Great cost of piracy at over US$800 million

Piracy is proving costly for firms operating in the Gulf of Guinea.  Industry experts say kidnappings at sea have become so common, they have increased the cost of operations.

Piracy is proving costly for firms operating in the Gulf of Guinea.  Industry experts say kidnappings at sea have become so common, they have increased the cost of operations.  Businesses have to factor in the costs of independent security contractors, extra insurance, and, sometimes, ransom money.

According to the Oceans Beyond Piracy’s 2017 State of Maritime Piracy report, cost of piracy in West Africa through 2017 was US$818.1 million, up from $793.7 million the year before.

Nearly a quarter of that $818.1 million was spent contracting maritime security.  Insurance also represents a huge cost.

The total cost of additional war risk area premiums incurred by ships transiting the Gulf was $18.5 million in 2017 alone, and 35 percent of ships transiting the area also carried additional kidnap and ransom insurance totaling $20.7 million.

Piracy is so common in the Gulf of Guinea that, in its most recent report, the International Maritime Bureau (IMB) described it as “one of the most dangerous shipping routes in the world” and a “world piracy hotspot”.

But because it is such a crucial part of the regional economy, ships still sail its waters and assume the increasingly higher costs that come with the threat of maritime piracy.

It is one of the world’s most important shipping routes for both oil exports from the Niger Delta and consumer goods to and from Central and West Africa.  However, it is not well guarded, a combination that creates ideal conditions for piracy.

Ninety percent of trade to West Africa comes by sea, according to the Danish Ministry of Foreign Affairs, so maritime security is a crucial factor in the region’s economy.

IMB records show pirates kidnapped 27 crew members in the first half of 2019 alone. One in four global piracy incidents in 2018 happened within Nigeria’s territorial waters, according to international insurance carrier Allianz Global.

In early December, the Nave Constellation supertanker was hijacked. Pirates boarded the fully loaded ship, stole its oil cargo, and kidnapped 19 members of its crew about 77 nautical miles (143 km) from Bonny Island, a loading terminal in Rivers State, Nigeria.

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