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Plans by the Nigerian National Petroleum Corporation (NNPC) to kick-start bunkering business to boost its profitability is generating mixed reactions, reports Olisemeka Obeche
With the Federal Government still battling, albeit unsuccessfully, to stamp out oil bunkering in parts of the Niger Delta; the decision of the Nigerian National Petroleum Corporation (NNPC) to incorporate the bunkering business model into its transformation initiative is generating mixed signals across the industry and beyond.
NNPC’s former Group Managing Director (GMD), Mr. Andrew Yakubu had, prior to his sack early this month, announced that the process of registering the bunkering venture with relevant government agencies had already begun with operation expected to commence in October, this year.
According to the him, contrary to public perception that bunkering is an illegal business, “it is actually a legal business which involves fuelling of ships and other marine vessels on the high sea”. He added that the business model gained notoriety due to long ban of the business on the country’s waterways by government, culminating in the proliferation of the illegal version. “This is a huge business we are not taking advantage of. We need the expertise of reputable bunkering firms. We have to embark on a study of the system; and very soon, we will take advantage of it”, Yakubu had declared.
The Federal Government lifted the ban on bunkering business in January, this year, precisely 13 years after it outlawed the business on the country’s territorial waters. Introduced as a legitimate business model with licensed operators by the Department of Petroleum Resources (DPR) in 1979, bunkering gained notoriety over time due to systemic abuse by operators and regulators, and by the time government outlawed it in 2000 it had degenerated to an industry synonymous with all kinds of illegality, such as vandalism of oil installations, theft and sale of petroleum products on the high sea.
Bunkering, according to experts, is a lucrative downstream business in the maritime sector, which involves ship to ship transfer/ sales of all kinds of petroleum products, lubricants and fresh waters in the high seas, inland waterways and within ports. Director of the Department of Petroleum Resources (DPR) George Osahon explained that bunkering is not strictly an illegal business. “Bunkering as a legitimate business line should not be confused with illegal trade in stolen crude for which the same term has been freely used in the Nigerian lexicon,” he said.
The decision by the administration of former President Olusegun Obasanjo to ban the lucrative business, critics say, orchestrated the proliferation of illegal bunkering that has cost the nation trillions of naira in revenue and other material losses. “The controversial ban on bunkering did not solve the problem that government envisaged; instead it worsened the situation”, opined Mr. Clement Ekwealor, an economist.
Thumbs-up for government’s action
A cross section of industry players, especially those eyeing the lucrative business, has hailed the lifting of ban on bunkering as a positive development. To this group of players, legalizing bunkering is a win-win situation for Nigeria. Reason for this cheery mood in the industry is not far-fetched: the legalization of the business, experts told TheEconomy, could make Nigeria a hub for bunkering operations in the sub-region, with a long list of beneficiaries including fishing trawlers, Oil and Gas vessels of all sizes, General Cargo carriers, bulk cement cargo carriers and all kinds of marine vessels.
Mr. Bolaji Akinola, the chief executive officer of Shipsand Ports, believes the policy would have multiplier effects on the economy. “The economic benefits are huge because this will be a stimulus for growth in other sectors of the economy, including inland ports and waterways.”
For Mr. Michael Anyiam-Osigwe, executive director, Anyiam-Osigwe Group, owner of the Nuel Energy Limited and PSTI Oil & Gas, the lifting of ban on bunkering has opened new vistas of business opportunities for Nigerians. “Bunkering is a hospitality business in that when a vessel is coming into Nigeria and the owners know that it will get bunkered easily for fuel, lubricant and water, then freight will be cheaper. So, when they come here, they will do the refuelling and this will also pay the country better. Freighting goods to Nigeria will be cheaper and the consumers will benefit from this,” he said.
Ebenezer Godspower, a maritime player agrees. “Definitely, it is a good thing that government has lifted the ban as it would save the country the stress and cost of going to neighbouring countries to fuel vessels operating in our territorial waters. It’s good for the government and the private investors as well as the economy,” he said.
Not yet Uhuru:
Despite positive reactions the new bunkering policy has generated since it was announced last January, some industry players and critics are skeptical about its efficacy in dealing with widespread corruption ravaging the petroleum downstream and maritime sectors. Those who spoke to TheEconomy expressed fears that the policy could trigger a new wave of racketeering and rip-off similar to the controversial petroleum subsidy regime.
Engineer Best Ezeani, Group Managing Director/CEO, Virgin Petroleum and Maritime (P&M) Group is one of the many industry players who harbour reservations about the efficacy of the policy shift. His fear is that the policy could be worse than the racketeering that marred fuel subsidy regime. “On paper, legalizing bunkering is a good thing because it means that instead of the whole money going into private pockets, government will also benefit. But my fear is that what the policy says on paper is not what would eventually be implemented,” he said.
Mr. Gbenga Adesanya, a petroleum economist with specialty in LNG, also views bunkering as a good business model, but insists that implementing it under present dispensation may not bear the desired fruits because the required regulation and implementation mechanism are not in place. According to him, imposing such policy on the country without putting in place ground rules to ensure there would be no sacred cows in its implementation as well as bringing past culprits to book is akin to a Robbin Hood affair.“It means, socially and morally speaking, government is endorsing lawlessness and stealing in the sector because there should be a penalty for those who had engaged in the illegal business before now for they are even worse than rent-seekers,” he said.
Ezeani noted that it is not enough for government to legalize bunkering without bringing to justice those that had plundered the nation’s source of wealth through such act in the past. “If the government is sincere in legalizing bunkering, it should also take proactive measures to criminalize illegal bunkering because that is the major problem. Those that have engaged in the business before now are supposed to be prosecuted for engaging in criminal acts that sabotaged the economic well-being of the nation,” he said.