Economic, Political, and Social Implications of Piracy in the Gulf of Guinea: Nigeria as a Case Study

Abstract

Piracy, although an age-old phenomenon that has posed challenges for Mariners has until recently been a phenomenon in decline. Although in the twenty-first century, piracy became a major issue in the South China Sea and in the Malacca Straits. But by 2007, the number of pirate attacks in Africa surpassed those in Asian waters, thus the shift of attention to African waters. Maritime pirate attacks in Africa, while concentrated in Nigeria and Somalia, are by no means limited to these countries. Because of the 33 littoral countries in Africa, 24 experienced pirate attacks during 2001–2008. Even though shipping in the GOG is threatened, attacks are not as frequent as those off Somalia. Nevertheless, it still remains and is still seen as a hub of threats to shipping.

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1 Introduction

Piracy, although an age-old phenomenon that has posed challenges for Mariners has until recently been a phenomenon in decline. Although in the twenty-first century, piracy became a major issue in the South China Sea and in the Malacca Straits. But by 2007, the number of pirate attacks in Africa surpassed those in Asian waters, thus the shift of attention to African waters. Maritime pirate attacks in Africa, while concentrated in Nigeria and Somalia, are by no means limited to these countries. Because of the 33 littoral countries in Africa, 24 experienced pirate attacks during 2001–2008.¹ Even though shipping in the GOG is threatened, attacks are not as frequent as those off Somalia. Nevertheless, it still remains and is still seen as a hub of threats to shipping.²

2 Piracy in Gulf of Guinea and Nigeria

The Gulf of Guinea is defined as the 11 coastal countries along the West and Central African sub regions, which is between Ghana and Angola with a coastline of some 5,500 km,³ and it is increasingly been viewed as part of a solution to the ever increasing needs of the world as regards energy, population, food and territory.⁴ These potentials have seen increased activities in the region which incidentally draws in other competitions (on national boundaries, resources etc.) and crime increasingly entering the fold.⁵ But unlike the Gulf of Aden and the Somali waters, virtually all pirates attack in the GOG occur very close to shore and within the port areas while ships are anchored or berthed. Nevertheless, recent developments have indicated increasing capacity by pirates to operate farther offshore.⁶

While piracy is an issue for the entire GOG and threatens their dependency on the resources and commerce originating from the Gulf,⁷ it is more an issue for Nigeria which experienced its first case with the attack on the Danish cargo ship MV Lindinga Ivory in 1979.⁸ As is always expressed in different forums, it’s virtually impossible to accurately gauge the amount of pirate activity due to insufficient reporting from the region, and the Safety4Sea magazine⁹ did quote a security analyst telling Reuters that, “In Nigeria it is estimated that approximately 60 percent of pirate attacks go unreported.” The International Maritime Bureau (IMB) went on to estimate that the majority of incidents of piracy (54 percent) in West Africa between 2001 and 2008 occurred in Nigeria.¹⁰

While the pirate activities in Nigeria has been receiving considerable attention, there has been other positions (though not mainstream) who have consistently argued that Piracy attacks mostly in Nigeria, are usually carried out to fund insurgency not personal gains, thus does not fall within the realm of criminal piracy. Additionally, they argued that unlike Somalia pirates who operate a ‘blue ocean’ form of piracy, legally recognized as “acts of piracy”. The attacks in the Gulf of Guinea and off the coast of Nigeria occur in national or coastal waters, and therefore do not legally qualify as “acts of piracy”.¹¹

Regardless of what ever opinion expressed on the issue of piracy in the region and Nigeria specifically, there is absolute agreement on the implications of piracy in the region which can be direct (including murder of crew, ransom payment, sinking of ship, delay penalty, requirement for security etc.) and indirect (including higher insurance premium etc.).¹²

3 Economic Implication

Indeed piracy cum maritime insecurity has been a major issue for the countries of the region, especially Nigeria where local people who hide under the cover of violence in the Niger Delta region have perfected the act. Infact the successes made in this regards has brought in sophistication and a growing synergy with crude oil thieves whose stolen product placed in small barges are taken straight into the sea where it is loaded into larger barges (mother ships) in return for money and weapons used to fuel violence.¹³ The maritime landscape in the Gulf of Guinea is more closely integrated with the well-being of littoral states and encompasses much more than threats to shipping.¹⁴

To understand the economic implication of this piracy sponsored insecurity on Nigeria, we shall attempt to use some calculations. Garuba¹⁵ using information from Human Rights Watch, 2003 report stated that the 150,000 barrels/day (the report assumed stolen), when sold at around $10–15 per barrel (given the level of discount owed to its illegitimate origin) sums $2–3 million daily and $750 million to $1 billion annually. Again using a Royal Dutch Shell study it was stated that “10% of Nigeria’s daily oil output, valued at $1.5 million, is stolen every day. Over the last fifty years, the value of the oil stolen or wasted has amounted to between $300 and $400 billion.”¹⁶ Most recently Freedom Onuoha, a research fellow at the African Centre for Strategic Research and Studies at the National Defence College in Abuja, writing in African Security Review, Vol. 17, No. 3, in 2008, cited a “recent study commissioned by Royal Dutch/Shell” as saying that between 100- and 250-million barrels of oil was stolen each year by bunkerers or vandals, putting the cost, at an average US$60 a barrel, at around US$15-billion a year. This was, he said, in addition to other costs to the Nigerian State due to oil pipeline sabotage, and other related activities.¹⁷ Incidentally, over the last 50 years, the value of the oil stolen or wasted has amounted to between US$300 and 400 billion.¹⁸

Additionally, companies that exploit the resources of the region are constantly threatened by pirate attacks on offshore oil infrastructure and the vessels that service this industry.¹⁹ Thereby reducing considerably, the level of interest and investment the region can generate and also increasing cost of business since the companies have to resort to hiring private securities. Events such as the attack by the Movement for the Emancipation of the Niger Delta (MEND) on the Shell Bonga oil platform (June 2008) and by the Bakassi Freedom Fighters on the tug Bourbon Sagitta (October 2008) depicts the level of threat posed to offshore oil operations and this will certainly have a direct impact on the land when operations are shut down.²⁰

Even though, an outright boycott of some African ports by shipping lines cannot be ruled out a scenario is already playing out in the Niger Delta where, as a result of insecurity, the costs of development projects are almost double of what obtains for projects of similar quality internationally²¹ or even locally. Additionally, even in places like Nigeria, where Nigerian ports are the destination for the oil trade and avoiding the area is not an option²² the situation still creates grounds for higher insurance rates for Nigeria’s shipping agencies, which exports crude oil across the Atlantic to the United States.²³

The impact of piracy is also an issue for other countries of the region. For instance in Ghana it’s not only the lucrative offshore oil industry that is threatened, its fishing industry is also at risk and already hiring private security agents to protect it.²⁴

Likewise, a spike in pirate attacks off Benin has also forced dozens of ships to steer clear of the West African state’s waters, a trend that is likely to hit the country’s port all important tax revenues and hurt economic growth. The country which is an entry port for neighboring land-locked countries such as Niger, Chad and Burkina Faso, collects about 100 billion CFA francs ($218 million), which is about 40 % of government receipts from port activities each year.²⁵ In the meantime, the London’s maritime insurance market has added Benin to its list of high-risk zones for shipping, on a par with the Gulf of Aden, additionally harming an already weak economy that depends heavily on shipping.

The Maritime instability in the region has continuously been raised as a reason many investors and entrepreneurs have shown relatively little interest in the sub-region, including the potentially lucrative fishing and tourism industries.²⁶ This is at a time when the Minister of Agriculture and Rural Development of Nigeria, Dr. Akinwumi Adesina disclosed that Nigeria spent over N100 billion on the importation of frozen fish in 2010. Lamenting the shortfall of fish supply in the country, Adesina said “the estimated annual fish demand in the country was about 2.66 million as against the annual domestic production of about 0.78 million, giving a demand–supply gap of about 1.8 million metric tons”.²⁷

The impact on private business and commercial interest is also alarming. As it is today, ship owners in an attempting to protect their property and crew from piracy attacks with security equipment and/or guards already spend between $363 million and $2.5 billion/year.²⁸

While insurance cost in all insurance category showed big downward movement in terms of costs overall by an average of 4.7 % across all vessel types in 2010.²⁹ The case was not the same for the GOG bound ships or those who do business in the region. They still struggle with increased insurance cost in addition to increased operational cost.

At the individual level too, piracy threatens the vital fishing industry and regional trade. And along with bunkering, reduces oil revenue and therefore potential financial support for the Delta region and its people. This is as a recent study suggests that poaching by vessels from Asia, Europe and other parts of Africa costs the sub-region some $370 million annually.³⁰

Again, until recently fishing constituted Nigeria’s second-most significant non-hydrocarbon export industry after cocoa. Yet the sector has been devastated by piracy and other violence. The country’s Maritime Security Task Force on Acts of Illegality in Nigerian Waters (IAMSTAF) reported in December 2008 that Nigerian fishing boats suffered no fewer than 293 attacks between 2003 and 2008. Infact at a point it was reported³¹ that some 170 fishing trawlers were idled because their owners were afraid to put out to sea, threatening some 50,000 jobs.

At a micro level, this constrained economic activity limits employment opportunities, as well as the income earning potential of the coastal populations, and these unemployment and low wages exacerbate human security concerns in the sub-region. That is why perhaps it can be said that the most significant losses from piracy is from lost investment.

4 Political Implications

In 2005 an elaborate coup attempts was launched against the governments of Equatorial Guinea and São Tomé and Principe in 2003, each involving far flung array of international adventurers in league with internal partners. In 2005, reports surfaced of further coup plotting against Equatorial Guinea, allegedly using mercenaries recruited from the Niger Delta of Nigeria.³² Situations like this became possible with increase capacity of pirates to attack further ashore which now has a trans border implication with increase not only in the level of insecurity in the region, but also the level of suspicion within States in the region. Incidentally making it more difficult to create a synergy or cooperate on a solution. Especially when viewed within the context that the focal point of growth, wealth and power is situated offshore, which has led to increased maritime boundaries dispute and interstate tensions with tendency to escalate.³³ Additionally, volatile conditions of this nature also create a fertile environment for insurgent-styled activities at sea.³⁴

Just as this situation is unfolding, the President of Benin Republic had to visit his Nigerian counterpart to ensure cooperation in the effort of his country to fight the challenges posed by cross-border banditry, terrorism and piracy especially.³⁵ While in this case the approach is positive, the same situation could breed confrontation.

In Nigeria especially, the situation is more complex and the threat–vulnerability more extended and politicized. The costs of maritime piracy to Nigerian society and the economy have been significant. Take a recent report commissioned by Royal Dutch Shell where it was estimates that 10 % of Nigeria’s daily oil output is stolen. That would be enough to arm a sizeable fighting force for some time. Indeed, today while the rhetoric of the political struggle remains, the true end of these attacks is the enrichment of the pirates who are increasingly becoming more assertive exporting the problems to other parts in the Gulf of Guinea region.

The returns made from this illegal activities including piracy has provided funds to arm fighters who are incidentally used to hijack political power.

5 Social Implications

With the political motives receiving considerable attention, somewhat less attention has been paid to the criminal motives and organizations behind some of the assaults on international shipping.³⁶ The complexity of the business of illegal oil bunkering is also illustrated by its sheer number of players. While Niger Delta youth may handle the local tapping and loading, international syndicates from Eastern Europe, Russia, Australia, Lebanon, the Netherlands and France (including new entrants like Filipinos and Ghanaians) all play roles in financing, transporting, and laundering the money associated from the business.³⁷ While much of this cost is borne by the oil companies and the federal government, the loss in revenue also means less for the social and economic development so necessary for the Delta region.³⁸ This meanwhile is at a time when oil exploitation-related environmental despoliation has destroyed the traditional economies of farming and fishing, with the resultant poverty threatening not only the community security but the coastal waters around the community. This gives rise to further social and political unrest due to limited available opportunities leading to more piracy.³⁹

Likewise, the scourge of illegal and unregulated fishing by foreign fishing fleets constitutes a serious threat to the realization of the benefits derivable from these resources (especially since pirates have made it risky to go to sea). This is in addition to the depletion of fish stocks which has economic and social implications including loss of foreign exchange earnings and the loss of livelihoods of several fishing communities.⁴⁰

As regards piracy, very little has been done in the way of highlighting the humanitarian causes and costs of maritime piracy in this part of the world. Just as humanitarian crises, under certain conditions, can be a breeding ground for maritime piracy and all other kinds of criminal activity, and maritime piracy itself can exacerbate already dire humanitarian conditions. Massive unemployment and the lack of meaningful economic opportunities, especially in the Delta region, have drawn young people into all sorts of maritime criminal activities,⁴¹ including kidnapping for ransom which has become a lucrative business that provides riches and weapons.⁴²

6 Implication to the World Economy and Political Stability

Piracy imposes costs on the global economy, according to international shipping organizations, insurance rates for ships have raised to $20,000 per voyage in 2009 because of piracy, from an estimated $500 in 2008—a 40-fold increase. Also, avoidance (the alternate route around the Cape of Good Hope) in the case of Somalia adds roughly 3,500 miles to the journey.⁴³ With the diversion situation playing out, the predicament of shippers will be increased if the pirates in the GOG master the acts like their counterparts in the Gulf of Eden. Indeed, significant numbers of attacks on ships in Nigeria (some of which occurred over 31 miles from shore) represent not only a geographical expansion of threats to maritime energy assets, but also perhaps an increasing oceangoing ability on the part of pirates in the area,⁴⁴ with reported attack 65 km offshore.⁴⁵

Considering the fact that they are also learning from other successful models of piracy operation, they soon will achieve the same kind of success as the Somali pirates. Meanwhile, piracy is also a growing concern for Southern Africa. Such trends have global energy supply implications given that 6 million tons of oil are transported around South Africa’s western coastline every month as well as regional energy production implications.⁴⁶

These ocean going capabilities again, have increased their chances of further attack and capacity for act of terrorism which can be against major installation, such as an LNG liquefaction plant, supertanker, or oil platform. This could create a spike in oil prices, raise global insurance rates, and damage production for some period. Of course the Gulf of Guinea does not yet have a central node analogous to Saudi Arabia’s Al Qaiqa processing center where a single concentrated attack could disrupt millions of barrels of oil per day. Nevertheless, as Nigeria’s LNG sector matures in the coming years, large multi-billion dollar facilities will create conspicuous new potential targets.

Additionally, the Gulf of Guinea is strategically located with direct access to U.S. East Coast refineries, thus avoiding more costly and dangerous routes. The region’s light, sweet grade crude also articulates closely with U.S. environmental considerations. Interestingly, the Gulf of Guinea producers are also of key importance to Europe and now slowly to Asia, which seeks to balance its own dependence on Middle East crude oil.

As important sources of energy supplies, the Gulf of Guinea stands to benefit or loose. Expanding economics disparities increase the potential for conflict and instability. Thus, as the gap grows between “haves” and “have not” both within and between nations, have-nots are increasingly channeling their frustration into violence, corruption and crime. In the sub-region, kidnappings, piracy and attacks on personnel and facilities have suggested an increased recourse to violence to raise awareness of and to attempt to address economic disparities. At the same time, global dynamics and international interconnectedness among energy markets, social trends and political philosophies have given such actions great impact. The price fluctuations rippling through global energy market after each significant pipeline attack, kidnapping or act of piracy in the Gulf of Guinea have highlighted these tightening connections between global energy security and local conflicts.⁴⁷

7 Recommendations

It is common knowledge that most port and surveillance infrastructure in the region are in need of repair, upgrading or replacement. As such the countries in the region should carry out a comprehensive evaluation of available resources and there efficacy. This will not only support and encourage cooperation, it will also reduce or eliminate duplication of effort at a regional level.

Additionally, a strategic approach for the Gulf of Guinea requires consistency between domestic and partner-initiated programs, as well as significant regional collaboration given the trans-national character of most threats and vulnerabilities. Thus, an effective strategy must incorporate national, regional and global realities, while the precise configuration would largely be country-specific.⁴⁸ Like the president of Nigeria said to his Beninese counterpart “Criminals don’t respect political boundaries in their nefarious activities, so we will cooperate with one another to find lasting solutions to the problems they (criminals) pose”.⁴⁹

Again, the Common African Defense and Security Policy pay little attention to the maritime dimensions in addressing threats to peace, security and development. The African Standby Force, as an instrument for the implementation of the policy, also does not address maritime forces or the contribution they could make to African security and development. Africa needs to become more maritime conscious and consider maritime matters at a continental and sub-regional level and not only as national issues.⁵⁰

While interstate arrangements still dominate, cooperation with non-state actors are prevalent as well. Public–private partnerships to improve maritime awareness and security show promise, despite being somewhat controversial.⁵¹ It is working for Nigeria and has been expanded to include Benin Republic’s waters after the country seek for assistance.

To address these threats, situational awareness of the maritime domain is of utmost importance as it would provide the knowledge base required to advise regional leaders in taking the right decisions that would enhance maritime security.⁵² And that is why regional organization which usually complicate rather than facilitates multinational cooperation to cover the Gulf of Guinea should cooperate. As it is the member states in the area belong to three different sub regional organizations which are the Economic Community of West African States (ECOWAS), the Economic Community of Central African States (ECCAS/CEEAC), and the Southern African Development Community (SADC). While they each have their own land-based geographic point of focus, they also have wildly differing developed capacities.⁵³

Another issue is the need to enact legislation if they are absent and enforce the necessary provisions available in the books. This would include in addition to the required sustained political will, the strengthening of relevant institutions and enforcement mechanisms, as well devoting adequate financial and human resources to maritime security.

In the context of Nigeria, abandoned watercrafts and wrecks in the territorial waters are being used by criminals as safe havens and hideouts after executing their criminal activities in the waterways. These wrecks, which stowaways have discovered as potential launching pads are a security challenge confronting the maritime sector. As such they should be cleared out to reduce potential hideouts for criminals especially around Lagos Ports. In addition to removing wrecks there is need to examine and proffer solutions to the feeders of piracy onshore, like increasing port efficiency to reduce the number of ships in the anchorage thus the number of potential targets as well as increasing the policing of the water.

Another emerging, partnership is the cooperation between governments and private enterprise to physically secure the offshore domain. The Military Professional Resources Incorporated (MPRI) involvement in Nigeria and the leaders of Equatorial Guinea turning to MPRI and Israeli security agencies to assist with training are but two examples.⁵⁴

The United States in its dealings with Nigeria and the region in general, should give priority to illicit oil sales, money laundering and arms trafficking centered in the Niger Delta. The U.S. should pursue strengthening a region-wide body that could effectively carry out a cross-regional monitoring and surveillance of maritime traffic.

8 Efforts by the Nigerian Maritime Administration and Safety Agency (NIMASA)

The Maritime Administration realizing its limitations addressing piracy and armed robbery at sea signed a Memorandum of Understanding with the Nigerian Navy. At the moment a detachment of Naval officers are with the Administration under the Maritime Guard Command (MGC) and they are expected to carry out regular security patrols of Nigeria waters aimed at deterring sea criminals and intervening during armed robbery attacks against vessels. This action has incidentally, reduced pirate attacks in Lagos waters with the Administration recording only four reported attacks between March and June, 2011.

With the recent acquisition of the ATR-42 Maritime Patrol Aircraft by the Nigerian Air Force, the Administration has concluded arrangements with the Nigerian Air Force (NAF) to establish a Joint Maritime Air Unit. Just as it is in the concluding stages of establishing a partnership with the Nigerian Marine Police to develop a contingency plans that will adequately deal with pirate attacks. This partnership will also facilitate the acquisition of additional patrol boats with a view to enhancing and ensuring the safety of navigation.

In the same vein, the Administration is proposing to facilitate collaboration by all stakeholders in equipping the various security agencies responsible for safeguarding the Nigerian maritime domain. It has as already made plans to reach out to the communities in the coastal areas, the multinational companies (especially the oil companies) and other shipping interests with a view to collaborating in the acquisition of vessels and other requirements to support the efforts of the Maritime Guard Command and the Nigerian Security Authorities.

Already, the Administration has a Maritime Domain Awareness (MDA) Initiative which it tagged “Maritime Electronic Highway”. This will complement the existing MRCC and boost the coverage of the entire Nigerian Maritime Domain. It features comprise of a synergy of Vessel Traffic Services (VTS), Automatic Identification System (AIS), Medium Frequency/High Frequency Radio Communication. This is as it provisionally working in conjunction with the Navy to improve on the Regional Maritime Awareness Capability (RMAC) system prior to the installation of a MEH.

The Administration is also currently working to ensure that all Fishing vessels (frequent victims of Armed Robbery in Nigerian waters) have the capability to contact the MRCC Lagos in case of any safety/security related incidents. Efforts are therefore being made by the Administration to encourage operators of fishing vessels to install GMDSS communication equipment compatible with those in the MRCC.

9 Conclusion

There is growing awareness that the vast resources and potential in the Gulf of Guinea are being undermined by multifaceted domestic, regional and international threats and vulnerabilities. Rather than contributing to stability and economic prosperity for countries in this sub-region, pervasive insecurity in this resource-laden maritime environment has resulted in more than $2 billion in annual financial losses, significantly constrained investment and economic prospects, growing crime and potentially adverse political consequences.⁵⁵ Nigeria, as Africa’s largest source of oil production, is particularly dependent on secure waters for export and import. As piracy in the region increases, ships are forced to reroute. Trade flows are disrupted, and the added cost is shifted to consumers.⁵⁶ The more reason the region and Nigeria especially cannot loss control to armed gangs; which would lead to escalated attacks on oil production facilities and new capacities to attack installations at sea. This situation can create sufficient danger onshore to shut-in a significant quantity of oil from the market, while potentially disrupting offshore installations.

It may be of interest to note that in discussing piracy especially within the Nigerian context, maritime insecurity has featured prominently. This is because; piracy in Nigeria is directly linked to oil development and the resulting economic, social and environmental conditions in the Niger Delta.⁵⁷ It is against this backdrop it becomes easier to appreciate the implications of piracy. Ibrahim⁵⁸ related that the state of maritime security and piracy are directly related. Thus, when piracy increases it reduces maritime security, while increase in the level of maritime security usually translates to decrease in the level of sea piracy. Good governance is therefore absolutely fundamental to achieving sustainable maritime security and development in Africa.⁵⁹

While the bulk of solutions proposed and actively pursued have remained in the realm of security, the region may consider the entrenchment of good governance. Since security alone, though a more expensive option has limited success and requires long term presence of hardware. Imagine what $1 million spent today would do for a poor community; same amount spent as ransom would probably buy better arms and ammunition, for a larger pay-off in future.

Even as the situation may need an Africa solution for an African problem, timely and consistent western or international assistance must remain significant⁶⁰ to avoid a situation where the economic and social consequences of the prevailing threats become grave. Since if they are allowed to persist, piracy would flourish and ultimately undermine political stability and economic development of the region.⁶¹

To conclude, it may be noted that successful anti-piracy efforts do exist. The Malacca Straits (which until 2004 was the world’s most pirate-prone region) has seen noticeable reduction in attacks through the efforts by the countries in the region.⁶² While this is also possible in the Gulf of Guinea (especially with a coherent, coordinated and comprehensive response by the international community). Maritime piracy cannot adequately be addressed and eradicated unless it is seen as both a cause of social and economic hardships and an effect of social, political and economic destitution as well.⁶³