What Does Oil Vandalism Mean for the Nigerian Economy?

Nigerian President Muhammadu Buhari and militants...photo Vanguard.ng
Nigerian President Muhammadu Buhari juxtaposed with a photo of militants. Photo/Vanguard.ng

Oil is Nigeria’s major source of revenue and the attacks on oil installations (majorly in the Niger Delta region of the country) has greatly affected the nation’s economy and supply of crude oil product to the international community.

The continuous attacks on the pipelines by vandals and militants known as the Niger Delta Avengers in the South-South region has caused lost revenue of 12.566 billion naira in one month, this is according to the Nigerian National Petroleum Corporation, NNPC, monthly Financial and Operations Report, March 2016.

The report by the NNPC showed that crude oil loss amounted to N5.94 billion; petroleum products losses stood at N1.757 billion, while N4.87 billion was spent on pipeline repairs and management costs.

According to the report, the losses negatively affected NNPC’s transfer to the federation account from the domestic sale of crude oil and gas. Specifically, the report noted that transfers to the federation account by the NNPC dipped by N69.544  billion to N9.23 billion in March.

Similarly on May 26, 2016, the then Minister of State for Petroleum Resources, Dr. Ibe Kachikwu was quoted to have said Nigeria’s crude oil production had declined from “2.2 million barrels per day to 1.4 million barrels per day due to pipeline vandalism”, this, he said, translated to loss of 800,000 barrels of oil daily. The minister made this known at a special session of the House of Representatives convened over the recent petrol price hike announcement (May 11, 2016) according to Vanguard newspaper.

The continuous decline of the petroleum products made the Kaduna Refinery Petrochemical Company (KRPC) Managing Director, Idi Muktar Maiha to call on the federal government to declare Warri-Kaduna pipelines as a “military zone,” in view of its strategic national importance. Maiha added that the pipelines need to be highly secured to guarantee continues supply of crude oil to KRPC, which supply refined oil to Nigeria’s northern region.

Maiha described attacks on Warri-Kaduna pipelines as the greatest threat to the oil and gas industry in the country. He made the plea while presenting his paper “KRPC: the journey to autonomy” at the 4th annual KRPC and Nigerian Union of Journalists, Kaduna Chapter training for Kaduna Energy Reporters’ in Kano State.

“We have advocated for the pipeline to be regarded as a ‘military zone’ in view of its strategic national importance,” he said.

Several groups of Niger Delta militants under different names have accused the government of polluting their environment through the unchecked supervision and clean up of oil spills by companies processing crude oil . In recent months the Avengers were behind numerous incessant attacks, to, as they say, rebuild their communities or leverage the Buhari-led administration to broker a deal to greater benefit the citizens of the South-South region or for the region to succeed (separate) in its entirety if a deal could not be brokered.

Interestingly, the Nigeria military feel the Avengers are not being cooperative in efforts to broker a deal.