CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND TO THE STUDY
This chapter is looking at challenges and prospects of oil theft and Bunkering in Nigeria from the socio-political context focusing on corruption in the oil industry as the crime encouraging factor which is a major threat to national development.
It is no longer news that corruption has been existing in Nigeria since the country got her political independence in 1960, and is still existing in all spheres of the nation’s socio-political economy and if not challenged and eradicated, Nigerians may continue to experience its ugly consequences in all sectors of the nation. Corruption means the nepotism, favouritism, bribery, graft, and other unfair means adopted by government employees and the public alike to extract some socially and legally prohibited favours (Dwivedi, 2007).
According to Nye (2000), corruption is a behaviour which deviates from the formal duties of public role because of private, pecuniary or status gains; or violates rules against the exercise of certain types of private gains. Otite (2004) defined corruption as the pervasion of integrity or state of affairs through bribery, favour or moral depravity. It involves the injection of additional but improper transactions aimed at changing the moral course of events and altering judgments and position of trust.
Nigeria discovered oil in 1956 and began to export it in 1958. Since the oil discoveries in the early 1970s, oil has become the dominant factor in Nigeria’s economy. Using 1970 as a benchmark, Nigeria gained an extra $390 billion in oil-related fiscal revenue over the period 1971-2005, or 4.5 times 2005 gross domestic product, expressed in constant 2000 dollars. The sizable oil windfall, of course, presented net wealth and thus additional spending room, but it also has complicated macroeconomic management and led to an extreme dependency on oil-a highly volatile source of income. Oil also accounts for about 90 percent of total exports and approximately four-fifths of total government revenues (Budina et al, 2008).
It is unfortunate that rather than bringing the country to a position of wealth and prosperity (increase in socio-economic welfare of the citizens), the many years with oil money have not brought the population an end to poverty nor have they enabled the economy to break out of what seems like perennial stagnation in the non-oil, the reason being corruption at all levels of the nation’s socio-political economy (Adegoke, 2004).
According to Adegoke (2004), ten per cent (around 55 million barrels) of Nigeria's oil is stolen and trafficked every year. In fact, it is estimated that oil production in Nigeria runs at only two thirds of capacity because of theft, vandalism and violence in the oil producing areas.
The new UNODC report, explores the practice of stealing and trafficking in the oil industry, locally known as "bunkering", in the Nigerian oil creeks. It identifies the traffickers and trafficking routes, the value of the stolen oil and the threat posed by oil bunkering not only to Nigeria’s national development but to West Africa as a whole.
Criminal groups with links to militant groups in the country especially in the Niger Delta carry out much of the stealing and trafficking in oil. Oil is stolen either by "hot tapping", where an unauthorized secondary pipeline is attached to a company mainline in which the oil is flowing under pressure, or by "cold tapping", which involves blowing up a pipeline and putting it out of use, which gives criminals enough time to attach their spare pipeline. (Varadarajan, 2006)
Fearnley Consultant (2003) reported that the stolen oil is loaded onto barges and tankers and sold in Nigeria and the surrounding region (in Ghana, Cameroon, Cote d'Ivoire, even South Africa). It is less clear how much reaches the international market further afield. Proceeds from the oil bunkering go directly to militants and corrupt officials. Oil is also stolen through corruption. vessels are filled or over-filled through payments to officials controlling export. Some officials from the military, private companies and local government have also been reported to be involved.
Oil bunkering is a crime that enriches a few criminals, insurgents and corrupt officials, while impoverishing many. It undermines the rule of law, deepens corruption, pollutes the environment, violates human rights and depletes natural resources posing threat to national development. It has become a transnational criminal enterprise in its own right, and the violent political struggle provides a convenient smokescreen for that intent on personal enrichment (Adegoke, 2004).
The wide range of players involved in oil theft activities and bunkering and the complex web of their alliances makes it difficult to discern the victims from the perpetrators. The loss of oil revenues - perhaps one third of the income on which 80 per cent of the Nigerian national budget is based - means that, aside from a few well-placed individuals, Nigerians are net losers. Fearnley Consultant (2003).
Nigeria is an economic powerhouse and home to half the population of West Africa. Illegal oil trade therefore poses the greatest threat to national development and the rule of law in the region. It directly destabilizes the most powerful economy in the region, with implications far beyond the oil producing areas. The bunker trade has extensively been exposed as well as the transportation of bunker fuel. The various types of vessels involved have also been understudied (Wood, 1994).
Statistics are awash as to amount of money which the nation loses from oil theft, pipeline vandalisation and illegal oil bunkering. According to Akanimo (2004) Nigeria loses $7 Billion yearly to oil theft while Ikokwu (2007) puts the figure at $14 Billion yearly. Report by Oduyela 2003 alleged that N38bn was lost in six months in 1996. Illegal bunkering leads to the loss of billions of dollars in public funds. These funds could have been used to build schools, hospitals, provide electricity and improvement on other public utilities so that the nation develops. But the practice only enriches few individuals who criminally convert what does not belong to them. Recently, following the election of a new President Muhamadu Buahari, oil bunkerering activities and corruption related activities has been drastically reduced because the President frowned at the way and manner the Nigeria National Petroleum Corporation (NNPC) was being managed, saying his administration would check the excesses of the and also arrest the former ministers for looting and supporting oil thieves (Vanguard, 22nd July, 2015).
1.2 STATEMENT OF THE PROBLEM
Nigerian crude oil is being stolen on an industrial scale. Some of this stolen oil is exported but it is not entirely clear how much is exported. Proceeds are then laundered through world financial centers and used to buy assets in Nigeria and abroad. In Nigeria, politicians, government security forces, militants, oil industry personnel, oil traders and community members benefit to varying degrees, along with organized criminal networks. The trade in stolen oil also supports the spread of other transnational organized crimes (TOC) in the Gulf of Guinea (Adegoke, 2004).
This research work wills explores how corruption intertwine with crude oil theft and the international dimensions of Nigerian crude oil theft. It will also tackle the challenges and prospects of oil theft and bunkering in Nigeria.
Nigeria offers a strong enabling environment for the large-scale theft of crude oil. Corruption and fraud are rampant in the country’s oil sector. A dynamic, overcrowded political economy drives competition for looted resources. Poor governance has encouraged violent opportunism around oil and opened doors for organized crime (Badejo et al, 2004).
The basic story of how Nigeria’s crude goes missing has been told for years. To steal oil, thieves tap into pipelines and other infrastructure in the Niger Delta. They then pump the oil onto waiting barges and boats. Some of it is refined locally while larger vessels carry the rest abroad. There are also allegations that oil vanishes from at least some of the country’s roughly two dozen export terminals.
Lines between legal and illegal supplies of Nigerian oil can be blurry. The government’s system for selling its own oil attracts many shadowy middlemen, creating a confusing, high-risk marketplace. Nigeria’s oil industry is also one of the world’s least transparent in terms of hydrocarbon flows, sales and associated revenues. Industry watchers and policy-makers often think they know more about oil theft than they actually do. (Fearnley Consultant, 2003).
The specifics of who steals oil are elusive, even in Nigeria. A typical large-scale theft network has facilitators, operations and security people, local and foreign transport, buyers and sellers, and a range of opportunists. Top Nigerian officials cut their teeth in the oil theft business during military rule. Over time, evidence surfaced that corrupt members of the security forces were actively involved. The country’s return to democracy in 1999 then gave some civilian officials and political ‘godfathers’ more access to stolen oil (Maduegbunam, 2008).
This study, thus, seeks to look into ways the problems of corruption, oil theft and bunkering has affected the growth and development of this nation and proffering solution to this challenges.
1.3 AIM AND OBJECTIVES OF THE STUDY
The overall aim of this study is to determine the effect of corruption, oil theft and bunkering on national development. Specific objectives include the following:
- To examine the effect of corruption on national development
- To determine the consequences of oil theft and bunkering on economic and national development
- To proffer solution to the problems of corruption, oil theft and bunkering in Nigeria.
1.4 RESEARCH QUESTIONS
- What are the effects of corruption on national development?
- What are the consequences of oil theft and bunkering on national development?
- What are the solutions to the problems of corruption, oil theft and bunkering?
1.5 STATEMENT OF HYPOTHESES
In order to enable the researcher confirm the influence of corruption, oil theft and bunkering on national development, the following hypotheses postulated:
- Ho: Corruption does not have a significant effect on national development
HR: Corruption does have a significant effect on national development
- Ho: Oil theft and bunkering does not have significant effect on national development.
HR: Oil theft and bunkering do have a significant effect on national development.
1.6 ORGANIZATION OF STUDY
This study is organized into five chapters. The introduction to this study was done in the first chapter. Chapter two present the conceptual and theoretical framework. Empirical review of previous literatures was also done in the second chapter. Chapter three is made up of the methods used in this study including the research design, method of data collection and analysis. The results are presented in chapter four, hypothesis are also tested. Summary of the findings was presented in chapter five. This study was concluded and necessary recommendation was also made in chapter five.
1.7 SCOPE OF THE STUDY
The scope of this study encompasses all the stakeholders in oil and gas and maritime industry including the government in Nigeria. But for the purpose of this study, it will be limited to the companies involved with refining and distribution of crude and refined oil in Nigeria. The institutional framework saddled with maritime security responsibility will also be involved. This is informed by the frequency of the operations and activities of oil thieves in Nigeria.
1.8 PURPOSE OF STUDY
This study will help beam the searchlight on the need to curb corruption in all sectors of the economy in Nigeria. It will also help to expose the problems and challenges facing the nation oil sector as regarding the issue of oil theft and bunkering which is a serious sabotage to the nation’s economic development. Again, it will also serve as an impetus to other researchers who are interested in carrying research in these areas in Nigeria.
LIMITATION OF STUDY
- Financial constraint- Insufficient fund tends to impede the efficiency of the researcher in sourcing for the relevant materials, literature or information and in the process of data collection (internet, questionnaire and interview).
- Time constraint- The researcher will simultaneously engage in this study with other academic work. This consequently will cut down on the time devoted for the research work.
DEFINITION OF TERMS
CORRUPTION: dishonest or illegal behaviour by officials or people in positions of power, especially when they accept money in exchange for doing things for someone
POVERTY: poverty or destitution refers to the deprivation of basic human needs, which commonly includes food, water, sanitation, clothing, shelter, health care and education
VANDALISM: the wanton or deliberate destruction caused by a vandal or an instance of such destruction
CRIME: An act committed or omitted in violation of a law forbidding or commanding it and for which punishment is imposed upon conviction.
TRANSNATIONAL: Reaching beyond or transcending national boundaries
NIGER DELTA: A large delta region of the Niger River in southern Nigeria
