Unprecedented Oil Theft Affecting Nigeria’s Economy, CBN Governor Emefiele Laments

By Derrick Bangura

Mr. Godwin Emefiele, Governor of the Central Bank of Nigeria (CBN), criticized the unprecedented rate of oil theft seen in recent years, as well as its crippling effect on government revenue and reserve accumulation. This was said by Emefiele during a press conference following the Monetary Policy Committee (MPC) meeting in Abuja.

The CBN decided to keep the Monetary Policy Rate (MPR), often known as the interest rate, at 11.5 percent after the second MPC meeting in 2022, with an asymmetric corridor of +100/-700 basis points around the MPR.
But Emefiele urged the Nigerian National Petroleum Company (NNPC) to take urgent steps to ensure adequate supply of petroleum products in the country to reduce the rate of arbitrary increase in price of these petroleum products by oil marketers.

The CBN governor’s comment came a day after THISDAY reported similar concern expressed by Co-founder and former Chief Executive Officer of Seplat Energy Plc, Mr. Austin Avuru, who called for a state of emergency in the Nigerian oil and gas sector, revealing that up to 80 per cent of oil pumped in the country, particularly in the East, is stolen. Avuru spoke few days after a businessman and Chairman Heirs Holdings, Mr. Tony Elumelu, also bemoaned the worsening state of the industry, stressing that about 95 per cent of oil production does not get to the terminal. Elumelu has his oil assets in the Niger Delta.

Just about a week ago, Aiteo Eastern Exploration and Production Company (AEEPCO), operators of the Nembe Creek Trunk Line (NCTL) pipeline, threatened to exit the facility due to incessant vandalism, perennial sabotage and outright theft.

The company sated, “AEEPCO remains gravely concerned about the persistent heightened attack on our production facilities and the NCTL. These attacks appear to have escalated in intensity and effect.

“All our current efforts to sustain and increase crude production are being aggressively undermined, even wiped out by the activities of economic saboteurs whose audacity continues to be growing by the day.”

Aiteo disclosed that its NCTL had been targeted, with considerable success, for the sole and devastating objective of aiding crude theft.

The company stated that given the level of losses, occasioned by massive oil theft, it was experiencing, as joint operator of the NNPC/AITEO JV, it was now left with the unavoidable option of actualising a total exit from the NCTL.

“We are giving active and urgent consideration to this course of action because the consequences of continuing to operate in this manner now represents an existential threat to our survival,” the firm stated.

The CBN also left other monetary policy parameters unchanged, namely the Cash Reserve Ratio (CRR) at 27.5 per cent and Liquidity Ratio at 30 per cent.

MPR is the rate at which the CBN lends to commercial banks and it often determines the cost of borrowing in the economy.

The MPC also voted to maintain CRR at 27.5 per cent as well as the Liquidity Ratio at 30 per cent.

The CBN governor said six out of the 10 MPC members present voted to retain monetary parameters, adding that while loosening could trigger liquidity surfeit in the system, a tightening stance would impact the fragile recovery of the economy, reverse credit expansion and yet, fall short of taming inflation.

Emefiele, who read the committee’s communiqué, however expressed worry that whereas global oil prices had gone up, this had been compounded by shortage of supply of petroleum products.

The CBN also expressed optimism that in the medium term, the proposed take-off of the Dangote refinery this year, would help to improve the supply of petroleum products in the country.

Emefiele said the CBN remained optimistic that food prices would trend downwards in 2022 as security agencies sustain efforts to subdue the activities of bandits so as to allow farmers back to their farmers.

He said, “And now what we are saying is that if farmers are able to access their farms, do they have the wherewithal to procure the inputs, seeds, fertilizer and other inputs with which they can go back to the farm and farm? We are making all those available. And that is why we still remain reasonably optimistic that food prices would moderate in 2022.”

He said the MPC further noted with concern the effect, which the global price increase in petroleum and other products was having on all economies. He pointed out that this had resulted in imported inflation on the Nigerian economy.

The committee believed that specific actions were required to ensure that the trend did not continue, given the adverse consequences and aggressive rising price level could have on the cost of living and purchasing power of Nigerians.

Emefiele noted that before the Russia-Ukraine war, the MPC was optimistic that the moderate decline in inflation was sustainable due to the positive impact of good harvest on price levels. But it expressed worry that, whereas global prices had gone up, this had been compounded by the shortage of supply of petroleum products.

He added that the rising price of diesel had been compounded by the inadequate electricity supply, which has adversely impacted domestic prices.

The MPC, however, advised the CBN and the fiscal authorities to take specific and urgent actions to avoid many power generating stations shutdown for turn-around maintenance, resulting in the current unwarranted shutdown of generating assets.

The CBN said the committee was, nonetheless, relieved that food inflation declined marginally due to good harvest.

Emefiele added, “Although some scarcity is expected as we approach the planting season, the committee is optimistic that with the high level of strategic grain reserves of the CBN, it is relieved that food prices would remain relatively moderated.”

The committee further advised the apex bank to redouble its development finance initiatives aimed at boosting domestic food output, which would help in moderating food inflation. going forward, thereby moderating headline inflation.

On the global scene, the committee noted with concern the recent heightening of uncertainties confronting the recovery of the global economy as the Russia-Ukraine conflict and numerous sanctions against Russia, introduced a new dimension of risk to the tepid recovery of the global economy.

Among other things, the committee took into cognisance the lingering headwinds associated with the COVID-19 pandemic and global supply chain constraints, rising inflationary pressure, and more recently, the progression of an interest rate hike by the US Federal Reserve Bank and Bank of England (BOE).

Members noted that the on-going war and the resultant sanctions against Russia will continue to have a considerable impact on the global supply chain as both countries are major players in the global commodities market.

Emefiele said global financial conditions were thus, expected to tighten in the short-term as the investment horizon gradually becomes clearer, adding that this is expected to impact capital flows to emerging market economies as risk-averse portfolio investors adopt a wait-and-see approach.

He said the risks to the overall recovery of the global economy remained heightened and called for cautious policy manoeuvring to avoid a sharp downturn, such as experienced in 2020.

Providing update on the N15 trillion Infrastructure Corporation of Nigeria (Infraco), the CBN governor said the company had commenced operation in earnest, adding that it has secured about N250 billion bridged loans to finance three projects.

He told journalists, “Infraco is set up, the board is running and the MD has been appointed, asset managers have been appointed. We have currently three assets that are under finance. We’ve done bridge finance of almost about N250 billion for that purpose and the remaining sum, asset managers are going to be going into the data room to see the numbers, to determine viability of those roads…Lagos- Ibadan, Abuja-Kano-Kaduna (AKK) project as well as the second Niger Bridge which is almost completed now.

“I am sure we are only meant to complete the funding that the federal government has put into it before now. And we will do it. And the Permanent Secretary, Finance, who also is assisting at least in terms of collaboration between fiscal and monetary authority also assured that there are pipelines of infrastructure to be looked at.”

He added, “Of course, Infraco as an institution that looks at commercial viability, we will look at each of those projects, determine their commercial viability and determine particularly how would revenue be realised to repay the loans and from there it would be done.

“So I believe we are on the fast mode and 2022 would be a very aggressive year in the tenure of Infraco.”