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What is Happening?
Nigeria’s GDP is comprised of approximately 2/3 of oil related activities. With the recent and abrupt fall in oil prices, Nigeria is facing severe economic challenges. This is coupled with significant social and political problems. Nigeria is being confronted with increasing incidents of conflict in the North, a turbulent election process, and, of concern here, oil theft in one of the countries most divisive areas in the South, the Niger Delta.
The Niger Delta region is a large producer of oil, accounting for much of the 2.4 million barrels of production a day. Oil Bunkering (the stealing of oil straight from the pipelines) has been running rampant in the region since the 1960s. There has been a steady increase in oil bunkering since the 1990s reaching new heights in the past couple of years. Estimates for the lost revenue have reached as high as $20billion a year, with some estimating 400,000 barrels stolen daily.
Two Possible Paths Forward?
The future of oil bunkering could be hypothesised to be heading in two directions. One, with falling oil prices, the profits of those who engage in oil bunkering are going to dwindle and the problem is going to be easier to tackle given less incentive to participate in bunkering. Conversely, those who are engaging in oil bunkering have very low opportunity costs compared to the government and will continue stealing oil with a diminished ability of the government to fund enforcement measures.
However, those who are engaged in this type of activity face huge transportation costs which will include navigating terrain to avoid detection, bribing officials, and paying off those who control the ports (with most ports largely infiltrated by non-state organisations). Those involved in oil bunkering don’t have staggeringly low costs. With that in mind it is unlikely that lower profits will lead to less participation given the lack of alternatives. What is more likely to occur is for oil bunkering networks to adapt to lower prices and continue to operate. This will be aided by Nigeria’s inability to eliminate oil bunkering.
What is Nigeria Doing?
There is a need for Nigeria to act, not only to regain lost revenue, but also to reach their ambitions of increasing oil production to 4 million barrels a day by 2020. This is unlikely to be feasible given current oil theft trends.
The Nigerian Navy, heading up a Joint Task Force, has been trying to curtail the opportunity for the export of oil and gas from the Niger Delta region through their ‘No Crude Oil Theft’ campaign. While this has seen some success it has struggled to reduce stolen oil and gas being exported to neighbouring countries. The international community has proposed some alternative solutions but have remained passive actors.
The Effects of Oil Price on Labour Force and Network Structure
Where is the labour for oil bunkering coming from? Some have pointed to 2009 as an important year for the increase of oil bunkering because Nigeria gave amnesty to militants in the area to end a conflict that started in 2003. Given a large group of armed men with little employment prospects, it is not surprising that there has been a large increase in level of oil bunkering. Further, there is little youth employment in the Niger Delta region and many young Nigerian men are flocking to these opportunities given the lack of alternatives. It is unlikely that oil bunkering will disappear altogether because of the lower oil prices. There will still be a demand for oil and there will still be a labour force willing to participate in oil bunkering.
Without going into a fine grained analysis of the oil bunkering network structure, some estimation of their actions are warranted. Given the lower oil prices will they reduce their labour size or wages? It is likely. Will this increase the risk of conflict in the Niger Delta region, more than likely. The stability in the region following amnesty in 2009 has been tenuous at best.
Is this an Opportunity for Change?
Nigeria has managed to become the largest economy in Africa with its abundant oil reserves. Leaving aside any discussion of a resource curse, Nigeria is in a difficult position to take advantage of lower oil prices and their likely effects on oil bunkering networks. There are intense pressures surrounding their elections that have been postponed due to security fears. This is tied with the increased pressure to deal with problems in the North where Boko Haram is diverting attention away from a potential opportunity to dismantle a likely weaker organisation in the South. The timing of the oil price change, elections, and the Boko Haram insurgency is unfortunate. This will likely mean that Nigerian oil bunkering networks will be able to weather the storm and adapt, like any other industry, to continue reaping the benefits.
One source of hope has been a recent development. Shell is set to pay $83.5 million to those who have been affected by the oil industry and the health and environmental damages associated with it. This may be a chance for those communities to invest in increasing their capacity to educate and employ their youth in the formal economy. While large portions of this money will be used to clean up and restore fishing communities it still represents a great opportunity for community level development. If the money is used appropriately it may not remove the oil bunkering networks but, may hinder their ability to recruit and operate effectively.
Nathan Seef is a PhD Student at the Norman Paterson School of International Affairs at Carleton University. He specialises in conflict management and resolution. Nathan received his Masters of international criminology in 2013 from the University of Sheffield, UK. His research interests include transnational organised crime, harms against the environment, and international policing and peacekeeping.
Featured Photo From Wikimedia Commons