ABUJA, July 27 (Reuters) - Nigeria's navy has retired 10 officers, including a rear admiral, because of evidence they were involved in smuggling stolen crude oil, the chief of navy staff was reported as saying by the official news agency.

Nigeria is the world's eighth biggest exporter of crude oil but a sizeable proportion of its output is stolen by thieves who either drill into pipelines or hijack barges loaded with oil. The theft and smuggling of oil are known as "bunkering".

Industry experts say much of the violence that plagues the oil-producing Niger Delta is connected to bunkering.

Armed gangs fight turf wars over bunkering territory, they say, while corrupt government officials and members of the security forces protect the gangs in exchange for a cut of the profits. Proceeds from bunkering fuel crime and militancy.

It is rare for the Nigerian armed forces to recognise that any of their own are involved, however, or to comment on the problem.

"They (the navy officers) were involved in oil bunkering," Chief of Navy Staff Ganiyu Adeyeye was quoted as saying by the News Agency of Nigeria late on Thursday.

He was answering questions from a House of Representatives committee investigating the retirement of a rear admiral and nine other officers. He said the navy had "formal intelligence reports" against them.

Proceeds from bunkering are a major source of funding for militants in the Niger Delta who often killed naval ratings and officers, Adeyeye said in his presentation.

The Niger Delta has become increasingly anarchic since early 2006, when militants alleging neglect by successive governments launched a wave of attacks on the oil industry and kidnappings of oil workers to press for local control of oil revenues.

The violence spiralled out of control as bunkerers, armed robbers and ransom seekers all sought to take advantage of the breakdown in law and order. More than 200 foreigners have been abducted, mostly for money, and thousands of others have fled the region.

Nigeria's oil output is down by about 20 percent because of the violence.

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