Illegal bunkering

Loss of N3.7tr to illegal bunkering

31 May 2011

Country: Nigeria

ILLEGAL bunkering, the act or process of unlawfully supplying a ship with fuel, has become an endemic problem in Nigeria. The Nigerian National Petroleum Corporation (NNPC) usually issues bunkering licenses to oil servicing companies to bunker vessels in Nigerian waters after fulfilling specific operating conditions and paying requisite annual fees. The licensed operators receive compensation for their services in foreign currency and pay requisite taxes, levies, and dues to the Federal Government.

Illegal bunkering has assumed a vast dimension in Nigeria. Any activity selling refined or crude oil to ships without an NNPC license, authorization, or government payment of taxes, levies, and dues can be classified as illegal bunkering. According to a report prepared by the Maritime Industry Advocacy Initiative, Nigeria currently loses 600,000 barrels of crude oil daily to illegal bunkering. At the current price of N112.52 per barrel, N3.7 trillion or $24.64 billion is lost annually in revenue to illegal bunkering.

In 2009, the NNPC disclosed that 1.7 million barrels of crude oil were lost between May and June. Official statistics showed that in 2001 alone, illegal bunkering accounted for a revenue loss of about $30 million, and by 2003, the figure had soared to about $ 1 billion.

The colossal loss of revenue accruable to the government, which has been on the upward trend over the years, is accurate and worrisome. While illegal bunkering brings massive profit to Nigerian syndicates and their unscrupulous foreign trading partners, many Nigerians wallow in abject poverty and misery. Late President Umaru Musa Yar’Adua described illegal bunkering as “blood oil’ akin to the trade in “blood diamonds” that fueled the bloody civil war in Liberia and Sierra Leone. He called on the international community to help Nigeria to bring the illegal trade to an end.

The call on the international community for help is still valid today due to the complex “modus operandi” of the trade that turns illegally stolen crude oil from Nigeria with forged or no title documents into legal commodities in the international market. Stealing and illegal sale of Nigeria’s crude oil are perpetrated by influential Nigerians with the connivance of officials of global oil companies, government officials, security agencies, and ship captains while officially selling crude oil to legitimate buyers. That is why tracking down perpetrators of the dastardly crime against the government and people of Nigeria is challenging.

The syndicate consists of powerful and well-connected Nigerians, many of whom are capable of destabilizing the country if a serious attempt is made to stop the trade. That is why it appears the federal government tends to be very careful in tackling the delicate matter despite billions of US Dollars lost annually by Nigeria.

However, many of the Niger Delta natives that engage in illegal bunkering do not see it as stealing. They claim that they are taking crude oil resources, which, according to them, are legitimately theirs but are inequitably distributed by some characters in the country. At the same time, they suffer environmental degradation with no meaningful development in their areas.

It seems that illegal bunkering in Nigeria has become a problem that continues to defy lasting solutions because the international community seems to give a stamp of legitimacy to the sale and purchase of stolen crude oil once the commodity is traded on international waters, especially at the Togo Triangle. And because of the legitimate classification of the transaction, proceeds of illegal bunkering are freely transferred back to Nigeria by foreign banks without being classified as proceeds of an illicit business.