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Nigeria boasts abundant natural resources, yet its failure to crack down on endemic corruption and constant thievery has eroded its status to such an extent that, in May, it lost its title as the continent's leading oil producer to Angola ( see Fig. 1). A reluctance to enact tough-enough reforms or revise the fiscal terms under which the industry operates has cost the country dear. And the threat posed by issues such as theft and civil unrest threatens to destabilise an industry teetering on the brink of a crisis.

Undoubtedly, the nation's oil wealth has been instrumental in unlocking growth and development in years past, but with Nigeria's oil losses snowballing and the price of oil spiralling downwards, there's never been a better time to double down on reforms.

Five-finger discount
Recently, a resurgent militancy in the oil-rich Niger Delta region inflicted untold levels of destruction on key oil sites and put a serious dent in production. Given that the Niger Delta brings in around 90 percent of the country's foreign exchange earnings and 80 percent of government revenues, any threat to it is a threat to Nigeria's economy as a whole.

No stranger to controversy, the area has a somewhat chequered past, with confrontations between oil firms and residents all too common. According to government figures, the region was the site of more than 7,000 oil spills between 1970 and 2000, and locals are concerned the state is reaping outsized rewards from the site's resource wealth, while the region itself has received very little in the way of material benefit.

Theft alone cost the country a reported one million barrels a day - of a 2.5 million maximum daily capacity - under the last government, according to President Muhammadu Buhari, who, in a speech, called the extent of the damage "mind boggling". The lower figure of 250,000, which Buhari mentioned in the very same speech, is surely closer to the mark - and that's including losses due to pipeline vandalism. Regardless, the truth of the matter is that nobody really knows with any degree of certainty how much is being stolen, nor do they know exactly how much is being produced.

Given that the Niger Delta brings in around 90 percent of the country's foreign exchange earnings and 80 percent of government revenues, any threat to it is a threat to Nigeria's economy as a whole

A Chatham House study entitled Nigeria's Criminal Crude suggested the problem has reached an "industrial scale". In the study, the institute wrote: "Officials outside Nigeria are aware that the problem exists, and occasionally show some interest at high policy levels. But Nigeria's trade and diplomatic partners have taken no real action, and no stakeholder group inside the country has a record of sustained and serious engagement with the issue. The resulting lack of good intelligence means international actors cannot fully assess whether Nigerian oil theft harms their interests... Nigeria's dynamic, overcrowded political economy drives competition for looted resources. Poor governance has encouraged violent opportunism around oil and opened doors for organised crime."

According to Stephane Foucaud, Managing Director of Institutional Research at FirstEnergy Capital, "growing security issues in the Delta" mean that production has been plummeting and "as much as 500 million barrels per day are now shut down". Keen to avoid the accompanying reputational and financial hazards, producers have been quick to distance themselves from the conflict.

As far as the Niger Delta is concerned, Royal Dutch Shell shut its Forcados export terminal earlier this year, its withdrawal costing the country 250,000 barrels a day. A Chevron closure not long after cost another 90,000 barrels following a security breach at one of its facilities. The intention on the part of the aggressors is clear. In a statement, they wrote: "This is what we promised the Nigeria government, since they refuse to listen to us."

The result, according to OECD data, is a landmark 20-year low in oil production, at a time when the economy is struggling to contend with falling oil prices. The claim of Angola - where disruptions are rare and the political hurdles lower - to the continent's top spot looks all the more assured. Nigeria, on the other hand, is watching its reputation as a world-beating oil exporter hang in the balance.

Resource curse
Nigeria is still the biggest economy on the continent, thanks in no small part to its oil wealth, though a continuing failure to address the problems facing the oil industry could see previously strong growth fall in line with the wider Sub-Saharan region.

Between 2005 and 2010, Nigeria's GDP at purchasing power parity more than doubled, yet its human capital and living standards leave much to be desired. As of 2010, the proportion of people living in absolute poverty rose to nearly 60 percent, up from 54.7 percent in 2004, according to the National Bureau of Statistics. And this, alongside World Bank estimates that 80 percent of energy revenues benefit just one percent of the population, has given observers real cause for concern.

Perhaps more than any other African nation, Nigeria has fallen foul of the so-called 'resource curse'; a situation where an abundance of natural resources can breed corruption, stagnation, and even economic contraction.

"Managing natural resource wealth is fraught with difficulties - some economic, many political - and if not done well, can adversely impact macroeconomic performance in the short and long runs", according to an IMF report entitled Boom, Bust, or Prosperity? Managing Sub-Saharan Africa's Natural Resource Wealth. "Data from the sub-region suggests that such a curse has been present to some degree, but has diminished since 2000, although the broad economic and social indicators point to continued weaknesses that could be attributed to poor natural resource management."

Africa, particularly Sub-Saharan Africa, is an example of how abundant resources can stifle development and distract governments from the central task of ensuring long-term prosperity. Looking at the past 50 years, the continent has made a name for itself as a region rich in natural resources, though also one in which citizens are severely handicapped by a low-growth climate and endemic corruption. With little incentive to raise taxes or focus on other sectors, plentiful resources have been known to cripple once-fruitful economies and shrink government responsibility.

Nigeria's wealth means there's potential for those in senior positions to profit personally, and the widespread perception that they are doing just that has bred resentment and mistrust among the population at large.

"The greater the value of the resources, the greater the incentive for corruption, so fossil fuel resources, particularly crude oil, are of course often associated with poor governance", Chris Beaton, Research and Communications Officer at the International Institute for Sustainable Development, told The New Economy. "But it's only a question of increased risk; it isn't guaranteed the two will come hand-in-hand. Some oil-exporting countries, such as Norway, score among the least corrupt in the world."

Crude reform
It's no secret that the oil price collapse has been felt keenly across Nigeria, and declining revenues threaten to slow the economy's momentum and unearth inefficiencies that have, in years past, been allowed to pass unseen and unchallenged. According to energy consultancy Wood Mackenzie, the cost of declining royalties and tax revenues between 2014 and 2018 is projected to amount to around $75bn, and, without swift and decisive action, the country's finances will stray into the red.

Fears the ruling authorities are not competent enough to contain the situation are far from uncommon, and investors are withdrawing their holdings at quite an alarming rate. President Muhammadu Buhari, nicknamed 'Baba Go Slow', has been famously reticent to react to the situation, for fear of upsetting a population in the midst of a major fuel shortage and record budget deficit. More than that, any meaningful attempt at reform will have consequences for Nigerian investors and fundamentally change the relationship between state and big business. The situation for the time being is such that policymakers must expect that any reforms made now will not be without consequence.

"President Buhari was elected on an anti-corruption platform and is doing his best to make institutions more transparent and accountable, which is vital", said Gail Anderson, Research Director at Wood Mackenzie for Sub-Saharan Africa Upstream Oil and Gas. One reason for Buhari's recent election success is the perception that his predecessor, Goodluck Jonathan, allowed corruption in the oil industry to run rampant. Another is that Buhari was one of very few Nigerian leaders to crack down on corruption over the course of his military rule (1983-85). Knowing this to be true, the newly elected Buhari can ill afford to stand still on this point, and has made tackling structural issues in the oil industry his first priority, ahead of underlying fiscal concerns.

Last year, Nigeria's budget deficit grew twofold, while exports were down 40 percent on the previous year. The result, according to PwC estimates, was a loss of approximately $18bn in oil-derived income in 2015. Senior figures at the Nigerian National Petroleum Corporation (NNPC) issued a warning to its venture partners, and cautioned that a failure to make good on arrears worth between $8bn and $10bn "could cripple" the industry, according to a letter seen by the Financial Times.

According to Buhari: "Given the previous levels of waste and corruption, if we spend what we have more wisely and effectively, we can achieve a great deal more." What's needed now is not necessarily a change in spending, but a full investigation into the business of oil itself and an anti-corruption drive of epic proportions. By targeting the NNPC, illegal crude theft, and the fiscal terms under which the industry operates, policymakers can at least begin to stem the industry's decline.

NNPC power
Arguably the biggest bone of contention is the NNPC itself, which has for years stood as a symbol of all that is wrong with the oil sector. Should it, after sustained pressure from senior figures in government, choose not to apply stringent and far-reaching reforms, the oil behemoth could well erode the national economy from the inside out.

The news in March that the NNPC had failed to pay $16bn in suspected fraud payments is characteristic of how the company operates. The audit, carried out by Auditor General Samuel Ukura, appeared to show that officials from the previous administration were engaged in wholesale corruption to the tune of billions of dollars. Worse is that the situation in 2014 was far from the exception; prior to that, the company was found guilty of withholding payments of $1.48bn.

Arguably the biggest bone of contention is the NNPC itself, which has for years stood as a symbol of all that is wrong with the oil sector

"The NNPC's approach to oil sales suffers from high corruption risks and fails to maximise returns for the nation", said a study by the Natural Resource Governance Institute. "Over 38 years, the corporation has neither developed its own commercial or operational capacities, nor facilitated the growth of the sector through external investment. Instead, it has spun a legacy of inefficiency and mismanagement. Its faults have been described by a number of scathing reports, many commissioned by government itself. Despite the NNPC's debilitating consumption of public revenues and performance failures, successive governments have done little to reform the company."

This - at least theoretically speaking - is where the difference between then and now lies. Buhari has wasted no time in upending the NNPC's management team. In August 2015, he removed the company's group managing director and group executive directors. Most important of all, the outgoing MD, Joseph Dawha, was replaced by the former vice chairman of ExxonMobil Africa, Emmanuel Kachikwu, in the hope that a new helmsman might inject a new lease of life into the struggling oil giant.

Aside from the changes to personnel, the government is going above and beyond to dismember the unwieldy beast and inspire change on the scale of a cultural overhaul. In what proved a surprise move, in March the Minister for Petroleum Resources and Group Managing Director of the NNPC unveiled plans to unbundle the company into 30 independent companies, each with their own managing director. "Titles like 'group executive director' are going to disappear, and in their place you are going to have CEOs and they are going to take responsibility for their titles", he said. "At the end of the day, the CEO of an upstream company must deliver an upstream result."

Anderson said the government's intentions are "sensible, to create a transparent and accountable NNPC that is commercially focused and profitable". Listing the changes, Anderson highlighted the replacement of the board and the fact that an outsider with industry experience was appointed to lead it - a first for the NNPC. The restructuring of the organisation into separate business units, each to be run for profit, is also notable, and the fact the company is looking at ways to pay back its join-venture cash call arrears to the IOCs and agree a sustainable funding model in the future is a positive sign.

"All of this is very commendable", Anderson said. "However, as with everything, it depends on how exactly you implement the changes, and the people in the organisation. There are some major barriers to profitability, such as regulated fuel prices and gas prices, so if the goals are to be achieved, issues such as these will need to be looked at, otherwise you could end up with only one part of your business being profitable (i.e. upstream), while the rest (downstream, refining and gas/power) stagnate."

Commendable as the reforms are, the majority of them stop short of the promised transformation, and the fact remains that the company's debts - not to mention its links to corrupt powerbrokers - remain intact. According to Quartz Africa, Matrix Energy was identified as one of several oil traders to have defrauded the government of $11.5m, yet it received a license last year to import refined products. The same applies to Eterna Oil and Gas, despite having cheated the government out of $9m in fuel subsidies. Other questionable names include Shorelink Oil and Gas, Northwest Petroleum and Emo Oil, and an unwillingness to do away with the services of such firms is proof that the cleanup is not as far along as senior government figures claim.

Risky future
Aside from the issue of corruption, Nigeria's concerns are made all the more problematic by the issue of subnational debt, which, in the wake of spiralling oil prices, is eating away at the balance books. Speaking about the steps taken to uproot corruption, Foucaud said: "So far this has not really dealt with the mounting debt problem and the capability to pay contractors." The NNPC's mounting debt, he added, "is crippling the ability of foreign companies to invest in projects".

Arguably, the issue is more important than militancy or corruption, for the fact that it threatens Nigeria's future oil output, and lack of funding severely limits the nation's ability to keep production online. Already, Wood Mackenzie has revised its output forecast for Nigeria, slashing it by more than a fifth to 1.5 million a day for the next decade.

Government promises of an overhaul have done little to slow investment leaving the country, and for as long as the reforms fail to materialise, Nigeria's economy will suffer. Restoring confidence in Nigeria's oil industry is most certainly a priority, and the longer these issues are left to fester, the greater the chance the country has of getting caught up in a crisis.

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Nigeria urgently needs to tackle corruption and theft in its oil industry

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Nigeria boasts abundant natural resources, yet its failure to crack down on endemic corruption and constant thievery has eroded its status to such an extent that, in May, it lost its title as the continent's leading oil producer to Angola ( see Fig. 1).

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Developing states with large natural resource industries have an inclination to become over-reliant on one source of capital, causing other industries to fail, promoting corruption, and stimulating crime. Nigeria is one such case, as their booming oil industry has lead to the creation of new militant groups who target petroleum production sites to either loot oil, kidnap for ransom, or damage infrastructure. In the past decade, major international drilling companies such as Royal Dutch Shell have begun to focus their drilling operations offshore in the Niger Delta in result of the increasing attacks. However, several incidents offshore have suggested that miles of ocean water is not a sufficient means of protection, as militants have carried out successful attacks with simple motorboats and home-made explosives. By using a case-study approach to analyze the frequency and success of offshore versus onshore attacks in Nigeria between 2006 and 2014, I argue that offshore sites are not as secure as oil companies would like to believe, as capital-deprived militants will simply follow oil and gas production offshore.

States whose economies are largely reliant on the resource industry with little diversity tend to be prone to corruption. Abundant natural resources have a long history of fueling tensions and are believed to be the single largest predictor of civil conflict (Collier and Hoeffler 2004). In areas with weak states and abundant resources, such as Nigeria, individuals or groups often target the resource industry because it is either the source of their grievances or to benefit from its value. While most "attacks" (instances of looting, kidnapping, damage of infrastructure, etc.) have traditionally occurred on land, there are valuable oil and gas platforms offshore that are relatively insecure and prone to attack, despite being located several miles offshore.

The lack of security on oil rigs may make up for the distance rebels must travel, making offshore sites even more desirable. Even if attacks offshore have occurred slightly less frequently than those onshore, offshore incidents have been more destructive overall.

States are labeled as having a "resource curse" when their economies are substantially reliant on renting indigenous resources to foreign clients, specifically fuel resources (Mahdavy). Such states often fail to develop other sectors of their economies (agri culture, technology, etc.), instead focusing on their naturally occurring wealth. The presence of valuable resources can undermine the government's ability to provide security and accountability, further weakening political and welfare systems (Collier 2010). However, it is unclear what portion of conflict is driven by sociopolitical grievances as opposed to the wish of rebels to benefit from the abundant resource wealth (Fearon 2005).

Experts argue over the causal mechanism that links large resource industries and conflict, and also why fuel exports in particular seem to increase the likeliness of civil conflict. Most measurements fail to indicate whether rebels actually have access to the resources, and how their locations play into the likeliness of conflict outbreak (Gilmore and Lujala 2003). Distance and rough terrain make it difficult for governments to transport troops and sustain them for long periods, often giving rebel groups the advantage (Buhaug, Gates and Lujala 2009).

In order to determine how offshore drilling sites contribute to conflict differently, this paper considers the intensity and damage of offshore versus onshore attacks during the nine-year period between 2006 and 2014, as well as the outcome of some significant conflicts, which may help determine the success of rebels onshore as opposed to offshore, where resources, backup, and transportation are less available for both the rebels and offshore workers. By looking at the type of attack (kidnapping, damage, lives lost) and the amount of damage, it can be seen that offshore attacks are almost as likely as those onshore.

Despite large oil companies like Royal Dutch Shell moving their operations offshore, in many cases rebels simply moved their targets offshore as well. By using a case study approach with temporal variations and a controlled comparison between onshore and offshore attacks, this paper argues that offshore attacks have the potential to be nearly as frequent and disadvantageous as those onshore.

There has been little research on how likely rebels are to target offshore oilrigs (structures for drilling oil wells) and offshore platforms (structures that stand on the seabed and provide a base for oil wells). While conflicts are more likely to be located in areas of resource extraction within the state, oilrigs are much less secure and extremely valuable (Harel 2012). With this in mind, it is possible that rebel groups may target offshore oil fields because they pose fewer security obstacles. Because several miles of ocean water surround offshore sites, they pose an added difficulty for rebels, yet still, offshore fields often make up a significant portion of the country's overall production. This is especially important as some oil industries like Shell and Chevron in Nigeria began to migrate offshore in the mid-2000s in order to reduce the number of insurgent attacks.

Between 2007 and 2012, Nigerian rebels undertook approximately 1000 attacks on drilling sites, most of which were onshore though some were also offshore. Nigeria, specifically the Niger Delta, is a viable case because it has hosted an exceptionally high number of onshore attacks as well as a majority of the world's offshore incidents during this time period. Nigeria also fits the model of a "weak" state, since it is largely dependent on the oil wealth generated from Shell, Chevron, ExxonMobil and so on.

The country has witnessed different insurgent groups, most recently the Movement for the Emancipation of the Niger Delta (MEND), who seeks control of the Delta's oil reserves. MEND is notably remembered for their attack on Shell's offshore Bonga field (located approximately 77 miles offshore), after which the oil platform was temporarily shut down along with a significant portion of Nigeria's oil production. Thus, Nigeria is an ideal case study because it has experienced an exceptional amount of insurgency against its resource industry, as well as both on- and offshore attacks. Since big companies like Shell began moving their drilling sites within the time period, Nigeria allows for consideration of how the number of conflicts have increased, decreased, or stayed the same since then. Studying these exclusively in Nigeria also ensures that other factors like the economy and sociopolitical structures remain constant.

James Fearon defines an oil dependent state as one that receives over one-third of its export income from oil (Fearon 2005). Resource wealth provides a relatively simple way to turn a very large profit, though it also often attracts groups that seek either to gain control of the valuable resources or to resolve perceived grievances such as political oppression. The groups' motives may never be entirely clear, since they often claim to be acting for sociopolitical reasons in order to gain support, but actually seek to profit from illegal resource extraction (Renner 2002).

Most of these groups do not seek to overthrow the government or secede, but rather gain control of the resources, which is sometimes the sole source of wealth in the state (Renner 2002). Rebel groups are aided by the political and economic factors of the resource curse, such as a weak governance and social division. While some groups start out with strictly loot-seeking agendas, others may begin with political goals and evolve into profit-seeking corporations (Collier 2010).

Still, the resource curse often causes considerable disadvantages for the local population, such as exploitation of agricultural land, environmental harm, and disruption to quality of life (Renner 2002; Lujala, Rod and Thieme 2007). Farmers may face a lack of support from a government no longer concerned with other sectors of the economy and may have their land confiscated if it sits on top of valuable hydrocarbons. Territory and resources may also represent a nontangible value for certain groups who hold spiritual connections to their land, contributing to the formation of rebel groups.

Even offshore, oil extraction poses a serious threat to fishing and maritime industries. Seismic cannon blasting can injure or kill tens of thousands of marine animals, threatening fisheries, coastal economies, depressing catch rates and displacing fish species (Charles 1992). Communities are rarely informed or considered before extraction projects begin, which has lead to a number of conflicts ranging from small-scale skirmishes to large acts of sabotage (Renner 2002).

If a rebel group rises from one or more of these possible motives, the state can be thrown into a sequence of acquiring more resource wealth and funding more war. Even though Collier and Hoeffler's "Greed and Grievance in Civil War" claims that when resources are abundant the government has the means to build a strong military and prevent rebellion, resources have actually lengthened conflict in many places. These governments are often corrupt, weak, and unconcerned with the population, making them somewhat susceptible to rebel movements. Furthermore, Collier and Hoeffler only consider primary commodity exports in their research and do not account for the effect production may have on conflict.

There is also a cycle at work where the wealth of resource exploitation funds war that in turn provides the means to sustain illegitimate access to resources (Renner 2002). In this rotation, the leaders of the government and rebel forces use resource money to buy more weapons and line their own pockets, increasing their war supply and lengthening the war. To keep up their military and personal funding, the governments may have to increase their production of oil. The conflict in Sudan is one example where oil wealth has allowed the government to continue conflict against the southern rebels. To fund the war, the government must expand oil extraction deeper into rebel territory (Renner 2002).

Lootable resources are believed to increase the likeliness and length of conflict, with oil resources being the most likely to spark uprising (Collier and Hoeffler 2004). Even though oil tops the list, there is debate among experts over the lootability of oil. While scholars like Collier and Hoeffler claim that oil is a particularly large indicator of conflict, Fearon claims that oil requires the control of a national distribution system, which rebels lack (Fearon 2005). However, Fearon does not take into account that many of these rebels are not looking to take over the oil industry but rather turn a small profit. Small-scale looting does not require a national distribution system in order to be lucrative.

Oil-producing states also tend to have less reliable institutions than other primary commodity exporters, which encourages corruption. Scholars are yet to agree on the most important mechanism between oil and conflict, though it is agreed that oil exporters are more disposed to civil war onset (Fearon 2005). It may be that oil is also a dispersed resource, which makes it harder to protect than a point resource and more available to benefit a range of contenders (Renner 2002). Besides its availability, oil provides ample opportunity for rebel finance through several methods, such as: bunkering (tapping pipelines), kidnapping and ransoming oil workers, or through extortion rackets against oil companies (Collier 2010). Offshore sites are equally prone to these methods, and can be particularly susceptible to acts of sabotage.

While scholars point out several ways that rebels can profit from the oil industry, they do not explain how different forms of attack may be used to achieve different outcomes. Bunkering, looting, and extortion can be assumed to be in aim of primarily economic goals, since they involve obtaining oil and do not seriously damage the industry. Kidnapping may pose either economic or political objectives, since rebels may either ask for money or for some other prize. Sabotage, on the other hand, is strictly the aim of a non-economic goal, since the valuable stored resources and equipment is damaged or destroyed.

The resource curse provides several overlapping motivations for the rise of rebel groups and conflict. Resource wealth may provide incentive enough for groups to rebel, though resource extraction and weak governance can infiltrate legitimate sociopolitical, economic, and environmental harm. These grievances pose another reason that groups may seek conflict with the state. Large resource industries can also lengthen existing conflicts, as both the government and the rebels may use the resource to fund the war and turn a profit. All of these factors are heightened in the case of oil, which is both dispersed and lootable. Rebels can profit from oil production in several ways besides looting, and their method of attack may depend on their desired outcome.

While resources are believed to increase the likeliness of conflict, the conflict is also likely to be located near the actual site of resource extraction (Collier 2010). Fighting in these areas of resource reserve are also proven to last substantially longer than those that take place in other regions (Lujala, Rod and Thieme 2007). With this being said, location can also help or hinder the ability of security forces. The greater the distance between the resource and the center of government power, the more difficult it is for the government to maintain control and protect the source (Renner 2002).

Some argue that the distance from the capital influences the type and duration of conflict, and that diffused resources near the government center are likely to induce riots while those further away are connected to warlordism (Gilmore and Lujala 2003). This is especially true for oil reserves, since they are dispersed over large distances, both onshore and offshore. With less government intervention in remote locations, militant groups have the ability to conduct illicit operations on a larger scale. Buhaug, Gates and Lujala find that conflicts located a considerable distance from the center of government, near remote international borders, and in regions with valuable resources will last substantially longer (2009). When these valuable resources are located in far away, remote areas, conflict may last for even longer periods. Borders provide an added advantage for rebels because they are usually far from the capital and provide easy access to safe havens and trade (Buhaug, Gates and Lujala 2009).

Logistically, distance makes it difficult for the government to transport troops and equipment, especially if rough terrain is involved (Buhaug, Gates and Lujala 2009). Geographic features like mountainous terrain or deep forest can inhibit government accessibility and provide an advantage for rebels. Some of the longest-standing conflicts are those found in the remote hinterlands of Myanmar, which are known for rugged mountains and dense forests along the nation's border as well as for a rich supply of natural resources (Buhaug, Gates and Lujala 2009). However, this study does not consider how offshore sites, which are separated from all communities, contribute to the likeliness of conflict. Offshore oil facilities are widely dispersed and difficult to protect for long periods of time, since no permanent safeguarding facilities can be established offshore.

Facing attacks and attempted attacks onshore, many multinational companies like Shell in Nigeria have begun to move their production offshore in attempt to make their fields harder to access for rebels. While these fields may be out of sight, they are still potentially important targets if rebels are set on attacking the resource industry. These sites are still likely to be targets, since offshore oil and gas production is the largest marine industry in the world, and amounts to more than $300 billion annually (Harel 2012). Platforms also store large volumes of flammable liquids and gas that could significantly increase the effect of an attack (Harel 2012). Offshore sites are very important generators of energy and income, and damage to such assets can be highly damaging to the state.

Though it would seem that offshore sites would be more difficult for rebels to attack, not much is needed to carry out large-scale sabotage. Devastating attacks have been carried out by a handful of people in simple speedboats, such as the attack on Shell's Bonga field, though larger groups are able to acquire more advanced equipment. At one time, al Qaeda was believed to control several large cargo ships that could be used as "floating bombs" on offshore targets (Harel 2012). There is also an increasing fear that these groups could acquire shore-to-sea missiles that could easily be used for an attack (Harel 2012).

Due to international maritime law, states can only enforce absolute authority for up to 12 nautical miles (13.8 miles) from their coast. In this area, called the "territorial sea," the state can impose limitations on the navigation of vessels in the vicinity of offshore platforms, establish safety zones around the extraction sites, and prohibit unauthorized access to those zones (Harel 2012). Even then it is difficult to enforce these laws, especially considering that these states are invariably weak with poor military coordination, especially offshore. Moreover the state does not possess sovereignty past the territorial boundary, meaning that any vessel that passes this point is subject to jurisdiction of the flag state. Thus, foreigners who carry out attacks beyond another state's territorial sea cannot be prosecuted by that state.

The "contiguous zone" extends another 12 nautical miles from the territorial sea (27.6 miles from shore). In this zone, the state does not have sovereignty, it may exercise the degree of control needed to prevent the violation of laws that apply within their territory (Harel 2012). Vessels and aircrafts of all nations have freedom of navigation in the contiguous zone, though the coastal state can establish safety zones and sea-lanes to monitor sea traffic. Again, these rules are not easily enforced with the offshore capabilities of weak states.

The "Exclusive Economic Zone" extends 200 nautical miles (230.2 miles) from the state's baseline. In the EEZ, the state is given exclusive rights for the economic and scientific exploitation of natural resources and for the construction of offshore platforms (Harel 2012). Though many platforms exist in this area, military ability weakens as the sites move further away, possibly making them tempting targets for rebels with the capability to travel that distance. Beyond the EEZ is the "continental shelf," which extends to the outer edge of the continental margin and is subject to the same regulations as the EEZ. Past the continental margin lies the "high seas" in which all states posses the "freedom of the high seas," a right that includes constructing offshore installations (Harel 2012).

States engaged in armed conflict gain extended rights offshore, such as the right to further limit navigation near offshore platforms and create exclusions zones in which access to the platforms is prevented. A state actually has greater authority to protect offshore platforms when it is engaged in armed conflict than it does in peacetime (Harel 2012).

Though offshore drilling sites seem more secure than those located onshore, the government possesses much fewer rights to protect offshore platforms and usually lacks the desire or ability to provide the military security necessary to protect the very large and diffused areas of sea where the platforms are located. While it may seem advantageous for resource industries to move further and further from the coast, these sites are actually much less protected, and are usually not too difficult for rebels to attack. While navies require large ships, equipment and many people to operate, rebels can carry out swift and destructive attacks with minimal supplies. This may be why attacks and attempted attacks offshore have become increasingly frequent in the last several years (Harel 2012). Continued on Next Page "

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The Resource Curse in Nigeria: Comparing the Security of Offshore and Onshore Oil Production

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Developing states with large natural resource industries have an inclination to become over-reliant on one source of capital, causing other industries to fail, promoting corruption, and stimulating crime. Nigeria is one such case, as their booming oil industry has lead to the creation of new militant groups who target petroleum production sites to either loot oil, kidnap for ransom, or damage infrastructure.

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Resources can bring wealth and development to countries that use them effectively, but they can also be a curse to countries that fail to use them adequately. Adesuwa O. looks at how Nigeria's oil impacts the country.

The Resource Curse describes a situation where a country with abundant natural resources such as oil, diamonds, or gold, is worse off economically and politically, compared to countries with fewer natural resources. Nigeria is rich in oil, but has failed to become more economically and politically advanced. The country's oil wealth fuels corruption instead of advancing education and health care. Since the discovery of oil, Nigeria has been faced with greater inequalities in wealth, an ecological system devastated by major oil spills and immense corruption.

Nigeria has the largest economy in Africa, and this is mainly because of its oil resource. The first commercial quantities of oil in Nigeria, were discovered in 1956. In 2011, oil revenues totalled $50.3 billion and generated 70% of government revenues. Despite this, Nigerian citizens remain poor, with almost 100 million people living on less than $1 a day. Statistics like this call into question how a country so rich in oil can have more than 50% of its population living in dire poverty. The answer lies with the people in power.

Nigeria has been cursed by the Sani Abacha dictatorship. Sani Abacha repeatedly used his greed to rob hard working Nigerians, of their share of the wealth. Ruling from 1993-1998 he is reported to have stolen $4.3 billion during his five years in office. It is difficult to know the exact source of this money, but it can be assumed much of it came from oil corruption. It is astonishing to think that a leader would steal billions of dollars from a country that they are sworn in to rule and protect. This extreme corruption and poor governance demonstrates that the problem starts at the top.

Oil has not only fuelled corruption in Nigeria, its extraction has had devastating effects on the environment. Oil spills have cursed communities and livelihoods. Shell and the Italian multinational oil giant ENI, claimed that more than 550 oil spills occurred in 2014, which equated to 5 million litres of oil spilt. A lack of reporting means that this figure is likely to be a significant underestimate. Amnesty International has accused Shell of "intentionally underestimating spills" as a way of minimising compensation pay-outs. Oil companies claim that they are rarely at fault, and that the spills are caused by thieves and militants. It is difficult to know the true extent of the damaged caused by spills, but what we do know is that oil extraction has destroyed farmland, contaminated water reserves and made certain areas inhabitable. The controversy over the impact of oil on the environment, has led to rebellion amongst Nigerians. Ken Saro-Wiwa was one of the leading figures in the fight against oil companies during the 1990s. He believed that oil brought poverty and disease not affluence.

Is oil really to blame? Not all resource-rich countries have experienced the problems that Nigeria has, suggesting that the problem is beyond oil. Botswana is one country that has successfully overcome the Resource Curse. Its abundance of diamonds has contributed to its strong economy, and its annual GDP per capita has averaged at 12.3% for 20 of the 35 years, since the discovery of its diamonds. The population has also benefited from its natural resources through social investments. Botswana has the second highest public expenditure on education in the world, as a proportion of GNP.

As Nigeria currently stands, a large proportion of its people remain poor, the environment has been destroyed and it is still one of the most corrupt countries in the world. If Nigeria is going to develop in the future, it must free itself from the corrupting influences of oil companies. Nigeria has been blessed with oil; it is a resource that can aid the country in alleviating poverty, and helping it to become a leading power on the world stage. Until the Nigerian government overcomes its domestic issues, and improves external relationships with oil companies, the future remains uncertain.

Feature Image: Schwarzes-flimmern
The views expressed in this article are those of the author and do not necessarily represent the views of Development in Action.
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The Resource Curse: Oil Corruption in Nigeria

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Resources can bring wealth and development to countries that use them effectively, but they can also be a curse to countries that fail to use them adequately. Adesuwa O. looks at how Nigeria's oil impacts the country.

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Giant oil companies, offshore accounts, ex-MI6 agents, champagne lunches, a former Nigerian president and allegations of hundreds of millions of dollars paid as bribes - the corruption case against Shell and Italy's Eni filed by prosecutors in Milan over a shady $1.3bn deal for a vast African oil field could have been lifted from the pages of an espionage thriller.

The latest developments thicken the plot further with a cache of documents seized in a raid on a Swiss financier's apartment that could be crucial to the case, leaving prosecutors in a race against time to get them to Milan as trial hearings get underway this week.

The Geneva raid uncovered a briefcase belonging to Emeka Obi, a middleman who received millions of dollars from the deal and is in the dock along with several former Shell employees and current and former Eni executives.

Inside the briefcase, Swiss prosecutors found a laptop, two Nigerian passports, five sim cards and a hard drive containing 41,000 documents that prosecutors believe could be crucial to the trial playing out on the other side of the Alps.

The stakes are high. Italian prosecutors allege that, of the total $1.3bn fee paid by Shell and Eni for the oil field, $1.1bn went not into the coffers of the Nigerian state but the accounts of former oil minister Dan Etete who then distributed hundreds of millions to well-connected individuals, including former president Goodluck Jonathan.

The amount distributed as bribes is more than the entire Nigerian healthcare budget for 2018, in a country where 87 million people live in extreme poverty - more than any other country on earth.

The Geneva apartment belonged to Olivier Couriol, a former Credit Suisse banker who has been named in two other international corruption cases.

He is under investigation for his role in a separate deal that involved Airbus allegedly paying bribes to sell defence equipment to the Malian government and has been named in proceedings that saw former Credit Suisse money manager Patrice Lescaudron jailed in February for fraud that cost clients £110m.

Couriol has said that Obi was merely a friend who left the bag at his flat by mistake while on holiday. Geneva prosecutor Claudio Mascotto said he believes it was stashed there to keep it hidden from authorities.

Couriol has not been charged in relation to the Shell/Eni deal. His lawyer did not respond to requests for comment.

In June, a court in Geneva said some of the documents found in Couriol's possession could be unsealed, paving the way for them to be sent to Milan but Obi has launched another appeal, meaning a Swiss federal court must now decide on the matter.

The court did not confirm when a decision on the appeal would be handed down. Meanwhile, the clock is ticking as Obi is set to face a "fast-track" trial in Milan that could conclude within weeks.

In the wider trial, defendants include Eni's current chief executive Claudio Descalzi and his predecessor Paolo Scaroni as well as former Shell board member Malcolm Brinded and Peter Robinson, a former Shell vice president for sub-Saharan Africa.

The significance of the briefcase is underlined by the actions of Geneva prosecutor Claudio Mascotto. After inspecting its contents, he swiftly opened his own investigation into money laundering and bribing a foreign public official. He then contacted his counterpart in Milan to tell him he thought it may be important. Authorities believe the documents may also contain details of other questionable deals for Nigeria's oil fields.

Shell and Eni could potentially be forced to pay huge damages in the case after judges ruled that Nigeria had the status of victim.

Barnaby Pace, an anti-corruption campaigner at Global Witness, said the trial should signal a turning point for the oil industry

"Some of the most senior executives of two of the biggest companies in the world could face prison sentences for a deal struck under their watch," he said.

Shell's day in court comes after years of denials in which it said it had not knowingly transacted with convicted money launderer and former Nigerian oil minister Dan Etete when it purchased the lucrative OPL 245 field.

In the final days of the regime of Sani Abacha in 1998, Mr Etete awarded the oil field - which held around a quarter of Nigeria's known reserves - to a company called Malabu Oil and Gas, which it later emerged he controlled.

When rights to the field were finally sold in 2011, all of the payments went through the Nigerian government but $1.1bn was then paid into Malabu's accounts, much of it via banks in London.

Shell says it paid money to the Nigerian state and denies wrongdoing, as does Eni.

After years of investigations by anti-corruption groups Global Witness, Re:Common and Finance Uncovered, Shell admitted last year that it did know Etete was behind the deal and that he had been convicted on unrelated money laundering charges in 2007.

Emails revealed that a former MI6 agent hired by Shell, who is also a defendant in the case, had been in contact with Mr Etete from at least 2009, two years before the deal was sealed. The agent wrote of champagne lunches with Etete in Paris at which the deal was discussed.

In one internal email to a senior Shell executive, he wrote: "Etete can smell the money. If, at nearly 70 years old, he does turn his nose up at $1.2bn he is completely certifiable and should then probably just hold out until nature takes his course with him."

Further correspondence from June 2010 states that Etete claimed to have a letter from Goodluck Jonathan, then Nigerian president, that was "clearly an attempt to deliver significant revenues to GLJ as part of any transaction".

Hundreds of millions of pounds of that money passed through JP Morgan in London, which is being sued by the Federal Government of Nigeria for "gross negligence".

In court filings, JP Morgan said the UK's top anti-money laundering authority gave the green light for the payments after the bank raised a series of suspicious activity reports.

Emeka Obi's lawyer did not respond to requests for comment for this article.

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Shell faces one of the biggest corporate corruption cases in history

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Giant oil companies, offshore accounts, ex-MI6 agents, champagne lunches, a former Nigerian president and allegations of hundreds of millions of dollars paid as bribes - the corruption case against Shell and Italy's Eni filed by prosecutors in Milan over a shady $1.3bn deal for a vast African oil field could have been lifted from the pages of an espionage thriller.

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Issue 3 Heavy dependence on a resource that fluctuates in price often

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Issue 3 Heavy dependence on a resource that fluctuates in price often

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Due to Nigeria's heavy dependence on oil, they are at the mercy of the international oil prices. Oil prices have steady dropped over the years due to varies reasons.

In the case of this article, Nigeria is doing well due to increase in oil prices. However, this is due to a political move made by Trump imposing oil trade sanctions on Iran, a big exporter of oil. With the current political climate, Nigeria will be able to enjoy slow climbing oil prices but for how long?

The political climate changes often and when the oil trade sanctions are lifted off Iran, prices of oil will go down and stabilize due to increased supply. When that happens, Nigeria will once again suffer and with its heavy dependence on oil prices, will only spell trouble for its economy.

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Global crude oil is heading towards to $90 per barrel, the highest since 2014 as a result of looming sanctions against Iran by the US.

Brent crude oil futures - the oil market which Nigeria and other international giant trade on - rose to $85.11 a barrel at the open of the market on Tuesday, October 2, 2018, according to data seen on oilprice.

While U.S. West Texas Intermediate (WTI) crude futures still below the $80 per barrel mark at $75.66 a barrel.

US reimposes sanctions on Iran

In August 2018, the United States reimposed sanctions on Iran, targetting Tehran's energy sector.

The sanction comes into effect on November 4, 2018, and it is designed to cut crude exports from the third-biggest producer in the Organization of the Petroleum Exporting Countries (OPEC).

Other international oil traders, including China's Sinopec, have also signalled to cut deal with Iranian oil

Nigeria in the mix

The Nigerian government has pegged crude oil price at $51 per barrel in the 2018 budget with a daily production of 2.3 million per barrel per day.

With the global oil benchmark above $85 a barrel, it means an extra of $30 in revenue will be accrued to the federation account.

Jubril Kareem ‏, an oil and gas expert in a tweet on Monday, said, "Oil at $85/barrel. Trump's policy on Iran is Making Nigeria Great Again."

Kareem, however, said Nigeria's policy on subsidising PMS will probably erode most of the greatness.

As 2019 presidential elections draw nearer, the government needs to work out ways for the economic prosperity for the 6th largest producer oil and biggest economy in Africa.

President Muhammadu Buhari who is seeking re-election for another 4-year term has hinged under-performance on dwindling oil price compared which pushed the country into economic recession in late 2016.
Also from Business Insider Sub-Sahara Africa:

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Oil price is heading towards $90 per barrel

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Brent crude oil futures - the oil market which Nigeria and other international giant trade on - rose to $85.11 a barrel at the open of the market on Tuesday, October 2, 2018, according to data seen on oilprice. While U.S. West Texas Intermediate (WTI) crude futures still below the $80 per barrel mark at $75.66 a barrel.

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Issue 3 Heavy dependence on a resource that fluctuates in price often

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Issue 3 Heavy dependence on a resource that fluctuates in price often

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Due to Nigeria's heavy dependence on oil, they are at the mercy of the international oil prices. Oil prices have steady dropped over the years due to varies reasons.

In the case of this article, Clean energy is on the rise due to worries of climate change. This causes oil, an often looked at cause of air pollution, to be the main reason. As the world starts shifting towards a less oil dependent society, less oil is purchased internationally. This heavily affects Nigeria more than any other country as it's economy is mostly dependent on oil prices and any change in prices will completely shift the economy. In this case, shifting downwards.

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Issue 3 Heavy dependence on a resource that fluctuates in price often

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Issue 3 Heavy dependence on a resource that fluctuates in price often

# data[].attributes.body
Due to Nigeria's heavy dependence on oil, they are at the mercy of the international oil prices. Oil prices have steady dropped over the years due to varies reasons.

In the case of this article, Nigeria is at the mercy of changing global oil prices. Economic recessions happen to all countries around the world, causing crude oil prices to drop.

During Jan 2017, prices of goods and services skyrocketed causing unemployment to increase. Due to fluctuations of oil prices, many Nigerians could not afford the skyrocketed prices of goods and services throwing many under the poverty line in Nigeria.

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By Babajide Komolafe
FIFTY eight years after independence, Nigeria's economy is still groaning under the weight of over-dependence on crude oil, infrastructural decay, severe import dependence, fostered by occasioned by a unitary federal structure and public sector dominance of critical socioeconomic amenities.

Over-dependence on crude oil: Prior to the oil boom of the 1970s, the Nigeria's economy flourished with export of agricultural products, tax revenue as main drivers of growth and government revenue. The oil boom triggered the flow of easy money, which displaced income from agric export and tax as major source of income for the country.

As a result, policy focus on agriculture began to decline while little effort was devoted to internally generated revenue. The economy completely depended on oil, which since then has accounted for 97 percent of foreign exchange earnings and over 70 percent of government revenue. By extension, the price of crude oil determines the volume of the nation's external reserves, the value of the naira.

Nigeria's economy grows when crude oil price is high, and contracts when crude oil price is falls. For example, the economic recession suffered by the country in 2016 was triggered by sharp fall in the price of crude oil. From a peak of $114.6 per barrel in June 2014, crude oil price fell to as low as $30.66 per barrel in January 2016. As a result, the nation's GDP contracted steadily from 6.3 percent in 2014 to -1.6 percent in 2016, before growing by 0.8 percent in 2017.

The external reserves also fell from $43.6 billion on December 31, 2013 to $29.13 billion at the end of 2015. In turn, the naira lost more than half of its value as the exchange rate rose from N167 per dollar in June 2014 to N521 per dollar in February 2017, before retreating to stabilise at N360 per dollar.

Prices of goods and services skyrocketed with inflation rising to 18.72 percent in January 2017, from 7.9 percent in November 2014, before declining for 18 months to 11.14 in August this year. During the period, unemployment rose sharply while numbers of Nigerians living below the poverty line increased.

"The Nigerian economy remains at the mercy of the price of crude oil", observed foremost economist, Ayo Teriba, Chief Executive Officer, Economic Associates. He said in an interview with Vanguard: "Nigeria's story largely revolved around the fluctuation in the oil price. Our economy is too dependent on the global oil price, and that is not good. We should take measures to insulate the economy from fluctuations in oil price, but we are yet to take the steps necessary to insulate our economy from the vagaries of the oil market".

Infrastructure decay

After 58 years of independence, despite the rapid growth in population, Nigeria is yet to boast of any world class infrastructure. Power is epileptic, with generation perpetually below 5,000MW. There is no modern fast railway system across the country. Road network is ridden with pothole and accident prone articulated vehicles which make travelling by road a near suicide experience. The major air and sea ports lack what is obtained in most developing countries.

These result in high cost of operations and low capacity utilisation for businesses, which in turn undermine competitiveness of Nigerian goods and services in the global market. At the same time individuals and households suffer high cost of living which makes savings impossible and increase vulnerability to poverty.

The result is that Nigeria today occupies a distant 145th position on the World Bank Ease of Doing Business ranking, while the country is ranked by the United States based Brookings Institution as the world capital of extreme poverty in the world. "At the end of May 2018, our trajectories suggest that Nigeria had about 87 million people in extreme poverty, compared with India's 73 million. What is more, extreme poverty in Nigeria is growing by six people every minute, while poverty in India continues to fall", the institution said.

A case in point is the breakdown of the rail and road infrastructure around the Apapa ports, which accounts for 81 percent of the nation's foreign trade. The accompanying traffic gridlock, has led to environmental deterioration, loss of man hours, with businesses deserting the once vibrant Apapa town.

Fixing the ports in Sapele, Port Harcourt, and Calabar

According to Managing Director/Chief Executive, Financial Derivatives Company, Mr. Bismarck Rewane, the Apapa meltdown is because the nation did not develop roads leading to other ports across the country.

He told Vanguard: "For example, Apapa gridlock. We now have dead weight on all the bridges all the way to Fadeyi. Those bridges will cave in and will kill people very soon. How can a country with 12 ports have all their products being imported through two ports, Tincan and Apapa? Why in one corner of the country? The reason is that the roads from Calabar, Port Harcourt, Koko to the inlands are all bad.

Is it better to start to have those bottlenecks or to fix the road from Koko port all the way to Benin City so that people can use Koko port? Is it not better to fix the ports in Sapele, Port Harcourt, and Calabar and fix the roads so that all of these goods can be evacuated without stress? Our imports today are less than our imports seven years ago when the price of oil was high. However, we didn't have congestion. So logically it means that the congestion is as a result of a failure in something".

Import Dependence: Besides exposing Nigeria's economy to fluctuations in price of crude oil, the oil boom also fuelled Nigeria's taste for imported goods and services. Hence the country today relies on importation for many basic goods, including food items, clothing, furniture, medical services and educational services. According to the Economic Complexity Index, Nigeria is the 52nd largest importer in the world and commodities like wheat, corn, rice, raw sugarcane, dairy products consume over $22 billion of foreign exchange annually.

Unitary Federal structure and public sector dominance

However, the root of the above challenges to Nigeria's economic development is the twin factor over centralised or unitary federal structure and public sector foray into and dominance of the economy. This started in the 1960s and was nurtured by successive military administrations, when government in a bid to assume the 'commanding heights of the economy' used public funds to establish banks, utilities and manufacturing companies, which became centres of inefficient services and waste as well as corruption, and in the process impeded economic growth.

For example, prior to the advent of mobile telephone, the number of telephone lines in Nigeria was below 500,000 courtesy of the inefficiency of the government owned NITEL. Today, Nigeria has over 100 million telephone lines facilitated by competition among the private sector owned telecommunications company, while the government owned NITEL has ceased to exit.

In spite of the privatisation exercise, critical aspects of the economy are still controlled by the government. These include railway, airport, and the power sector, where government still owns 49 percent of the distribution and generating companies, and totally owns and controls the transmission company.

Also is the revenue allocation formula where the federal government currently takes 52.68 percent of income into the federation account, while the 36 states and 774 local governments take 26.72 per cent and 20.60 per cent.

This concentration of huge national resources in the hands of few government officials makes the country vulnerable to corruption and abuse of office. This structure according to former Vice President Abubakar Atiku, "makes us economically unproductive, uncompetitive, indolent, and politically weak, disunited and unstable."

According to the Deputy Senate President, Ike Ekwuremadu, Nigeria was not designed for economic growth, adding that unless the country was restructured, its quest to get out of the depressed economy would remain a mirage.

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Nigeria @58: Still struggling with same economic problem - Vanguard News Nigeria

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By Babajide Komolafe FIFTY eight years after independence, Nigeria's economy is still groaning under the weight of over-dependence on crude oil, infrastructural decay, severe import dependence, fostered by occasioned by a unitary federal structure and public sector dominance of critical socioeconomic amenities.