Nigeria losing competitive space in $20bn West African Bunker market

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The Nigerian maritime industry and dealers in bunker fuels are losing out on an estimated $20 billion market as vessels calling at Nigeria’s ports choose to procure their bunkers from sources outside the country.

Although it is a well-known fact that at least 60 per cent of vessels calling in the region are destined for Nigerian ports which should result in steady demand for marine fuels, issues bordering on insecurity and expertise drive them to seek bunkers elsewhere.

Bunkers are fuels consumed by the engines of a ship or fuel used to power a ship, therefore, bunkering is the act of supplying or replenishing a ship with fuel including but not limited to Automotive Gas Oil (AGO), Fuel Oil, Liquefied Natural Gas (LNG) & Lubricating oils.

With increasing trade in sub-Saharan Africa and lots of vessel activities along the Gulf of Guinea, the demand for bunker fuel in the region is growing with a lot of opportunities for suppliers and providers of support services. However, this has not reflected positively in the Nigerian market as the country continues to battle huge competition from established bunker trade locations offshore Lome and as far as Dakar, Senegal.

This raises the question of what is hindering Nigeria capacity to capture her fair share of the bunker trade business on the continent in order to incentivize more ship owners to pick up products in-country, increase investments and improve associated services.

Reacting to this matter, Head, Products Trading Desk, Propetrol Nigeria Limited, Bisi Olajugbe told M&P that one of the major factors working against Nigeria’s dominance of the West Africa Bunker market is lack of refining capacity onshore. She said traders’ inability to access products from local refineries compels them to depend on international suppliers, which in turn affects consistency and product availability.

“Because of the gap of not being able to buy directly from the refineries in Nigeria and having to depend on international oil traders, lots of operators can’t fit into the value chain. Most of the time, we find that the people who play in the market are actually illegal operators who get their products from unverifiable sources”, Olajugbe said.

In addition, lack of an articulated security arrangement for vessels awaiting berth spaces has continued to work against Africa’s largest petroleum products market.

“Undoubtedly, Nigeria is the biggest market for petroleum products in the whole of West Africa. On the one hand, due to security issues, there is no focus on Nigeria itself as a bunkering hub, so what you find is most people buying from Lome, because the government in Togo has been able to create a Secure Anchorage Area (SAA) for the trade to happen; therefore most international vessels coming to the gulf coast avoid Nigerian waters to get their bunkers from Lome”, she said.

On the other hand, Olajugbe also identified an expertise deficiency that affects some operators in the business. Olajugbe noted that most operators fail to master the value chain and indulge in a haphazard approach to the business. This is against the fact the bunkering is a very organised sector and the kneejerk approach to bunkering activities in Nigeria is alien to international customers who are accustomed to better operations.

The situation is further exacerbated by the increasing dominance of the sector by foreign players who are better positioned to secure bunkering contracts with international vessels before they arrive in Nigerian waters.

Olajugbe notes that it all comes back to the problem of expertise, security, technology and funds. “Even when indigenous companies have been able to acquire all these requirements, there is also need to gain the support of regulatory agencies to operate at full potential. The authorities should recognise that foreign companies cannot be in fair competition with their indigenous counterparts and should create incentives and interventions that would help the local guys hold their own,” she declared.

She even advised that some form of priority be accorded to local operators in the form of a right of first refusal to supply bunkers to vessels sailing into Nigeria ahead of their foreign counterparts.

President of the Bunker Traders Association of Nigeria, Sola Adewumi recently appealed to Vice President, Yemi Osinbajo, to as a matter of urgency, engage stakeholders to design a blueprint for sustainable bunker trading with a view improve industry methods and promote good practice in the sector.

Adewumi disclosed that bunker traders in Nigeria go through the most excruciating process to get licensed, registered, profiled, and provided with security and approvals to discharge fuel products to their clients. These challenges, he claimed, have led to capital flight to other African countries with huge job losses and dearth of expertise for Nigeria.

He further disclosed that it was unfortunate that Nigerian security personnel, particularly the Navy, seemed to have been influenced by the wrong public perception of the bunkering trade, which has resulted in the treatment of bunkering operators as collaborators in oil theft and pipeline vandalism.

According to him, “The deliberate operational hiccups by the Navy have led our members to incur avoidable demurrage and loss of patronage from vessel owners and clients. Furthermore, this has driven Nigerian and corporate ship owners operating within the Nigerian maritime space to bunker outside our shores.”

The operators also identified the need for the Nigerian Maritime Administration and Safety Agency (NIMASA) and the Nigerian Navy to expedite action towards the establishment of a Secure Anchorage Area to encourage bunkering activities in Nigerian waters and for the security of petroleum product vessels awaiting berthing space at the ports.

Regarding the preparedness of Nigerian bunker traders for the implementation of the International Maritime Organizations’ (IMO) 0.5% sulphur cap on marine fuels by 2020, Executive Director of CITAC Africa, David Bleasdale said “Post 2020 there will be greater concern about the quality of the product, rather than just the price…so ship owners will be nervous about where they buy their bunkers and this counts against Africa.”

However, he continued “there could be light at the end of the tunnel as in about five years there could be around 500,000-1 million barrels per day of new refining capacity coming online in West Africa and the bulk of these refineries will be processing low sulphur crudes which make for good quality low sulphur marine fuels and this could work in West Africa’s favour.”

On the Nigerian front, Olajugbe noted that her organisation and other indigenous traders tailor their services to meet the specifications of the local authorities and will comply with the agencies’ directives on the IMO specifications when in effect.

Nigeria has a specification that is already low sulphur- it is called the Nigerian-DPR-NNPC specification for PMS, AGO, LPFO and others. What the IMO requires is for sulphur levels to be further reduced- and this will have to be discussed at the level of the regulatory authorities to review the specification that is acceptable within Nigerian waters.

With the Dangote Refinery set to come on stream soon, the traffic of vessels coming to Nigeria will increase- against this background, operators have reiterated calls for indigenous bunkering companies to streamline their activities in order to exploit the emerging market, and urge the NCDMB, NIMASA, DPR and NNPC to give viable companies the leverage to operate.

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