Ask Nigeria Header Logo

Implication of oil crisis on businesses

Photo of author

By Akintola Timothy

Nigeria loses 95 percent of its crude oil hub production to oil theft annually.

Since the discovery of oil in Nigeria in 1956, the country have accrued about 37,050 million of crude oil barrels in reserves, contributing to about 2/3rd of the national economy. However, there has been recurrent concerns as to the social and political crisis that have been remotely catalyzed by the need to control this sector. In fact, recent findings indicate that the oil pipelines are invaded with over 300,000 barrels being stolen daily. Activities like pipeline damage, unlawful bunkering, syphoning, smuggling, lighting without authorization, processing crude oil and petroleum products are evidently illicit acts of oil theft that is being indulged in in Nigeria.

Historically, oil theft in Nigeria commenced during the late 1970s, when the Militant youths in Niger Delta engaged in a war against the Nigerian government and the multinational corporations for the control of the resources. Though the establishment of the Militant Group was largely on the basis of a nonviolent struggles against the poor living conditions of the Niger region. However, it was the the lack of development and the unemployment that ravaged the community catalyzed the violent struggles and political agitations of the people which resulted in the in the rise of oil theft in this region. The corrupt practices of the military and political systems also immensely contributed to the rise of oil theft in the country. Governmental officials indulged in this crime unofficially and funds accrued from it were used to fund campaigns, buy votes and obstruct election processes.

1 of every 4 stolen oil barrels globally sourced from Niger Delta.

Globally, statistics note that at least 150,000 barrels of crude oil are being stolen, with one in every four stolen barrels, sourced from the Niger Delta. Reports posits that Bonny Terminal, the largest crude oil terminal in Nigeria loses about 95% of its products to oil theft. The Managing Director of the Nigerian National Petroleum Corporation, Mele Kyari was in fact, critical of the roles of the religious centers in abetting this crime by enacting storage facilitation for these stolen oil barrels. Chinese oil businesses in Nigeria also gross over 3 billion Yuan annually. Royal Dutch Shell also lost 7 billion annually in Nigeria alone due to the complications of oil theft. In June 2022, Shell and ExxonMobil, two of the largest oil companies globally decided to sell off their production units as a result of the recurrent losses incurred.

At least, 295 illegal connections have been estimated to be draining away the country’s wealth. Even though oil companies that facilitated different measures to detect oil taps and curb oil theft, there has been no major change, as a result of the cumbersome process of efficiently monitoring the long pipes. Reports published in September 2022 indicated that Nigeria loses about $700 million monthly as a consequence of the menace of oil theft. In fact, the efforts of the Nigerian government by setting up a technical committee in 2019 to investigate the key actors of this crime have yielded no tangible result, as there have been no arrest recorded.

Youths in Nigeria now see oil theft as a lucrative activity.

The oil theft menace, as well as the violence and instability that attaches to it have rampantly expanded to regions outside of the Niger Delta, across the national borders. Youths across the different regions now see oil theft as a lucrative activity. In fact, those in the upper class now provide them with guns and other violent implements to aid their illegal activities and serve their financial interests. Immense oil theft in the high sea area and oil export terminals have contributed to the rise of piracy in Nigeria’s marine environment.

Waterway regions of the West African communities have become infested with pirate attacks on the assets of oil investors. The security situation of communities along the coast of the oil exporting routes to Europe and Asia have become highly vulnerable and the emergence of Boko Haram and ISWA have also worsened the situation. However, this menace has had no implication on the country’s diplomatic relations, due to the crisis being seen as an internal conflict. In fact, the former US Ambassador to Nigeria, John Campbell noted that external pressure would not herald monumental change in the situation.

Oil related thefts have caused a deterrent for new investment.

On the business implications however, pipeline sabotage and oil theft have sabotaged numerous companies, causing them to halt production and even sell off their assets. The lack of development of the land has caused companies like Shell, Chevron, Mobil and other International Oil Corporations to sell their assets, blaming difficulty in operations as a reason for these actions. The variation problem within these oil terminals, together with the expenses in environmental cleanups and security measures have overwhelmed these companies, causing a deterrent for new investments. Nigeria’s budget stability has been reported to be relatively shaky, due to the menace of illicit bunkering and oil theft. In over 5 years, this menace has catalyzed the free fall of the Naira’s valuation, all of which have contributed to the difficulty of business survival in Nigeria.


Related Link

Wikipedia: Website

The content on AskNigeria.com is given for general information only and does not constitute a professional opinion, and users should seek their own legal/professional advice. There is data available online that lists details, facts and further information not listed in this post, please complete your own investigation into these matters and reach your own conclusion. AskNigeria.com accepts no responsibility for losses from any person acting or refraining from acting as a result of content contained in this website and/or other websites which may be linked to this website.

Fact Checking Tool – Snopes.com

1 1 vote
Rate This Article
22 Comments
Oldest
Newest Most Voted
Inline Feedbacks
View all comments
Admin
9 months ago

Implication of oil crisis on businesses – Nigeria loses 95 percent of its crude oil hub production to oil theft annually. – Express your point of view.

SarahDiv
SarahDiv
Member
9 months ago

95% of the crude oil lost to theft annually by hub production in Nigeria is very huge. When our Government fails in their duty to provide basic amenities, all the needed and necessary things that will make an average Nigerian comforted then it will result to what is being mentioned above.

DimOla
DimOla
Member
9 months ago

When jobs is not made available to the masses that is what you should expect, when federal government failed to clean, build and develop the surounding where crude oil is being extracted oil theft is inevitable. Federal Government should do the needful to achieve their desired results.

Adeolastan
Adeolastan
Member
9 months ago

Oil theft is a big problem facing the oil production in the country and it has impact negatively to both the economy,production,environment also many people have loss their life through this and lots of jobs has been lost through this.

jdpumping
jdpumping
Member
9 months ago

The negative implication of oil crisis on business is enormous because virtually all business need movement from one location to another to get goods and services distributed and can only be done through oil so withblarge number of oil theft and vandalisation numerous companies have halted their production.

Christiana
Christiana
Member
9 months ago

Boko Haram and ISWA have made villages along oil export routes to Europe and Asia extremely vulnerable.

Tolaniiii
Tolaniiii
Member
9 months ago

Due to the difficulty of effectively monitoring the extensive pipelines, little has changed despite the fact that oil firms have facilitated several procedures to identify oil taps and reduce oil theft.

Bola12
Bola12
Member
9 months ago

The emergence of piracy in Nigeria’s marine environment can be traced in part to the widespread theft of oil in the high sea area and at oil export terminals.

Abusi
Abusi
Member
9 months ago

Oil theft has really affected a lot of businesses. It has lead to scarcity of fuel and only small fuel is sold around in a humongous price. Something needs to be done quickly.

theApr
theApr
Member
9 months ago

The surge in oil theft in the nation was also significantly influenced by the corrupt actions of the military and political establishments. The government ought to make an effort to protect the oil territory against theft.

Godsewill Ifeanyi
Godsewill Ifeanyi
Member
9 months ago

There have been persistent worries over the social and political crisis that has been indirectly triggered by the requirement to maintain control over this sector.

Adesanyaj72
Adesanyaj72
Member
9 months ago

In large part, the foundation of the Militant Group was predicated on the basis of nonviolent struggles in opposition to the deplorable living circumstances that prevailed in the Niger region.

Chibuzor
Chibuzor
Member
9 months ago

The widespread poverty and joblessness in the area stoked the violent protests and political unrest that ultimately led to an increase in oil theft in the area.

Hassan Isa
Hassan Isa
Member
9 months ago

The criminal activity of stealing oil in the country was significantly aided by the corrupt policies of both the country’s military and governmental regimes.

Taiwoo
Taiwoo
Member
9 months ago

Unofficially, members of the government were involved in this illegal activity, and the cash that were obtained from it were used to finance campaigns, buy votes, and hinder election processes.

Remi1
Remi1
Member
9 months ago

Concerns about the social and political problems that may have been indirectly sparked by the necessity to regulate this industry have often come up. In fact, according to recent estimates, over 300,000 barrels of oil are stolen everyday from oil pipelines.

Nwachukwu Kingsley
Nwachukwu Kingsley
Member
9 months ago

Due to it being difficult to adequately monitor the extensive pipe systems, little progress has been made despite oil firms’ efforts to implement various measures to identify oil taps and reduce oil theft.

Kazeem1
Kazeem1
Member
9 months ago

Companies are hesitant to invest more money because of the oil terminal variance problem and the high cost of environmental remediation and safety measures.

Haykaylyon26
Haykaylyon26
Member
9 months ago

The percentage of oil we lost to theft is too much this theft oil is one of the major reason why our oil is not going well FG need to find solution to it so thing can run smoothly

Ultra0711
Ultra0711
Member
9 months ago

Theft of oil has a significant detrimental influence on oil production in the nation, with repercussions seen in areas such as the economics, production, the environment, and the lives of many people.

Tonerol10
Tonerol10
Member
9 months ago

Nigeria loses 95 percent of its crude oil hub production to oil theft annually. Like seriously, then who are the thieves? Who are there deceiving.
Federal government are the major thief , no need to talk too much.

Iyanu12345ogg
Iyanu12345ogg
Member
9 months ago

The surge in oil theft in the nation was also significantly influenced by the corrupt actions of the military and political establishments. Federal Government should do the needful to achieve their desired results.