Nigeria is stuck in a puzzling crisis despite having abundant crude oil reserves, citizens struggle with constant fuel shortages and soaring pump prices. At the root of this problem are widespread oil theft and pipeline vandalism, illegal activities that drain billions from the economy and make life harder for everyday Nigerians.

A Deepening Crisis

The Nigerian National Petroleum Company (NNPC) reports that about 200,000 barrels of crude oil are stolen daily. The Niger Delta, Nigeria’s oil hub, has become a hotspot for illegal bunkering, where criminal gangs and corrupt insiders tap pipelines with sophisticated equipment. Vandalism, carried out by militants, aggrieved communities, and organised crime networks, further worsens the situation by destroying vital infrastructure such as pipelines and storage facilities. The World Bank estimates that these illegal activities cost Nigeria approximately $3 billion annually, crippling oil production and disrupting supply chains.

How Oil Theft and Vandalism Hurt the Economy

1. Declining Exports: Oil companies like Shell and Chevron often declare force majeure due to damaged pipelines, reducing Nigeria’s production to just 1.2 million barrels per day (bpd) in 2024 far below its Organisation of Petroleum Exporting Countries (OPEC) quota of 1.8 million bpd.
2. Revenue Shortages: Crude oil sales make up 90% of Nigeria’s foreign exchange earnings, but theft and vandalism have slashed government oil revenue by 40% since 2021, deepening budget deficits.
3. Rising Global Prices: Reduced Nigerian oil exports tighten global supply, indirectly increasing crude prices. Since Nigeria imports most of its refined petroleum, this results in higher costs for consumers.

How Fuel Price Inflation Affects Nigerians

Nigeria’s reliance on imported refined fuel makes the economy highly vulnerable to external price fluctuations. However, oil theft and vandalism worsen the crisis in several ways:

• Higher Import Costs: Lower crude production reduces foreign exchange reserves, leading to a weaker naira. The landing cost of petrol jumped by 72% in 2023, causing pump prices to rise sharply.
• Subsidy Pressure: Although fuel subsidies were partially removed in 2023, the government still spends about ₦4 trillion annually to keep prices stable. Revenue losses from oil theft make it difficult to sustain these subsidies, leading to frequent price increases.
• Supply Disruptions: Pipeline vandalism distorts fuel distribution, pushing up transportation costs. In early 2024, Lagos experienced long fuel queues again after attacks on major pipelines disrupted supply.

The Ripple Effects on Society

The consequences of oil theft and vandalism extend beyond the petroleum sector, affecting everyday life:

1. Rising Inflation: Fuel price hikes drive up the cost of transportation and food, contributing to Nigeria’s record 33.7% inflation rate in April 2024 the highest in 28 years.
2. Environmental Destruction: The Niger Delta suffers from frequent oil spills due to pipeline sabotage, damaging farmland and aquatic life. Over 10,000 spill incidents were recorded between 2015 and 2023.
3. Security Threats: Money from stolen oil funds criminal gangs and militant groups, worsening insecurity. The Niger Delta accounts for 65% of Nigeria’s kidnapping cases, according to SBM Intelligence.

What Can Be Done?

To curb oil theft and vandalism, Nigeria must take strategic and lasting actions:

1. Technology-Driven Surveillance: Deploying AI-powered drones and satellite monitoring (such as NNPC’s “Project Delta”) can help detect pipeline breaches quickly.
2. Fixing Local Refineries: The government must fast-track the rehabilitation of the Port Harcourt and Warri refineries while ensuring that the Dangote Refinery meets its target of refining 650,000 bpd.
3. Community Involvement: Expanding programmes like the Presidential Artisanal Crude Oil Refining Initiative (PACRI) can help convert illegal refiners into legal cooperatives, reducing criminal activity.
4. Strict Legal Action: Speedy prosecution of oil theft cases and strict enforcement of the Petroleum Industry Act (PIA), including asset forfeiture, can serve as a deterrent.

A Call for Urgent Action

Oil theft and vandalism are not just economic issues they threaten Nigeria’s stability. While recent security efforts, such as partnerships with Tantita Security Services, have reduced theft in some areas, lasting solutions require deep-rooted reforms. Investing in modern infrastructure, ensuring fair resource distribution, and enforcing strict legal measures will be key to preserving Nigeria’s oil wealth for future generations.