Home The artisanal oil industry: mapping integration and incentives in local economies

The artisanal oil industry: mapping integration and incentives in local economies

June 2019 and August 2020

Summary

SDN is working with SOAS University of London (UK), as part of its DFID-funded Anti-Corruption Evidence programme, to help map links between artisanal oil refining and other livelihoods, and highlight the ‘benefits’ or incentives structures of those involved in this informal economy. A wide informal economy has grown around the activities of artisanal oil refining in the Niger Delta – with both direct and indirect income opportunities. It is therefore a crutch to local economies that lack diverse employment options.

The aim is to understand the incentives that make people engage in informal, and in this case illicit and corrupt, livelihoods in the Niger Delta region, instead of engaging in the formal, legitimate economy. Without understanding and supporting everyone with a stake in artisanal oil refining, creating the necessary buy-in for an alternative to this risky and environmentally damaging activity will fail, as people will not commit to change without an alternative incentive structure.

The project approaches the issue from the pragmatic perspective that artisanal oil industry workers, and the surrounding economy, is made up of productive individuals. It would have a negative impact simply destroy it, and attempts to do so have thus far been unsuccessful. Instead, policy makers should search for solutions that change the rewards associated with the choices to incentivise this productivity being channelled into the legitimate economy, and ensure the long-term welfare of those involved.

Aims

To help map links between the informal artisanal oil industry and other livelihoods, and highlight the ‘benefits’ structure (networked corruption) of those involved in this informal economy, so as to identify options that can eventually create buy-in amongst all involved in alternatives to this risky and environmentally damaging industry.

Key activities

  • Mapping of the artisanal oil refining economy in two locations. This will take place with respondents with livelihoods connected to the artisanal oil industry from directly refining through to food catering and sex workers at refining sites and medics attending to workplace injuries.
  • Development of potential alternative approaches to addressing the artisanal oil refining industry and the production of a report outlining the feasibility of getting buy-in from all stakeholders in reforming, or transitioning away from, the artisanal oil industry.

Context

Between 2012-2017, we estimate the number of refineries in Rivers and Bayelsa states grew fivefold, and that annual earnings across the supply chain increased by 24x to more than GBP£540 million (NGN240 billion). The rate at which refineries are established far outstrips the rate at which they can be identified and destroyed.

Refining practices pollute, and the low quality fuel produced is likely to release more emissions when consumed (though this may not be worse than official fuels being imported to Nigeria currently). Artisanal refining camp workers are exposed to environmental, health, and security hazards. Security agencies often burn what they find at site, or pour it out onto land and waterways. The hazardous soot plaguing Port Harcourt over recent years is expected to be a direct result of these factors, and others—including the poor environmental standards of the State Port Harcourt Refinery.

The current militarised policy response to combating the artisanal oil industry is not capable of addressing factors driving it, and may be catalysing its evolution. Instead, it is necessary to understand the underlying reasons that people choose livelihoods that are directly or indirectly involved in this informal industry, in order to create inclusive livelihood alternatives and reduce resistance from vested interests. Livelihoods that indirectly benefit from the burgeoning artisanal oil industry include caterers, market traders and transporters (from availability and cheapness of artisanally refined kerosene for light and diesel for trucks), and medical personnel from the community health centres.

Funders and Partners

Published: 20.05.2020