Maritime 2022 Review (3) – Security ramps up in GoG

/in , /by

In January 2022, the EU committed to a two-year extension of its deployment of warships to the Gulf of Guinea region, known as the Coordinated Maritime Presences (CMP) program.  It was proposed that Denmark will patrol West Africa’s waters for four months, Spain for seven and a half months, France for eleven months, Italy for eight months and Portugal for three and a half months.

Although the Danish naval presence in the region ended in February 2022 (partly due to the invasion of Ukraine and the requirement for NATO vessels to return to the region, in mid-September, the Consul General of France in Lagos, Laurence Monmayrant, representing the French Ambassador at the 7th Lagos International Maritime Week, announced the decision to extend the CMP program and said it is a result of the successes recorded by the initiative in reducing pirate attacks against commercial vessels in the Gulf of Guinea by more than 80 per cent.

Earlier in the year, in July, the EU stepped up support to the development of the Liberian Coast Guard through the Support for West African Integrated Maritime Security (SWAIMS) program.  Focal areas for improvement include the supply of rigid-hull inflatable boats (RHIBS) and relevant training of its personnel, patrolling and evidence collection at sea will also be strengthened.

In early January 2022, the Ghanaian Navy received four Flex Fighter vessels from Penguin Shipyard in Singapore (GNS Volta, Densu, Pra and Ankobra), which were acquired specifically to patrol oil and gas fields in the country’s EEZ.  

This development ensured that only Ghanaian Navy vessels and boats will protect offshore oil and gas infrastructure in the country, displacing private security vessels, which had previously proliferated with the growth of piracy in the region.

Nigeria’s New Banknote Crisis – A Case Study in Self-Harm or a Shrewd Step towards Modernising the Economy

/in , , /by

On 26 October, 2022, Godwin Emefiele, Governor of the Central Bank of Nigeria (CBN), announced that the bank had redesigned NGN200, NGN500, and NGN1,000 naira notes.  It announced that the new designs would replace the old notes over a very compressed timeline in early 2023.  The principal reasons for the move were given by the CBN as:

  • More than 80% of all banknotes were in public hands – characterised by the CBN as hoarding.
  • High rates of, and increasing ease of, counterfeiting of NGN500 and NGN1,000 banknotes
  • An excess of bank notes in circulation – having risen from N1.46 trillion in December 2015 to N3.23 trillion in September 2022
  • The ambition to fully implement a cashless policy
  • To enable security agencies to track anyone who withdraws huge (undefined) sums to determine its use
  • The shortage of clean and fit banknotes
  • To moderate inflation
  • To curtail the activities of kidnappers and bandits by making ransom payments more difficult and to allow tracking of new notes.

Many commentators have, in recent weeks, suggested that the timing of the strategic move is very revealing.  It has been suggested that the withdrawal of the old bank notes from legal tender was timed to forestall the payment of huge amounts of cash to influence the outcome of the imminent elections.  Some have been more outspoken and claimed it is a direct attack on the APC nominee for the Presidency, Mr Bola Ahmed Tinubu.  

President Buhari officially unveiled the new NGN200, NGN500, and NGN1,000 notes on November 23, 2022, at the Presidential Villa in Abuja.  On 15 December, 2022, the newly redesigned naira notes were released into circulation as they were dispensed through ATM machines mixed with the old banknotes.   However, many commercial banks failed to issue the new notes and seemed to operate an unofficial policy of withholding the new notes until the deadline for the withdrawal of the old notes – 31 January 2023.  This had the effect of seeing people deposit the old notes and then being issued with the same old currency.  The stage was set for widespread discontent among ordinary Nigerians who were not yet ready to join the cashless society desired by the CBN.

In response, on 04 January 2023, the CBN banned over the counter cash withdrawals in an attempt to ameliorate the effect of a dramatic shortage of the new notes.  Compounding the difficulties experienced by millions of Nigerians, the CBN governor ordered commercial banks to set the withdrawal limit of the new notes at NGN100,000 (c.$135) for individuals and NGN500,000 (c.$660) for corporate bodies.  Moreover, the maximum cash withdrawal via ATM per day was pegged at NGN20,000 (c.$25) and NGN100,000 (c.$135) per week.  This strategy triggered a wave of economic hardship for small businesses, traders, and individuals, leading to an outburst which forced the CBN to increase the limit to NGN500,000 (c.$660) for individuals and NGN5 million (c.$6,600) for corporate accounts.

Early in 2023, the Governor of Kaduna state, Nasir El-Rufai, addressed the economic hardship being inflicted on people as a result of the CBN’s policy on cash withdrawal limits, alleging that “CBN mopped up over NGN2 trillion of the old notes but only printed NGN300 billion of the new notes”.

In response to the growing crisis, the House of Representatives sent an invitation to the CBN governor to address the House and explain the policy and strategy to them.  He ignored the invitation until an infuriated Speaker of the House threatened Emefiele with arrest.  He then, reluctantly, appeared before them on the day of the deadline for withdrawal of the old notes.  During his meeting with lawmakers, Emefiele extended the deadline date to deposit the old naira notes to 17 February, 2023, which also meant holders of the old notes could spend them till 10 February.

It was initially reported that the cash shortage was caused by banking authorities failing to release enough new notes.  However, the Economic and Financial Crimes Commission (EFCC), has reported that it has conducted raids in which officers had arrested bank managers for allegedly hoarding the new notes in vaults rather than putting them in ATMs and giving them to customers.  

Following a legal challenge initiated by the APC-run northern states of Kaduna, Kogi and Zamfara, on 09 February 2023, the Supreme Court waded into the crisis, suspending the deadline for withdrawal of the old notes.  On the same day, the International Monetary Fund and the World Bank both called on the Federal Government to push the deadline for implementation back to alleviate the growing hardship being experienced by Nigerians.  On 13 February 2023, Ekiti, Bayelsa, Sokoto and Rivers joined the group of states lodging the legal challenge to the CBN strategy.  The Supreme Court heard the case on 15 February but immediately adjourned the case until 22 February amid the expectation of an address to the nation by the President.  

On 15 February 2023, President Buhari addressed the nation (a full transcript of the address is available at Annex A).  Following the address, he ordered the release of the old format N200 notes back into circulation alongside the new format notes of N200, N500 and N1,000 denominations until 10 April.  This step, broadly in line with the recommendations of the IMF and World Bank, is designed to ease the hardship being experienced by millions of Nigerians and has been met with mixed reactions.  The move leaves the old format N500 and N1,000 denominations as no longer legal tender.  Some commentators stated that the move would save many small businesses from failure.  Significant dissatisfaction exists at the continuing scarcity of the new bank notes amid suspicion that the banks are witholding the new format notes. 

It is noteworthy that the extension will allow Nigerians to sustain their businesses beyond the presidential elections due on 25 February 2023 and the state and local council elections due to take place on 11 March 2023.  It is illuminating that the President stated that “this new monetary policy has also contributed immensely to the minimization of the influence of money in politics”.  The aim is admirable, with the timeline being compressed in order to maximise the impact on electoral fraud and vote-buying, but the implementation of the strategy has, to a large extent, been muddled and possibly counterproductive.   

 

The Impact of the Strategy on Social Cohesion

Since early February, banks across the country have been closing their doors to customers due to the scarcity of the new format of bank notes.  Particularly affected have been banks in Lagos, Ogun and Abuja.  The crisis is affecting multiple banks including Fidelity Bank, First Bank, Zenith Bank, Access Bank and Guaranty Trust Bank.

Small businesses that depend on day-to-day cash transactions have been unable to access their funds or manage their cashflow.  Point Of Sale operators are being forced to shut down as they are unable to withdraw cash to service their businesses.  This has resulted in a suppression of commerce compounded by the fact that the customers were also unable to access cash to spend in the markets.  Worst hit were businesses that handle perishable goods.

Millions of Nigerians do not have bank accounts and in many families the main earners have been struggling to support their families due to their inability to acquire cash.  One estimate says that approximately 40% of Nigeria’s adult population does not have a bank account, particularly those living in rural areas. Even for those that have an account, the shortage of new naira notes is leaving many people unable to pay bills and buy sustenance.  The CBN policy of moving towards a cashless society is unrealistic as the country currently lacks the infrastructure to facilitate such an ambition.

Businesses that did have POS payment facilities were forced to close and those that stayed open are charging exorbitant interest rates, adding further misery to the already struggling people of Nigeria.

Some banks have been attacked as patrons find the ATM machines unable to dispense the non-existent new currency.  Customers are queueing for hours to withdraw the very limited amounts of cash the CBN will permit banks to issue.  Anecdotal information tells of people queueing for hours, only to be told they can only have N3,000 due to the shortage of new notes.  The banks are in a difficult position, but their customers are suffering extreme hardship.  One customer was allowed to withdraw just one thousand naira – and then only because they pleaded that they would not be able to pay for transport to reach home again.  Fights have broken out and anyone fortunate enough to be able to withdraw cash risks being robbed by desperate citizens and opportunistic thieves.  Amid threats against bank staff, the National Union of Banks, Insurance and Financial Institutions Employees have threatened to withdraw their services of its members nationwide following attacks on some commercial banks.

Inflation has also surged, as those with cash available impose punitive interest rates on ordinary customers.  Anecdotal information indicates that money changers are charging N6,000 for a N20,000 transaction.  A survey by one Nigerian newspaper revealed that Point of Sale (PoS) transaction charges jumped 400% in most cities across the country in the first week of February.

Some Nigerians have also been unable to purchase essential medications without access to cash.  This has impacted to such an extent that the Governor of Borno State ordered the release of N300 million worth of drugs to government hospitals and called on hospitals to issue them free to patients. 

Violence and protests have been spreading across the country as a result of the upheaval including; 

  • Commercial drivers refusing to accept old format notes in Ibadan, Oyo State leading to widespread stranding of commuters generating significant tension;
  • Protestors barricading streets with bonfires in Ondo Town, Ondo State and in Sango Ota, Ogun State;
  • Protestors setting fire to a branch of Access Bank in Udu Udu LGA, Delta State;
  • Protests locking down the Eleko Axis Of Kwara State Polytechnic in Ilorin;
  • Security forces being forced to fire warning shots as protestors blockaded the CBN office on the ring road of Benin City, Edo State;
  • Protests erupting in Port Harcourt on Ozuoba Road in the Rumuosi area;
  • Violent protests taking place in Mokola and Sango in areas of Ibadan in Oyo State.

 

Political Implications and Fallout

The timing of the transition – within weeks of the Presidential election and months of the State and local council elections – could not have been worse.  The move has triggered widespread hardship and discontent among countless millions of Nigerians – most of whom are entitled to vote in the upcoming polls.  

The social impact cannot have been overlooked in the planning of the strategy and, indeed, according to some commentators, it was probably considered a desirable outcome.  This is reflected in comments by the All Progressive Congress (APC) Presidential candidate, Asiwaju Bola Ahmed Tinubu, who has publicly alleged that the move was designed to damage the APC’s election prospects.  Coming at the same time as a fuel shortage and pricing crisis, the bank note change out is generating very high levels of frustration and anger among the population.  

Atiku Abubakar of the main opposition PDP backed the policy in principle but said it had been implemented poorly, while Peter Obi of the Labour Party urged Nigerians to be patient, saying the reforms would have long-term benefits.

If Tinubu’s allegations are correct, and the crisis is contrived for political reasons, it would have the potential to light the fuse of an explosive situation.  Tinubu has reportedly warned that he would set the country ablaze if he loses the election unfairly.  The veracity of that report is unknown, but the political veteran has long been known as a kingmaker, initially in the Peoples’ Democratic Party, and latterly the All Progressive Congress.  It is widely accepted that his wealth and influence is sufficient to shape the political landscape of the country, and that may be the basis for the report.  

The political position of the CBN Governor is itself fueling speculation that the strategy is politically inspired.  Emefiele was appointed to the position in 2014 after the previous Governor, Sanusi Lamido Sanusi was ousted after illuminating the issue of missing revenues.  Emefiele has been Governor since then and exposed his political ambitions when in 2022 he sought to run as the APC presidential candidate.  The Supreme Court ruled against his candidacy, and this has led to speculation that the unhelpful timing of the currency exchange might be simply a case of settling political scores.

Interestingly, if Tinubu is correct, and the instability triggered by the CBN strategy reflects back onto the APC at the polls, the Presidency will most likely go to a northern candidate, breaking the long-standing so-called Zoning Arrangement irreparably.  Such an outcome will have dangerous political implications and could lead to widespread social unrest as the south rejects the result.  Following the 2011 elections, thousands of Nigerians died in sectarian and political violence when the north felt it had been robbed of the Presidency.  It is very likely that the south will feel equally cheated, resulting in a wave of political violence across the mid-belt states and targeting some communities in the southern states.

 

What to Expect

The Supreme Court decision has bought the government some time, but the outcome is not going to change; the bank notes will be changed.  However, how quickly they will be introduced remains to be seen. Some analysts suggest it will take another 3-6 months – which is beyond the elections and into the first term of the new Presidency.  

Meanwhile, the average Nigerian will continue to suffer great hardship caused by the shortage of hard currency.  This will undoubtedly lead to more frequent outbreaks of unrest at banks as well as an elevated level of risk posed by destitute people being forced into street crime in order to sustain their families.  Other negative effects include;

  • Pedestrians leaving banks are likely to be more frequently targeted by the desperate of the opportunists;
  • Motorists sitting in traffic, already at risk from marauding gangs of armed robbers will become even more heavily targeted;
  • Small businesses – especially those that handle cash such as beer parlours, street vendors, hair salons etc or that trade in consumables (rice, cooking oil etc) – will be more likely to suffer theft and robbery.
  • The predatory gangs that have existed for years will become even more energetic in their activities and could pose an elevated threat to individuals and small businesses.

In the event that the APC loses the Presidential election, there is a significant risk of widespread political violence in protest at the perceived ‘rigging’ of the election by the CBN.  

There is also a heightened risk of sectarian violence in mixed communities and along sectarian fault lines in some areas including, but not limited to, Kaduna, Benue, Plateau, Kano City and parts of Lagos. 

To try and assist their customers, some banks have waived fees for transferring money, others opened on Saturday and Sunday. However, other banks have been forced to close due to the threat of violence to their premises and staff. Arete will continue to monitor notices/advice from the banks and other institutions, along with the ongoing situation, and provide updates accordingly.

Maritime 2022 Review (2) – Nigeria’s Pirates Switch from Kidnapping Seafarers to Stealing Oil

/in , /by

The Gulf of Guinea witnessed a dramatic reduction in acts of piracy through 2022 with an IMB report in Q4 of 2022 showing acts of piracy in the first nine months of the year at 50% the levels for the same period in the preceding year.  

Indeed evidence suggests that criminal networks have now switched back to oil bunkering, theft and illegal fishing most likely due to these activities being less risky and more profitable.  The result of the switch to illegal bunkering is thought to be behind the oil production in Nigeria in August and September 2022 falling to below one million barrels per day as a consequence of a huge surge pipeline vandalism and industrialised oil theft.

A report to the UN Security Council stated that changing dynamics of criminal activities in the Gulf of Guinea underline the importance of the Yaoundé Code of Conduct, signed in June 2013, and the need for states and their regional and international partners to accelerate efforts to establish security in the region.  

The code promotes information sharing and reporting, interdicting suspicious vessels, ensuring apprehension and prosecution, harmonising national legislation, guaranteeing resources to maritime security and safety, and outlining state responsibility to patrol anchorage areas.

However, disagreements between key maritime bodies attribute the drop directly to strategies in which they could be said to have vested interests.  The International Maritime Bureau attributed the reduction of piracy and other maritime crimes in the area to the presence of foreign Navies in the region. This was challenged by the Director General of NIMASA, Bashir Jamoh, who said the controversial USD195 million Deep Blue Project initiated by the Federal Ministry of Transportation, but paid for by NIMASA, is responsible for the decline in piracy at Gulf of Guinea.

Maritime 2022 Review (1) – Illegal, Unlicensed and Unregulated Fishing

/in , /by

On 02 November 2022, a report was published that identified a global trend of the deliberate disabling of AIS systems, which amongst other reasons, could be due to illegal, unreported and unregulated fishing.  

The report, titled “Hotspots of Unseen Fishing Vessels,” was a collaboration between the Institute of Marine Sciences at the University of California, Santa Cruz (UCSC), who worked on the study with researchers at Global Fishing Watch and NOAA Fisheries.

Key findings revealed more than 55,000 suspected intentional disabling events from 2017 to 2019, which in turn may have obscured nearly 5 million hours of fishing vessel activity.

The waters of West African littoral states are one of four global hotspots for this activity where the disabling of AIS systems may have been undertaken not only for illicit fishing purposes, but to possibly to protect the ship and crew from piracy. 

The issues surrounding both legal and illegal fishing have become such an issue that in early November 2022, Ghana issued a new maritime strategy to promote and secure its blue economy by 2040.  

Indeed, an investigation by the Environmental Justice Foundation found that 90% of fishing vessels operating in Ghana are owned by Chinese companies and overfishing of Ghanaian waters is devastating the Ghanaian fishing economy, resulting in estimates of a 40% fall in income rates for local fishermen.

An investigation by Associated Press found that Cameroon is becoming a favoured state for the registration of fishing vessels that are then suspected of IUU activities in the region and further afield.  

By example 14 vessels owned by companies based in EU countries – of a total of 80 from around the world – reflagged to the Cameroon flag between 2019 and 2021.

IUU in Cameroonian waters is also likely linked to wider criminal activity, e.g., in the past both artisanal and industrial fishing vessels have been intercepted by third parties and used for smuggling fuel, arms, other contraband and illegal migrants.  

An estimated 70 industrial fishing vessels that operate in the Cameroonian maritime area come from mainly China and Nigeria and over 80% of artisanal fishers come from Nigeria, Ghana, Benin and Togo.  

Exercise Obangame: US Sixth Fleet commander visits Lagos

/in , /by

Obangame Express (OE23), the largest multinational maritime exercise in Western and Central Africa, kicked off its 12th year with 33 participating nations. The exercise, hosted in Lagos, Nigeria, on the 27th of January 2023, featured both in-port and at-sea training scenarios including maritime operations center familiarization and exchanges on medical care, search and rescue operations, and boarding techniques.

Vice Adm. Thomas Ishee, commander, U.S. Sixth Fleet, arrived in Lagos, Nigeria for the opening ceremony. His visits also included engagements at the Western Navy Command, Naval Airbase Ojo, and the Joint Maritime Security Training Center. The meetings focused on enhancing relationships with senior government and military leaders and underscored the longstanding importance of U.S.- African maritime cooperation on mutual security interests within the region.

During the OE23 opening ceremony held at the Naval Dockyard, Vice Adm. Ishee delivered remarks alongside U.S. Consul General Will Stevens and the Flag Officer Commanding of Nigeria’s Western Naval Command, Rear Adm. Yakubu Wambai.

“The global importance and vast scale of the waters surrounding Africa provides an opportunity to work with our African partners to solve transnational issues,” said Ishee. “The work accomplished during Obangame Express strengthens regional cooperation and trust, ensuring African nations can continue protecting their coastal resources and sovereign waters.”

Read the full story here.

Cameroon Signs Maritime Security Law

/in , /by

On December 27, 2021, President Paul Biya of Cameroon signed a law on the suppression of piracy and general safety of maritime navigation within its waters, making Cameroon the second country in the region to enact a national legal framework on suppression of piracy and maritime offenses. Nigeria was the first after it adopted a similar law back in 2019. The law is a critical milestone in the Gulf of Guinea’s maritime security, with Cameroon’s national maritime authorities empowered to punish any illegal activities threatening safe navigation within its territorial waters. 

The law rules on the following: piracy, terrorism onboard ships, pollution of waterways and financing acts of piracy. The punishment for these crimes include life imprisonment if a conviction is successful. Fines range from $16,000 to $4 million depending on the crime.

A series of piracy incidents since 2019 prompted the government to take action. The primary goal was to guarantee security of ships at the Doula anchorage, using local armed guards onboard vessels. Most importantly, as Gulf of Guinea piracy evolves into other maritime offenses such as oil theft, countries in the region are encouraged to strengthen their national capacities in maintaining maritime security. It is hoped that such frameworks, especially combined approaches between neighbouring countries such as the Yaoundé Code of Conduct, will act as further deterrents to criminal gangs.

Read the full news here.

Maritime Alert: Crude tanker fired on in Gulf of Guinea

/in , /by

A maritime shipping alert has been issued and vessels have been put on high alert in the Gulf of Guinea after suspected pirates fired on a crude tanker. In the early hours of Monday, December 12, a laden Suzemax tanker was 89 nautical miles southwest of the Kome-Kribi Marine Terminal in Cameroon, where it had loaded a cargo and left the previous evening.

A skiff approached the tanker underway approximately 100 miles west of Equatorial Guinea and shots were fired from the small boat but there was no attempt to board the tanker. The Maritime Domain Awareness for Trade – Gulf of Guinea (MDAT-GoG) issued two alerts on December 12 to vessels operating in the area.

Several shots were reported fired but it was stated that the skiff didn’t come closer than about 200 meters. Unconfirmed media reports are linking the incident to the Greek-flagged Suezmax tanker Maran Poseidon managed by Maran Tankers Management. AIS data shows that the 158,000 dwt tanker departed the terminal off Cameroon on December 11 bound for the German port of Wilhelmshaven.

In a separate incident, on December 13 an unnamed passenger vessel was reported hijacked whilst underway approximately 55nm northwest of Bata, Equatorial Guinea. It was later confirmed that 2 Cameroonian crew members were abducted from the vessel.

Historically November & December have seen a rise in incidents in the Gulf of Guinea. Arete provides full spectrum risk management services to the maritime industry. These services include embarking Risk Management Consultants (RMCs) on clients’ and platforms offshore to coordinate Security Patrol Vessel (SPV) activity, undertake incident response & crisis management, train and drill the crews in counter-piracy etc. You can email us info@arete-group.com or fill this form.

Read more about the news here.

Denmark finds Nigerian guilty in piracy case

/in , /by

On Monday 26th of November, a Danish court found a Nigerian man guilty of endangering the lives of Danish military personnel in a shooting incident last November involving Denmark’s Navy and a crew of suspected Nigerian pirates in the Gulf of Guinea.

The Nigerian man, 40 year old, Lucky Frances, was however not sentenced. The incident occurred when as part of international anti-piracy efforts, Denmark deployed a frigate to the Gulf of Guinea in October 2021. The following month, it intervened in an alleged attack on a commercial vessel, killing four pirates and capturing four other suspects.

“The court emphasized that the (40-year-old) man, together with the other perpetrators, fulfilled all the signs of piracy and had to be described as a pirate group,” Copenhagen city court said in a statement.

Frances was injured during a firefight with Danish navy personnel in the November clash and was taken to Denmark for prosecution in January after being treated at a hospital in Ghana. His leg was amputated as a result of his injuries. The other three suspects had charges against them dropped in January, after Denmark failed to find a country in the region to take them, the Danish Armed Forces said at the time.

Frances was exempted from any legal consequences due to his medical condition and the fact that charges against the other three suspected pirates had been dropped, according to his lawyer Jesper Storm Thygesen, speaking to Reuters news agency here. Frances will remain in custody until both sides have decided whether to appeal against the verdict. We will continue to monitor the case.

Oil Theft, Pipeline Security, Piracy & Elections: Drivers of Instability

/in , , /by

Oil Theft, Piracy, Elections Nigeria

Oil Theft and Economic Strain

The Nigerian economy is currently under intense strain, particularly in respect of foreign currency reserves and inflows.  At the end of November, Governor Godwin Emefiele of the Central Bank of Nigeria stated that “The official foreign exchange receipt from crude oil sales into our official reserves has dried up steadily from above $3.0 billion monthly in 2014 to an absolute zero dollars today”, The single greatest earner of foreign currency has, for decades, been the oil and gas sector.  However, the CBN chief attributed the atrophy of this sector’s ability to generate foreign currency inflows to the relentless and expanding industrialised theft of the country’s crude oil and condensate production. 

Since Russia’s invasion of Ukraine, the oil and gas sector represents a huge opportunity for Nigeria, with global supplies having become strained as a result of economic sanctions imposed on Russia.  However, Nigeria has been unable to exploit the potential this global crisis represents and its foreign currency reserves continue to dwindle.  This is becoming critical as evidenced by the CBN governors comments and a swathe of recent changes in monetary policy relating to foreign currency and banking regulations.   

With Europe now unequivocally cut off from the major supply route for Russian gas since the destruction of the Nordstream 1 pipelines, and the failure to commission the Nordstream 2 pipeline through the Baltic, the question is whether Nigeria can ramp up its production and export levels to fill the supply gap in Europe.  The sea routes to Europe’s markets from Nigeria are relatively short and this reinforces the merits of trading hydrocarbons with European countries.  

Europe’s requirement for LNG supplies is buoyant and Nigeria has capacity to produce 22 million tons per annum (mtpa) from Bonny.  The recent commissioning of train 6 has not yet generated the benefits for the economy that were envisaged though.  For Nigeria to fail to step into the supply gap and increase LNG exports to Europe could be economically – and politically – damaging. 

So can Nigeria exploit the prevailing global economic environment to generate a reversal of fortunes and stabilise the economy?  While clearly a potential opportunity exists, Nigeria faces significant challenges, noting that in late September, media sources reported a 13.5% year on year drop in crude oil output.  This is very significant at a time when these other massive new market opportunities are opening up.   

The following graphic is taken from the OPEC Monthly Oil Market Report and shows the steady year-on-year and month-on-month decline in crude oil output.

Industrialized Theft of Hydrocarbons

Pipeline vandalism and lack of investment in pipeline infrastructure are intrinsically linked to the challenges facing the Nigerian National Petroleum Company (NNPC) and the Federal Ministry of Petroleum Resources.  Chronic threats/risks to the security and physical integrity of pipelines, particularly in the Niger Delta, undermine confidence among domestic and foreign investors.  The apparent inability of oil companies to secure their pipelines is partly responsible for a wave of divestment by the International Oil Companies, an example of which is the planned major divestment by Shell of its remaining onshore oil production assets.  Shell would likely complete the divestment by the time of the elections were it not for a legal challenge to the process centred around a $1.8 billion settlement claim against the operator by host communities in the Niger Delta.

Onshore gas is less problematic from a security perspective due to its volatility and the technical and safety challenges associated with removing it in volume from the closed systems operated by the oil companies. However, Nigeria’s production of associated gas – that which emanates from the same wells and reservoirs as the crude oil production – is entirely dependent upon the ability of the oil companies to continue to pump oil.  With pipelines now so heavily attacked by thieves and vandals that, according to some sources, as much as 90% of oil that leaves the wellheads is stolen before it reaches the export terminals, there is a significant risk that oil companies will shut in their fields.  This will directly impact on gas production.  

Conversely, with oil being far less profitable than gas for the operating companies, it is possible that the oil companies might take a pragmatic position and adopt an elevated tolerance for theft of crude oil as long as the gas continues to flow.  The downside of such pragmatism is that operators are responsible for the environmental impact of their operations, and as we have seen in the past, they face litigation even for loss of containment events caused by deliberate interventions by communities, criminal elements and militants.  Against such a background, it is understandable that they might decide to divest.   

The Nexus with Piracy

On the maritime front, the point is made in shipping media that when the Dangote refinery comes on stream, the facility will likely export refined hydrocarbon products via tankers.  There could be fewer tankers exiting the onshore terminals in the Delta and more off Lekki.  The cargo will change as well from crude to refined product.  That will change the target set available to pirates and maritime armed robbers off the Lekki area and beyond.   However, in late November 2022, Martha Pobee, an Assistant Secretary-General in the Department of Political and Peacebuilding Affairs (DPPA) of the UN, warned of a shifting situation in the Gulf of Guinea.  She warned that “Pirate groups are adapting to changing dynamics both at sea and in coastal areas,” going on to say; “In this respect, the recent decrease in instances of piracy may in part be attributable to the shift by criminal networks to other forms of maritime and riverine crime, such as oil bunkering and theft, which they likely view as both less risky and more profitable”.  She urged regional States and their regional and international partners to accelerate their efforts to establish security in the Gulf of Guinea, referring to the Yaoundé Code of Conduct, signed in June 2013 as the benchmark.

Strategies to Avert a Crisis

The Dangote refinery will also rely on oil from the Delta region to operate.  That feedstock will need to be brought in either via pipelines or tankers.  If it is via pipeline, the line could be targeted onshore by thieves and vandals.  It could also be a target for politically inspired vandalism / sabotage.  If the feedstock is coming in via tanker, that increases the costs and also relies on existing output and terminals in the Delta.  It is likely that Dangote has been or very soon will be lobbying government to resolve the security dilemma in the Niger Delta Region.  

In response to the challenges in the region, we have seen a re-energised focus in government on the seemingly intractable challenge of securing the pipeline network in the Niger Delta.  The Federal Government has realised that crude oil production is vital for the economy and security of the infrastructure is critical to success.  

Recently, we have seen the award of a Niger Delta-wide contract to the former MEND militant leader, Government Ekpemepulo – aka Tompolo.  As at mid-October, the status of this contract remained unclear as a result of strain between Tompolo and other former militant leaders – notably Dokubo Asari. However, by the end of November, pipeline security contracts with Tompolo companies were in place and operational in Delta, Bayelsa and Rivers States. 

According to local media reports, Tompolo’s company, Tantita Security Services, has been directly involved in:

  • The discovery of a 4km illegal pipeline running from Yorke Flow Station to an offshore loading point.  It was just one of 15 illegal connections to the Trans Escravos Pipeline.
  • 06 October 2022 – Arrest of an illegal oil bunkering vessel and its crew in the Escravos area.
  • 07 October 2022 – Arrest of a 1,500 metric tons capacity crude oil tanker, MT Deinmo, IMO number 7210526 with eight crew members at the Escravos River in Warri Southwest LGA.
  • By 10 October, a total of 58 illegal connections had been discovered by Tantita Security Services in Delta and Bayelsa States.
  • 15 October, TSS reports the discovery on preceding days of another illegal connection behind a military post in the Ogulagha Community in close proximity to the Forcados Terminal.

Tompolo was keen to demonstrate his company’s capability as a significant sum of money had reportedly been paid at an early stage – before the contract had been signed.  Despite numerous claims of ‘discovery’ of oil theft infrastructure and operations, Tompolo and his organisation would almost certainly have had foreknowledge of the many oil theft operations in the Burutu Kingdom and the wider area, including into Bayelsa. Tompolo’s Chief of Security in Tantita Security Services is one Keston Pondi – formerly a senior Delta State MEND commander in Camp 5.

In November, despite growing support among influential actors, Tompolo was still faced with demands for inclusion by security companies and organisations that are closely associated with former militants.  In Rivers, Asari Dokubo has been pacified and is now supportive of the contract and High Chief Edwin Clark has called for people in the region to support the contract.  However also in Rivers, The Onelga Security Planning and Advisory Committee (OSPAC) demanded inclusion in the Tantita Security Limited surveillance contract, and in Delta State, a speedboat operated by Tompolo’s company local subsidiary was attacked and the engine stolen.  This may have been purely incidental, but it cannot be ruled out that a group seeking inclusion was sending Tompolo a message.

The key challenge facing Tompolo is to demonstrate capability, competence and integrity in the delivery of the contract.  The problem he faces is that the youths who are directly involved in the operational theft of the hydrocarbons are very small fish in a big pond where some very large fish also swim.  The youths are expendable, and any number of arrests will only scratch the surface of the problem that is driven by powerful actors, who drive the operations from afar.  

The economic emergency created by the dwindling foreign currency reserves, and the election campaign which is now underway will perhaps focus minds in Abuja and energise the review of options for securing the region’s pipeline infrastructure.  Arete sources indicate that at least one of the presidential candidates intends to make the issue of industrialised oil theft a key election issue.  That same candidate has reportedly pledged to address the challenge to the country’s prosperity that this illicit industry represents, should he win the Presidency.  Any response will likely see the deployment of high-tech surveillance solutions that have not previously been used in the region and it is likely the new technology will be integrated with existing command and control structures that will see Tompolo’s companies responding to highly accurate but perishable intelligence.  Thus, it is expected that, given time, Tompolo’s companies will be seen to be an effective response to the oil theft problem. 

Conclusion

We should expect the issues discussed in this analysis to become hot topics in the election campaign and we will continue to monitor and add our analysis in the coming months.  The scale of the theft of crude oil is such that the problem will not be fixed quickly or without major pushback from powerful vested interests.  The entire Niger Delta region faces a period of strategic change, and the ending of the industrialised theft of hydrocarbons will not come about without massive investment in the region.  The question is, where will the funding be generated for such a project?

Nigerian Floods 2022 – Security and Stability Implications

/in , /by

Background

For the last three months, most of Nigeria’s domestic mainstream media, as well as social media, have carried stories of the escalating flooding crisis that has engulfed large areas of 34 of the country’s 36 states and Federal Capital Territory.  

While flooding is almost an annual event (the following map shows those areas affected by historical flooding events), the events of 2022 have occurred on a scale not witnessed since 2012.  

The following before and after satellite photos show the impact of the flooding in the area of Lokoja at the confluence of the Niger and Benue Rivers.

The causes of the annual inundation of flood plains and the communities that farm them generally stem from poor implementation of environmental management and inadequate infrastructure.  Nigerian authorities say the causes of this year’s excessive flooding are twofold:

  • Water overflowing from local rivers as a result of unusually high levels of rainfall 
  • The release of excess water from Lagdo dam in neighbouring Cameroon’s northern region into the Benue River system

 

The Impact 

Earlier in October, Nigeria’s National Emergency Management Agency (NEMA) warned of catastrophic flooding for states through which the Niger and Benue rivers flow.  It is expected that flooding will persist through November for the southern states of Anambra, Delta, Rivers, Cross River and Bayelsa, and three of Nigeria’s reservoirs, Kainji, Jebba, and Shiroro, are expected to overflow.

The minister of Humanitarian Affairs, Disaster Management and Social Development, Sadiya Umar Farouq, revealed mid-October that about 82,053 houses had been totally decimated, 2,504,095 million persons had been affected, and 332, 327 hectares of land were completely damaged

The flooding, which began in the early summer, has:

 

  • Killed up to 600 people (as at the end of October)
  • 1.4 million people have been displaced
  • Spread waterborne diseases including cholera and malaria (The flooding has occurred during a severe cholera outbreak that had already killed more than 465 people and affected over 18,000 others in 31 states since January 2022)
  • Damaged Infrastructure and farmland 
  • At least 70,566 hectares of farmland and crops have been destroyed; some more recent reports have the scale of impacted farmland as high as 569,000 hectares. 
  • Destroyed crops and farmland resulting in food shortages

 

The floods are a humanitarian disaster and may also heavily impact security in the region.  According to the State Emergency Management Agency (SEMA) of the north-eastern states of Borno, Adamawa and Yobe at the end of October, more than forty-three thousand people in 26 Local Government Areas (LGA) have been affected by flooding since the beginning of the rainy season, including the reporting of 7,485 cases of cholera. 4,347 people have been displaced, with the elderly, women and children most affected.  

These Internally Displaced Persons (IDPs) have taken refuge in communal buildings such as schools in areas adjacent to the affected areas. Tounga and Fufore LGAs in Adamawa state and Gujba, Geidam, and Gulani LGA in Yobe state have been the most affected areas by the floods according to one NGO. 

IDPs in the flood-prone regions who were already using makeshift shelters or sleeping outside are identified as the most vulnerable and NGOs and relief operations mounted by State emergency management authorities are being ramped up with funding from several sources, including the Nigeria Humanitarian Fund.  

The Rivers State government has reportedly allocated 1 billion Naira for relief operations but nevertheless, across the country, at the end of October less than 40% of people affected by the disaster had received any food assistance, leading authorities to warn of victims resorting to “negative coping strategies” – criminal behaviour triggered by desperation and the urge to survive. 

Further deliveries of relief food & packages have been made in the last few weeks, but some local groups have called for further transparency in its distribution.

Anecdotal information from within Nigeria indicates that:

  • Flood related criminality is increasing.  
  • In one location, displaced cult members took over a town hall and forcefully seized boats and engines.
  • Vacated residences in some areas are being looted by criminals – especially in more affluent areas.
  • State authorities are distributing support but are allegedly using the relief operation as an opportunity to launch election campaigning.
  • The floods are driving inflationary pressure on basic commodities and amenities; inflation is currently sitting at around 20% in Nigeria.

 

Nigerians making their way through floodwaters after heavy rainfall in Hadejia, Jigawa State on Sept. 19.

 

Other impacts from media reporting include:

  • Adamawa state – In late August, severe flooding in Adamawa State caused 10 fatalities and damaged dozens of homes.
  • Anambra state – On 7 October 2022, 76 people drowned after an overloaded boat fleeing the flood capsized. The overflow of River Niger and downpour fuelled the rise of the water level. Riverine communities in the state have been submerged by the flood.  The three-storey Madonna Catholic Church in Iyiowa, Anambra West collapsed due to flooding on 9 October.
  • Jigawa state – Floods struck Jigawa State from August to September, where at least 92 people died.
  • Kogi state – Lokoja, situated at the confluence of the Benue and Niger rivers, is among the worst-affected areas of the flooding.
  • Niger state – In Mariga, Niger State, over 1,500 corpses were washed away from a cemetery.  Officials said that 650 of the bodies were found and were reburied.
  • Yobe state – Severe flooding struck Yobe State in July and killed four people.
  • Rivers State – 5 LGAs have been inundated as at 26 October.

 

The Response 

Conclusions

The flooding has the potential to seriously dislocate Nigerian society and trigger instability and increased criminality as IDPs seek to survive.  The alleged exploitation of relief efforts for political gain will either win popular support, or, where the perception is that relief funding is being embezzled, trigger protest and unrest.  The government’s handling of this national disaster will potentially have a major impact on the outcome of the 2023 elections as Nigerians seek the support of their state and federal level leaders.