Political risk has always been a part of oil business, and today’s situation in Nigeria is no exception. Over the past several months the insurgency in the Niger River delta has devastated the Nigerian oil industry, with the country’s production being halved from 2.2 to 1.4 million barrels per day. The severity of attacks not only affected Nigeria’s oil production, but also the global markets. Accordingly, Angola has surpassed Nigeria as Africa’s largest oil producer while global oil prices have hiked to $49 per barrel.

The on-going armed insurgency is a direct result of the government’s decision to cut subsidies for former rebel soldiers who were involved in a similar conflict that ended in 2009. But the root of the current rebellion against the government of President Muhammadu Buhari and the Nigerian federal state is a combination of long-standing social and economic grievances that have beset the region ever since oil production began in the late 1950s.

The Nigerian oil industry is plagued with endemic corruption. In the latest scandal involving the Nigerian National Petroleum Corporation (NNPC), the country’s official audit revealed that around $19 billion of oil revenues went missing through corruption and oil theft in 2014 alone. According to some estimates, around $400 billion has vanished in a similar fashion since the country gained independence in 1960, making oil industry crime the second largest industry in the country, right after the oil industry itself. It is estimated that around 200,000 barrels a day are stolen by a sophisticated network of former warlords, local businessmen, and corrupt officials.