ABUJA, Nigeria—Alhaji Dokubo-Asari once stalked the mangrove-choked creeks of the Niger Delta, a leaf stuck to his forehead for good luck, as a crew that he ran bled oil from pipelines and sold it to smugglers. "Asari fuel," they called it.
Last year, Nigeria's state oil company began paying him $9 million a year, by Mr. Dokubo-Asari's account, to pay his 4,000 former foot soldiers to protect the pipelines they once attacked.
He shrugs off the unusual turn of events. "I don't see anything wrong with it," said the thickly built former gunman, lounging in a house gown at his home here in Nigeria's capital.
Nigeria is shelling out hundreds of millions of dollars a year to maintain an uneasy calm in the oil-rich delta, where attacks ranging from theft to bombings to kidnappings pummeled oil production three years ago, to as low as 500,000 barrels on some days. Now production is back up to 2.6 million barrels daily of low-sulfur crude of the sort favored by U.S. refineries, which get nearly 9% of their supply here.
The gilded pacification campaign is offered up by the government as a success story. But others say the program, including a 2009 amnesty, has sent young men in Nigeria's turbulent delta a different message: that militancy promises more rewards than risks.
While richly remunerated former kingpins profess to have left the oil-theft business, many former militant foot soldiers who are paid less or not at all by the amnesty, and have few job prospects, continue to pursue prosperity by tapping pipelines.
Now, oil theft appears to be on the rise again. Royal Dutch Shell RDSB.LN -1.28%PLC's Nigerian unit estimates that more than 150,000 barrels of oil are stolen from Nigerian pipelines daily. That is one of the lower estimates. In May, theft from one pipeline got so bad that Shell simply shut it down.
"Everybody seems to believe…that the Niger Delta problem is over," said a former government mediator, Dimieari Von Kemedi. "It's just on pause. The challenge is to move from pause to stop."
Meanwhile, Nigeria is facing a separate militancy, in the form of the radical Islamic group Boko Haram, whose guerrilla attacks on churches and police stations in a different part of the country have left hundreds dead. Some legislators have proposed extending amnesty to Boko Haram, as well.
It is an expensive proposition. This year alone, Nigeria will spend about $450 million on its amnesty program, according to the government's 2012 budget, more than what it spends to deliver basic education to children.
Under the arrangement, the government grants living allowances to tens of thousands of former members of the bandit crews and sends them to vocational classes, in sites ranging from Houston to London to Seoul. These costs are on top of millions of dollars paid at the outset to the crews' leaders for handing in their weapons.
For a few, the program has meant spectacular rewards. To improve ties with former delta warlords, the government invited the top "generals," as they call themselves, for extended stays on the uppermost, executive floors of Abuja's Hilton hotel.
The Nigerian state oil company, according to one of its senior officials, is giving $3.8 million a year apiece to two former rebel leaders, Gen. Ebikabowei "Boyloaf" Victor Ben and Gen. Ateke Tom, to have their men guard delta pipelines they used to attack. Another general, Government "Tompolo" Ekpumopolo, maintains a $22.9 million-a-year contract to do the same, the official said.
A liaison to Mr. Tom declined to comment on the contracts. Mr. Ekpumopolo didn't return phone calls and messages. Mr. Ben, when reached for comment, asked, "How much money is involved in this interview?" and then hung up.
Later, he sent an enigmatic text: "Very wel dn im nt dispose bt cnsider 100%al u wnt ,we need investors in niger delta absolute peace is guarante."
For President Goodluck Jonathan, a Niger Delta native, such lavish expenditures have become a political liability. Despite a growing economy, his country of 167 million struggles to finance even the basics, starting with power plants, roads and sewers. A blossoming middle class in Nigeria's cities has put further strain on public infrastructure.
Yet because four-fifths of government revenue flows from the oil fields, aides to the president defend the high cost of peace by saying the treasury would face an even worse drain if a full-blown militancy in the delta flared up again. "If it's too huge, what are the alternatives?" said Oronto Douglas, a senior adviser to Mr. Jonathan.
"For you to address the whole issue of poverty and development, you need some kind of peace," added Mutiu Sunmonu, managing director for Shell's Nigerian unit. "That is what I think the amnesty program has offered."
Enticed by the program, the militants emerged a couple of years ago from the oil-soaked swamps of the delta. Some of the leaders took up residence in the executive floors of Abuja's Hilton and through much of 2010 and early 2011 spent weeks or months enjoying the Executive Lounge's complimentary supply of Hennessey V.S.O.P. cognac, priced at $51 a shot on the room-service menu. Over a buffet of fiery Nigerian dishes—gumbos, Jollof rice pilafs, goat stews—they rubbed shoulders with the country's leading politicians and influence peddlers, who often live in the floor's $700-a-night art-deco rooms.
"These are young men who came out of the creeks and were given the opportunity to hang out with the crème de la crème, wearing gold watches and drinking from gold-rimmed teacups," said Tony Uranta, a member of the government's Niger Delta Technical Committee advisory group and a frequent Hilton executive-floor guest. "It's a natural thing."
Most have since moved out of the hotel. "It's too high-profile," said an aide to one ex-warlord, Mr. Tom.
Meanwhile, thousands of former militant foot soldiers have been given job training, a feature of the program that officials call its most indisputable success. The question is how many will be able to make use of this training. In Nigeria, the government estimates, there are 67 million other people waiting to be employed.
Kempare Ebipade says he spent six years guarding creekside armories as an oil militant, in the course of which he took two bullets to the thigh. In 2009 he accepted amnesty and was sent to the U.S. for two weeks at the Martin Luther King Jr. Center for Nonviolent Social Change in Atlanta. He displayed a booklet of Dr. King's speeches from which he said he sometimes reads to villagers.
Mr. Ebipade is a skilled welder now, trained in the craft by the amnesty program. But the father of four struggles to imagine how he will find clients for a welding workshop he has set up, or how he will continue to afford his apartment's rent of $1,100 a year.
The government has vigorously pushed oil companies to hire locals. Mr. Ebipade says that out of the former militant army of 10,000 he belonged to, he has heard of only five that landed jobs with oil companies.
Shell's Mr. Sunmonu warned against the idea "that every trained ex-militant is going to get a paid employment, because if you just look at the number, it's probably huge. So we therefore must broaden our solutions to focus more on self-employment: small enterprises, medium enterprises."
The Niger Delta has seen promising economic progress. Construction on a regional highway is under way.
Nigeria's overall economy is projected to grow at a brisk 7.1% this year. But much of the growth is in cities far from the delta, and a population boom reduces the degree to which the growth helps with the unemployment problem.
In the delta, years-old electric towers punctuate village skylines, but many don't carry electricity, having never been connected to the overtaxed power grid. Children travel to scattered schools aboard canoes, navigating creeks coated by the rainbow stains of oil slicks. A United Nations office has estimated it would take 30 years to clean the waters, which once sustained fisheries.
Amid this landscape, oil-related crime lures locals like Atu Thompson, father of 18 and self-described oil thief, who says he and others see few other ways to provide. "You can take me to amnesty, give me a good contract—but others are still there," Mr. Thompson says.
Mr. Dokubo-Asari, 48 years old, used to be prominent among them. While not all of his account of life in the mangrove swamps could be verified, he long was one of Nigeria's best-known oil marauders.
About 25 years ago, Mr. Dokubo-Asari left overcrowded university classrooms, he says, to study guerrilla warfare in the Libya led by Col. Moammar Gadhafi. He says he was given $100,000 to stir up trouble back in Nigeria, an oil competitor to Libya.
Fomenting conflict proved easy in the restive Niger Delta he returned to in the early 1990s. From a local governor, Mr. Dokubo-Asari says, he procured weapons and money to build a militia that ultimately was several thousand strong. For years, as he tells it, they broke open pipelines, filling canisters with crude oil and refining some of it through timeworn techniques used by locals to boil palm-tree sap into wine.
The government struggled to lure him out of the mangroves. Mr. Dokubo-Asari responded to one amnesty offer that he considered meager by announcing a death threat against petroleum workers. Shell evacuated hundreds of expatriates and oil derricks briefly slowed to a stop. The next day, oil prices hit $50 a barrel for the first time.
Nigeria's government offered Mr. Dokubo-Asari a truce and $1,000 apiece, he says, for his AK-47 rifles, numbering 3,182. He says he took the deal and used the profits to purchase more weapons and return to the swamp.
There, he recounts he was finally arrested and coerced into another round of negotiations. Fearing assassination, he fled to Cotonou, Benin, where he says he founded a school for Niger Delta children. He showed a video of him teaching kids kung fu at the school.
New warlords quickly took Mr. Dokubo-Asari's place. Marauding under noms de guerre like Gen. Shoot-at-Sight, Gen. Africa and Gen. Young Shall Grow, they formed a loose confederation of gunmen calling itself the Movement for the Emancipation of the Niger Delta, or MEND, and crippled enough oil infrastructure to bring Nigeria's production on some days to a near-halt.
That was when Nigeria announced the 2009 amnesty. In televised ceremonies, guerrillas dropped off rifles, machine guns, tear-gas canisters, dynamite bundles, rocket launchers, antiaircraft guns, gunboats and grenades to be sold to the government, which also offered the nonviolence training courses and nine-month vocational classes.
Theft fell sharply. Yet now, just as Nigeria's state oil company has begun institutionalizing pipeline-watch jobs for some ex-militants, theft has blossomed again. "It's quite an escalation. If nothing is done, it will continue to increase because more and more people will just come to feel that this is a gold field," said Shell's Mr. Sunmonu. "We're not going to give up on this and run away from it. We believe it can be stopped."
Maclean Imomotimi left an overpacked university four years ago, the muscular 30-year-old says, to rob barges in the Niger Delta swamps. Now, befitting his new career, he is known as Gen. Imomotimi.
He says he accepted the government's amnesty offer in 2011 on the expectation he would be feted, his hotel bills and bar tabs paid; instead, he was disappointed to receive a living allowance of just 65,000 naira ($413) a month.
So Gen. Imomotimi has returned to the waterways, this time, he says, not to rob barges but to steal oil.
"I take amnesty's money—what [little] they give me—I take it and I buy other guns," he says. "There's much, much more money in the creeks."
Write to Drew Hinshaw at email@example.com
A version of this article appeared August 22, 2012, on page A1 in the U.S. edition of The Wall Street Journal, with the headline: Nigeria's Former Oil Bandits Now Collect Government Cash.