africa special articlesSpecial Articles

Special Artiles Archive

East Africa to Remodel Rift Valley RailwayHuman Trafficking in AfricaAfrica's Silk Road: Expanding Economic OpportunitiesGill Marcus Will Replace Mboweni as Governor of the South African Reserve BankKosmos Energy May Invest $ 750 Million in GhanaNigeria and Oil SmugglingBlood Diamonds Fields May Be Over in ZimbabweEgyptian Oil Service Expands to Russia and IndiaWest Africa and Drug TraffickingNigeria and Russia in a Joint Venture for EnergyJoint Forces Create Opportunities in GhanaTanzania: Growth, Inflation and Efforts to Support the EconomyCongo and Rwanda: Hope for a Brighter FutureAfrica: Communalism, Barriers and EconomicsWorld Economic Forum on Africa Will Have Five African LeadersAfrican Development Bank - AfDB lends $1.5 billion to BotswanaGhana welcomes UK High Commission for second timeWorld Bank to Address G20 Finance Ministers on Developing NationsEthiopia and Japan: Agreement for Water DevelopmentTunisia: $24 billion Investments in OilAustralia to Boost Aid for ZimbabweZimbabwe Adopting the South African Rand?IMF Weary of Impact on Sub-Saharan AfricaMorocco: $11 Billion to Energy SectorImpact of Recession on Aid in AfricaSierra Leone Youth Unemployment52% Increase in Egyptian Cotton ExportsSudan Intends to double oil production within 5 yearsLibya's Investments in North AfricaOil Workers and Senate Committee Respond to Deregulation and Privatization PoliciesAfrica- Gulf Seek To Bolster TiesNigeria's Financial Reforms Proposed by the Presidential Steering CommitteeKenya-Iran to Strengthen TiesEgypt Discovers 100 billion cubic square of Natural GasAlgeria Halts Projects Due To Crises

Source: www.africaecon.org

Africa Economic Institute

Nigeria and Oil Smuggling


West Africa is widely known for its weak governance and illegal trafficking. Niger Delta, a southern region of Nigeria, has been escalating in conflict over the last two decades, due to its valuable oil-rich land.

The United Nations Office on Drugs and Crime’s (UNODC) Executive Director Antonio Maria Costa said, “West Africa has everything that criminals need: resources, a strategic location, weak governance and an endless source of foot soldiers who see few viable alternatives to a life of crime.” Criminals exploit the country’s chaotic conditions and traffics oil through the region.

 

About 55 million barrels of oil a year (one- tenth of production) is lost through theft and smuggling, also known as “bunkering”.

 

A report called, “Transnational Trafficking and the Rule of Law in West Africa: a Threat Assessment” showed that illicit income generated from illegal oil bunkering or cocaine trafficking (approximately $1 billion each) rivals the GNP of Cape Verde or Sierra Leone.

 

Where does the oil go?

Destination of the bunkered oil are Nigeria, other Gulf of Guinea states, China, North Korea, Israel and South Africa.

 

Who are the Traffickers?

Traffickers are most commonly Niger Delta militants, but Brigadier General Elias Zamani has affirmed that they are not the only participants. When asked if it were local people, security forces or government officials, he simply stated, “All.”

 

How oil bunkering hurts the country’s economy

Nigeria is considered the eighth largest oil producer in the world and is responsible for about 4 percent of the world’s crude oil production. It is also the fifth largest supplier to the United States. Most of the oil is produced in Niger Delta, which is one of the poorest areas of the country.

Oil bunkering negatively affects Nigeria’s economy. Although the area is abundant in oil, oil bunkering groups have set up gang-like groups that protect the underground business and discourage newcomers through violence. A port Harcourt-based researcher into Niger Delta affairs estimated that up to 1,000 people were killed between January and November 2008, at least party motivated by control of oil turf.

 

Despite technological advancements, however, Nigeria’s production has not increased and is estimated to be running only at two-thirds of its capacity. “Underproduction is mainly attributable to theft, vandalism and violence in the Niger Delta.” This underproduction limits GDP and prevents the country from achieving long term growth.

 

Oil bunkering “involves stealth… attaching an unauthorized secondary pipeline to a company mainline by the techniques known as hot and cold tapping.” Isolated oil pipelines may easily be found in one of Delta’s 3,000 communities and most of the bunkering is done at night.

 

Hot Tapping is when a branch connection is created through a pipeline in which the oil is flowing through.

 

Cold Tapping is when oil bunkering gangs blow up a pipeline, putting it out of use long enough for them to attach their spur pipeline. In 2008 alone there were 19 pipeline bomb attacks, according to Niger Delta security analysts Bergen Risk Solution.

 

Weak and Corrupt Government

In March 2008, the Nigerian Senate admitted, “No one really knows exactly how much oil is pumped out of the ground.” Some of it is sold legally, some is bunkered and sold illegally and other is just “lost” through sabotage from local villagers. At a press conference in September 2008, the Nigerian environment minister, Halima Alao reported that there had been 1,260 registered oil spills from all causes (including bunkering) between January 2006 and June 2008. Still, the lack of accounting for the oil pumped out of the ground induces corruption and theft among well-connected groups or by the government, through bribe or embezzlement.

 

In 2006, the Nigerian Economic and Financial Crimes Commission (EFCC) announced that 31 of 36 governors in the country were under investigation for corruption.

 

Effects of Oil Bunkering

If the country would produce and sell at its full capacity, the country’s economy would be in much better shape. In fact, it would add about 10 percent to the country’s production if the 55 million barrels of oil, valued at about $1 billion per year would be sold legally. Prices of oil around the area would not be as high, and the additional one-third would make contribution to the country’s productivity and GDP. The government would be able to raise taxes and have the funds to increase overall social welfare.

Source: www.africaecon.org