within that period, I have seen, at close range, the promise and peril of our country. On Tuesday, I was in Ibeju Lekki, Lagos to witness the commissioning of the Dangote urea and ammonia fertilizer plant with a capacity to produce three million metric tonnes per annum, making it the biggest on the continent. It is located within the precincts of the almost completed 650,000 barrels per day oil refinery, also promoted by Alhaji Aliko Dangote. That is a delightful testimony to resilience and entrepreneurship. But yesterday, I joined the federal government team from Abuja to Port Harcourt to witness firsthand how our oil wealth is being ‘privatised’ by criminal gangs. Led by the Minister of State, Petroleum, Mr Timipre Sylva, others in the team included Chief of Defence Staff, Lt. General Lucky Irabor, Group Managing Director of the Nigeria National Petroleum Company (NNPC) Ltd, Mr Mele Kyari, the CEO, Nigeria Upstream Petroleum Regulatory Commission (NUPRC), Mr Gbenga Komolafe, NNPC Group Executive Director, Upstream, Mr Adokiye Tombomieye, as well as several senior officers from the navy, airforce and the security agencies. Before we took to the sky, we had travelled by road into the forest of Ibaa in Ikwerre local government where we saw local refineries at work. A pipeline takes crude into huge dumps and the long petrol storage tank under which it is cooked (refined). With what I saw yesterday, I don’t know how any rational investor would want to put his money in the Nigerian oil and gas sector. The sheer magnitude of the tragic debauchery speaks eloquently to the total breakdown of law and order in Nigeria.  

While I intend to return to the oil theft malaise and the implications for our national economy and security as well as the environment, let me state that this problem did not start in 2010 as alluded by Avuru. For the past two decades, the Gulf of Guinea has been one of the most dangerous routes for shipping activities because of oil theft. “A tanker will be commandeered, the tracking devices disabled, and its cargo siphoned off onto a smaller ship in an isolated location and sold on the black market”, according to oilprice.com, an authoritative news outlet for oil and gas, in a report published years ago. “Fuel theft in Nigeria is so systemic it will not be slowed or stopped any time soon. Doing so would be tantamount to eliminating drug trafficking in Colombia”, argued Dr Terry Hallmark, an international oil and gas industry risk analyst, in a piece he wrote for Forbes magazine in 2017.     

With 5,120 kilometres of pipelines network, 2,965 kilometres of sea-lines, 124 kilometres of condensates, 164 kilometres of liquid petroleum gas (LPG), 112 flow stations, 2000 wellheads, 126 production platforms, 17 loading buoys and 13 export terminals, Nigeria has a huge oil and gas assets. But these assets, as I have consistently highlighted in the past two decades are also perhaps the most unsecured in the world. That explains why we now have a situation in which almost everyone believes he could help himself with what belongs to all of us without consequences.   

In a 5th June 2019 report, ‘Nigeria’s Oil Thieves Roar Back as Militants Kept in Check’ that I once referenced, Bloomberg stated that “Oil theft is now an industry employing thousands in Nigeria.” Barely a month after the report, the Nigeria Natural Resource Charter (NNRC) revealed that Nigeria lost a whopping N1.6 trillion to oil theft in 2016 and N995 billion in 2017. That amounts to a combined loss of N2.6 trillion (about $7.2 billion at the then prevailing exchange rate) for the two years.    

Before we left Port Harcourt around 9PM last night, I spoke with several NNPC officials and senior military/security personnel on the gravity of the challenge of oil theft in Nigeria but that is an issue for another day. Today, I am republishing my column of 23^rd September 2004 (about 18 years ago) so that Nigerians can understand just how long this rain has been beating us.   

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The United States-based Human Rights Watch, in a recent report, stated that oil theft accounts for 10 percent of Nigeria’s daily production. Describing illegal oil bunkering as Nigeria’s most profitable private business estimated to yield between $750 million to $3.5 billion annually (depending on the season), the report also stated that the violence being witnessed in the Niger Delta has a direct link to the illegal business: “Oil has become literally the fuel for the violence-despite the fact that in theory it should be easy to stop its theft (it is hard to hide a tanker and easy to trace its owner)”. The Human Rights Watch is wrong here. In a nation where big vessels ‘disappear’, bunkers are not that hard to hide! But the report gets interesting when it talks about their modus operandi and those believed to be involved. I crave the indulgence of readers to quote more extensively:    

“Illegal oil bunkering-long prevalent in the Delta-has become a sophisticated operation that no longer requires the cooperation of oil company staff to operate equipment at wellheads or allow access-though there are still reports that they are involved. The bunkerers tap directly into pipelines away from oil company facilities and connect from the pipes to barges that are hidden in small creeks with mangrove forest cover. Frequently, both in the riverine areas and on dry land, the police and military are involved in the process or are paid off to take no action against those tapping into pipelines. In November 2001, the Nigerian federal government set up a Special Security Committee on Oil Producing Areas, ‘to address the prevailing situation in the oil producing areas which have, in recent past, witnessed unprecedented vandalisation of oil pipelines, disruptions, kidnappings, extortion and a general state of insecurity.’ Reporting to President (Olusegun) Obasanjo in February 2002, the committee noted that a ‘major threat to the oil industry … arises from the activities of a ‘cartel or mafia’, composed of highly placed and powerful individuals within the society, who run a network of agents to steal crude oil and finished product from pipelines in the Niger Delta region.’ The committee indicated that many of the militant youth groups responsible for halting or diverting oil production and preventing free traffic on the waterways ‘could be enjoying the patronage of some retired or serving military and security personnel.’ Despite this high-level recognition of the seriousness of the problem, there appears to be no proactive government strategy for investigating the organized illegal oil bunkering rackets. There have been some seizures of the vessels involved. More than nineteen vessels used in the illegal bunkering business are reported to have been seized by the army and navy in the year to July-though it is often not clear what happens to their cargoes thereafter…”    

According to media reports, now confirmed by the authority, ‘MT African Pride’, one of the 15 vessels arrested for alleged bunkering in August last year (2003), and carrying 15,000 barrels of crude, is missing. Testifying before a House of Representatives Committee, the Chief of Naval Staff, Vice Admiral Sunday Afolayan said his men were helpless on what he called ‘practice of topping’, obviously the Naval euphemism for oil theft. He blamed the Police for this sudden disappearance of a vessel on the high sea, arguing: “It is my responsibility to arrest the ship and another to prosecute. I have made arrests and handed over and it is not my duty to do anything beyond my constitutional duties.”    

Probed further, Afolayan said there was a directive in January this year (2004) from President Olusegun Obasanjo to the effect that the vessel should be handed over to the police for prosecution after the cargo had been taken away by the NNPC. Those who attended the said meeting were Nuhu Ribadu, Chairman of the Economic and Financial Crimes Commission (EFCC); Funso Kupolokun, Group Managing Director, NNPC; and the Police IG, Tafa Balogun. Afolayan, during his testimony at the House (where we got to know that another vessel, ‘MT Jimoh’, has also disappeared) said the Navy had begun an in-house probe into the matter resulting in the court-martial of some officers and ratings, after pushing the blame on the Police. But the Naval Chief did not have the last say on the matter.   

In his testimony, Balogun said that consequent upon receiving the presidential directive, he set up a panel led by DIG Ogbonna Onovo (who would later become IGP) to take custody of the vessel and suspects but the Flag Officer Commanding Western Naval Command, Rear Admiral Bob Manuel, refused to oblige them on grounds that he was yet to be briefed by Afolayan. At about the same time, according to Balogun, another letter was issued to the police stating that the Navy would take custody of the ship but would release the suspects.   

Said Balogun: “MT African Pride, reported missing by the Navy was never, and I repeat, never in the custody of the police. It is not even a question of ‘MT African Pride’, all the vessels have always been with the Navy. If anybody says he handed over a ship to me, let him produce the handing over note because there is no way the handover of such magnitude can take place without a handover note. The vessels in question were at the high seas where the police have no access to them. The Navy deployed helicopters and ships to trace the ‘MT African Pride’ and it was on the pages of newspapers that I read it. If the ship had not been in their custody, why did they deploy ships and helicopters to search for it?”   

In another country where leaders are accountable to the people, several public officials would have lost their jobs by now, assuming they are not already in jail. But because this is Nigeria, we have a situation in which arrested vessels carrying stolen oil just ‘disappear’ into thin air and the Naval Chief can only tell us some cock-and-bull story!   

Since the ugly development broke, I have had time to speak to several people in the oil sector as well as in the Navy and I am privy to some damning reports. I also have it on good authority that the Navy has on several occasions in the last one decade arrested vessels carrying stolen crude but up till now, there has not been one single prosecution of these criminals. The oil majors have also written several reports to the government on the activities of these illegal bunkerers, sometimes mentioning names and pointing out the danger of their activities since a large chunk of their ‘returns on investment’ go into the purchase of arms. But nothing happened.  

Whichever way one looks at the Nigerian condition today, one cannot but agree with the conclusion reached in the July 2003 IMF Working Paper titled “Addressing the Natural Resource Curse: An Illustration from Nigeria”. It reveals that over 35-year period Nigeria’s cumulative revenues from oil (after deducting the payments to foreign companies) have amounted to $350 billion at 1965 prices yet only few people feel the impact of this huge wealth.   

The authors, Xaxier Sala-i-Martin, a professor of Economics at Columbia University and Arvind Subramanian, an Advisor, Research Department, IMF argued that on just about every conceivable metric, Nigeria’s performance since independence has been abysmal essentially because of oil. Check out the statistics: While Nigeria’s Per Capita GDP was US$1,113 in 1970, it had declined to US$1,084 in 2000 which places the country among the 15 poorest nations in the world. The poverty rate, measured as the share of the population subsisting on less than $1 per day, increased from 36 percent to 70 percent. “In 1965, when oil revenues per capita were about US$33, Per Capita GDP was US$245. In 2000, when oil revenues were US$325 Per Capita, the Per Capital GDP remained at the 1965 level. In other words, all the oil revenues did not seem to add to the standard of living at all. Worse, however, it could have contributed to a decline in the standard of living,” the duo wrote. 

The objective of the 44-page report, according to the authors, was to demonstrate that corruption, weak governance, rent seeking and plunder are problems intrinsic to most countries that own mineral resources, especially oil. In the light of recent developments, I think the authors may have to review their report because they have only scratched the surface where the Nigerian oil asset is concerned. The rot is much deeper than they, or anybody, can ever imagine.   

ENDNOTE: Watch out for my report on oil theft in Nigeria on this page.   

20 Years of Yar’Adua Centre    

This morning in Abuja, the president of Ghana, Mr Nana Akufo-Ado, will chair the 20th anniversary of the Shehu Musa Yar’Adua Centre. The lecture will be delivered by Prof John Palfrey, president of the John D. and Catherine T. MacArthur Foundation. It is remarkable that 25 years after the death of the former Chief of Staff, Supreme Headquarters and consummate politician who envisioned a Nigeria United with a strong commitment to social justice and democracy, the centre built in his memory continues to thrive as a conference facility, Research library, exhibition hall and hub for policy advocacy and citizen engagement. Credit must go to the board chaired by President Olusegun Obasanjo and the management team led by Director General, Ms Jacqueline Farris.   

 • You can follow me on my Twitter handle, @Olusegunverdict and on www.olusegunadeniyi.com