JP Morgan and Nigeria’s crude oil thieves

FILE PHOTO: Oil pours out of a spout at the Drake Well Museum and Park in Titusville, Pennsylvania U.S., October 5, 2017. REUTERS/Brendan McDermid

Nigeria is a strange country that does not worry about its economic calamities. Bystanders end up mourning more than the bereaved.

The federal government pays lip service to Nigeria’s catastrophic oil theft. Ironically, JP Morgan, a leading American investment bank, is more worried about oil theft in Nigeria than the federal government itself.

Two weeks ago, the American investment bank lamented that the Nigerian National Petroleum Company (NNPC) Ltd. paid pittance into the federation account from crude oil export proceeds for two months in the first quarter of 2022 because of outrageous petrol subsidy bill and crude oil theft.

Nigeria does not know precisely how much petrol it consumes daily. It gives NNPC a blank cheque. The deceitful organisation slots in any figure it deems fit and returns the pittance left to the federation account.

At the best of times, Nigeria’s daily petrol consumption hovers around 35 million litres. At lean times like this, daily petrol consumption should drop below 30 million litres.

Ironically, NNPC deducts petrol subsidy on the consumption rate of 65 million litres per day. On one frenzied day in September 2021, Mele Kyari, group managing director of NNPC, warned that Nigeria’s daily petrol consumption had surged to 102 million litres. He blamed the surge on unmitigated smuggling into Benin, Togo, Niger, Chad and Ghana.

While claiming that Nigeria’s daily petrol consumption remained at 65 million litres, he implied that 37 million litres were smuggled into the five impoverished countries daily. Everyone knows that the five countries import at least 90 per cent of their daily petrol needs and that the balance that is smuggled from Nigeria cannot be more than a few thousand litres because there are more vehicles in Lagos alone than the five countries put together.

The 36 state governors are convinced that NNPC is swindling Nigeria, but none of them is bold enough to initiate a litigation that could bring out the truth. They are all afraid of the Willy Obiano treatment at the end of their tenure. No one wants to be hounded like the former governor of Anambra state. The governors’ hands are tied by the stinking skeletons in their cupboards.

Consequently, Nigeria will dole out N4 trillion for petrol subsidy in 2022. The actual figure cannot be more than N2 trillion.

Petrol subsidy fraud pales into insignificance when measured against oil theft. Like petrol consumption, government does not know precisely how many barrels of crude oil leaves its oil wells in a day.

The Organisation of Petroleum Exporting Countries (OPEC) allows Nigeria to pump about 1.8 million barrel per day. Nigeria misses that target persistently because of crude oil theft. At the best of times Nigeria manages to slip 1.3 million barrels of crude oil to its export terminals. The rest is stolen.

Besides a few thousand barrels stolen from hacked pipelines by operators of the primitive refineries in the creeks of Niger Delta, no one can really say that most of the missing crude oil is stolen.

They are inauspiciously allocated to influential politicians and retired generals for sale to criminals at a discount in international waters. Hundreds of thousands of barrels are shared under the inauspicious allocation formula and calibrated as stolen crude oil.

That is precisely why government cannot stop crude oil theft. In my village, it is believed that only God is greater than government. It therefore follows that any crime that government cannot tackle is committed by government itself.

That explains why JP Morgan is more worried about crude oil theft in Nigeria than the rulers of the land.

A few days after the presidency directed security agencies to go after crude oil thieves, the navy announced the seizure of 61 million litres of crude oil from illegal refineries.

Crude oil quantity is normally expressed in number of barrels not litres. The probable reason for the navy’s deviation is that it wanted to dazzle ignorant readers with the quantity of crude oil seized. Ironically, what the navy celebrated was a scant 34,000 barrels of crude oil in a country where 500,000 barrels are stolen daily.

There were no seizures from the barges hauling inauspiciously allocated crude oil to criminals in international waters. Those ones are sacred cows that no one can touch.

Five years ago, a senior official of an oil company told me how a navy patrol ship apprehended a ship loaded with stolen crude oil and impounded it. Within minutes of the navy captain’s encounter with the crude oil thieves, an order came from “above” directing the captain of the navy ship to release the illegal oil bunkering ship. He complied. The news in that encounter is that the captain of the navy ship was redeployed within the week.

Some years ago, I confronted a group general manager of NNPC on the audacity of crude oil thieves and wondered why NNPC cannot stop them. He responded with a rhetorical question; “Why do people in the navy lobby to be assigned to ships monitoring oil theft”? I had no answer to the question and the group general manager refused to provide one. The answer to that question is precisely why Nigeria cannot stop crude oil theft.

JP Morgan knows that crude oil thieves are more powerful than the rulers of Nigeria. Rather than wasting its precious time sermonising about stopping crude oil theft by a country on the throes of bankruptcy, JP Morgan has quietly dropped Nigeria from its emerging markets index list.

JP Morgan believes that crude oil theft thrives on Nigeria’s fiscal decadence. Ironically, JP Morgan maintains a dominant emerging markets index that allows enlisted countries to float corporate and sovereign bonds that attract leading investors.

Fund users access a minimum of $2 trillion annually from JP Morgan’s emerging markets index. The removal of Nigeria from that list means that foreign investors monitoring that prominent index would no longer invest in Nigeria’s bonds.

However, investors prone to taking high risk will still invest in Nigeria’s bonds. Consequently, with the loss of JP Morgan facility, Nigeria might have to float bonds at double digit interest rates to attract investors. The previous rate was seven per cent.

The message from JP Morgan to investors is that with oil theft and petrol subsidy fraud consuming half of Nigeria’s annual revenue, the bank is no longer sure that Nigeria can pay back its loans.

JP Morgan has wielded the big stick to compel Nigeria to choose between pleasing a few high net worth thieves and doing things the right way to move the country forward.