The 2022 budget has a deficit of N6. 26 trillion, which has forced the federal government to issue new borrowings. In the 2022 budget, the federal government pegged the crude oil benchmark at $73 bpd with the projected oil production put at 1.88 million bpd. Nigeria only managed to hit just 1.158 million bpd in the June assessment after it fell to a record low of 1.024 million bpd in the previous month of May. Oil theft and illegal gold mining are largely responsible for the deficit of N6. 26 trillion. I am worried over oil theft and illegal gold mining in Nigeria. Nigeria’s 2022 budget deficit is as a result of oil theft and illegal gold mining. The volume of crude that is being stolen is well beyond comprehension. You can see some of the figures in the press, maybe it’s about 100,000 barrels per day at $100 per barrel and that’s $10 million per day that is being stolen. And NNPC owns 60% while taxes of 85% are paid so it’s a huge loss for the country. Oil theft and illegal gold mining are worse than banditry and Boko Haram combined.
Nigeria has fingered years of declining upstream investment, inability to restart oil wells shut in the wake of the COVID-19 pandemic in 2020 as well as outright sabotage by oil-producing communities for its lack of capacity to raise production. This means that Nigeria could not produce as much as 717,000 bpd or 22.22 million barrels during July. When valued at a conservative price of $110 per barrel, the 22.22 million barrels were about $2.444 billion for the month. The country’s crude oil production remained below expectation, slumping to 1.083 million barrels per day in July.
July’s production figure, sourced from the data released by the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), followed the trend in the country’s abysmally low drilling capacity in at least the last 10 months. For the month under review, however, the country’s production allocation by the Organisation of Petroleum Exporting Countries (OPEC) was roughly 1.8 million (1.799) barrels per day.
Nigeria lost at least $1 billion in the first quarter of 2022 due to oil theft. An unusual level of theft estimated at a daily average of 103,000 barrels which was recorded in 2021 had grown to 120,000 barrels in the first quarter of 2022 The daily average production in 2021 stood at 1.5 million barrels while the national production advised by the commission was 2.2 million barrels. “Consequently, only 58 percent of the technical rate was achieved in 2021 and similar performance has continued in 2022 hence the need for more concerted efforts across all quarters to stem the tide.
“Unfortunately, the amount of oil received at the terminals indicates that over one million barrels of oil are lost to crude oil theft, amounting to a loss of $1 billion in the first quarter of 2022. The effect of this level of theft had resulted in the declaration of force majeure, shortage of wealth, a hostile, unsafe environment, and was a disincentive to investors in the Nigerian upstream sector. Many operators had deliberately shut down facilities and pipelines which further aggravated the low oil production and also impacted gas production both for domestic utilisation and exports.
Theft of crude oil grew from 103,000 barrels per day in 2021 to 108,000 barrels per day on average in the first quarter of 2022. Crude oil theft in Nigeria is organized crime and should be differentiated completely from host community issues. This is according to the Managing Director of Chevron Nigeria/Mid Africa Business Unit, Richard Kennedy who said this in a panel session held at the recently concluded NOG Conference in Abuja. Mr. Kennedy made this remark when he was asked to comment on the host community provisions of the Petroleum Industry Act.
He also revealed that the level of theft is costing Nigeria millions of dollars daily in lost revenue which could have helped solve our fiscal challenges.
Illegal gold mining has become routine in Nigeria and both compatriots and foreigners are neck-deep in stealing the country’s highly valued mineral, yet Nigeria wallows in foreign debts. Garba said Nigeria has “very vast” gold with occurrences in Edo, Niger, Osun, Kebbi, Kaduna, Kogi, Kwara, Zamfara, Katsina, Kano, Nasarawa and Bauchi states and the Federal Capital Territory.
With crude oil trading at around $35 per barrel, untapped solid minerals offer Nigeria the opportunity to diversify and earn more foreign exchange (forex), as gold currently trades at 1,683.65 per ounce. The Federal Government had, over the years, talked about diversifying the economy but not much has been done to ensure proper implementation. With the COVID-19 pandemic altering energy balance and demand for oil, many countries have been forced to consider other revenue resources to contain falling oil prices. Nigeria, given its current economic challenges can harness the potential in its solid minerals resources to salvage the country from impending economic disaster. Data from the Ministry of Solid Minerals and Development show that there are gold deposits in Abuja, Abia, Bauchi, Cross River, Edo, Niger, Sokoto, Kebbi, Oyo, Kogi, Zamfara, Osun and Kaduna states.
The Group CEO of Oanda, Wale Tinubu also weighed in on the issue at the oil and has summit revealing about 20% of Nigeria’s daily crude production is lost to oil theft.
“There has been a 43% reduction in our production from March 2020 to May 2022. We lose almost 20% of our daily crude production to oil thieves and pipeline vandals and 20,000 barrels a day of oil is lost to oil theft. Basically some three million barrels on average yearly is lost to oil theft and pipeline vandalism.”
Nigeria has been experiencing some of the worst crude oil theft in its history with millions of dollars lost daily. Several allegations have been made against the ability of security agencies to guard the pipelines. Some have even alleged the complicity of security agencies in the spate of pip theft being experienced.
Recently the Chairman of Nigerian Upstream Petroleum Regulatory Commission (NUPRC) Gbenga Komolafe, revealed that only about 132 million barrels of the 141 million barrels of oil produced in the first quarter of 2022 were received at export terminals. Komolafe said, “This indicates that over nine million barrels of oil have been lost to crude theft…this equates to a loss of government revenue of approximately $1 billion…in just one quarter,” He added, “This trend poses an existential threat to the oil and gas sector and, by extension, to the Nigerian economy if left unchecked.”
Globally, gold is a treasured, high-priced mineral. In the international market, an ounce of gold, as of Thursday, was about $1,806. According to the 2016 Mining Growth Roadmap by the Ministry of Mines and Steel Development, Nigeria has an untapped 200 million ounces of gold, scattered across about 13 states, Osun inclusive. The Vice-President, Prof Yemi Osinbajo, affirmed this figure at a forum in June 2020.
Thus, gold alone could fetch Nigeria trillions in dollars, even when the cost of production is deducted. But for years, government abandoned it and other solid minerals, making it an all-comers affair for illegal and artisanal miners who remit almost nothing to it, while the country battles incredibly low revenue, compelling it to unashamedly borrow nonstop, to the tune of N35tn at the moment with plans to borrow even more –about N6.2tn in 2o22 to finance the budget.
The International Monetary Fund, the Minister of Finance, Zainab Ahmed and the Chairman of Economic Advisory Council, Dr Doyin Salami, stressed at various times that Nigeria was facing revenue problems. Beyond the revenue loss, illegal mining has caused severe environmental degradation; farmers have been abruptly sent packing from their farms; their water, like the Osun River, polluted, and life made difficult for the dwellers.
Sadly, despite the volume of activities on the mining fields and the increasing number of miners, the revenue from the sector has remained a paltry sum. Between January and August 2021, the finance minister revealed that Nigeria earned only N2.44bn as minerals and mining revenue, which is less than one per cent of the N754.16bn received as oil revenue within the same period.
Similarly, in 2019, the Nigeria Extractive Industries Transparency Initiative said in its report that royalties received from 39 minerals was N2.50bn, with limestone contributing 37.68 per cent, granite 31.31 per cent and gold 0.26 per cent, despite the volume of mining activities by illegal miners. The Federal Government revealed that the country loses $9bn to illegal mining annually, with the little revenue in the sector coming from the three per cent royalty paid by the few licensed miners.
Inwalomhe Donald writes via [email protected]