Notable stakeholders in the nation’s maritime industry including, the Nigerian Association of Master Mariners (NAMM) and a former Minister of Interior; Captain Emmanuel Ihenacho and others have commended recent moves by the Nigerian Maritime Administration and Safety Agency (NIMASA) to change the nation’s crude oil lifting terms from the age long Free on Board (FOB) to Cost Insurance and Freight (CIF).
In separate interviews with Shipping Position Daily last week in Lagos, the stakeholders were of the opinion that the change will not only boost revenue of the government, it will also boost cargo generation for indigenous operators and also create employment for Nigerians.
The president of NAMM, Captain Tajudeen Alao, however told our correspondent that there is need for political will to effect the change, he added that it is beyond NIMASA alone to accomplish.
“It is a very welcome idea, we need the political will to do it, it is not a NIMASA doing it, it is a Federal Government thing and it is beyond NIMASA. So I hope the leadership of NIMASA will champion the course, so it is commendable. In terms of revenue the country has lost so much, we have also lost so much, in terms of not knowing the amount of crude being taken out, it has been massive. We can be able to buy the ship we have bought ships in the past. So we can overcome it in just a matter of time”, he pointed out.
Also speaking, a frontline ship owner and a former Minister; Captain Emmanuel Ihenacho, advised that changing from FOB to CIF, will give the nation a captive business that can yield enough profit.
“Talking about changing our oil lifting from Free On Board (FOB) to Cost Insurance and Freight (CIF), that means we have to change the shipping elements and attach it to the cargoes that come and that will give us a captive business that we can make profit from. A business that will bring employment for our people and so many things will come from it because at this point in time, we seem only to be interested in selling the crude and then we leave the carriage to somebody else and the refining to somebody else and the carriage we also leave it back to somebody else. This are economic value-added channels that we can very well capture for own people”, he said.
Asked if the shipping industry is ready to take up the challenge, he said: “Why will you say if the shipping industry is prepared, why are they not prepared, running a ship whether you are running in the coast it is an internationally, it is exactly the same skills that you need. And if there are adjustments to be made, the adjustments will be to the protocols when you want to go into foreign ports, so it is not a big issue. They also have agents in those ports to ensure that the protocols are adhered to. But in terms of the skills, technical skills it is the same certification that you require from the IMO conventions”.
Meanwhile, a member of the Nigerian Indigenous Ship-Owners Association (NISA), Captain Taiwo Akinpelumi said that the move is long overdue, adding that there is need for the country to add value to her crude.
According to him, it is only in Nigeria that the crude is lifted on FOB terms, he stressed that changing the terms to CIF will help to create more cargoes for indigenous ship owners.
“That is what we have been canvassing for, it is long overdue; we need to add value on our crude oil sales scale. It is only in this country that our crude is sold on FOB basis, whereby no value added to shipping agents as handled by foreigners. So NIMASA is partnering the NNPC to make sure that it is changed is a welcomed development, that is what we have been canvassing for and it will go a long way.
“Apart from developing our capacity it will go a long way to boost employment opportunity in the industry. Don’t forget that one of the core mandates of NIMASA is shipping development, so if they are canvassing for a change on FOB basis, what they are saying is that they want more tonnages for indigenous ship owners”.
Akinpelumi however expressed optimism that the nation maritime industry is capable of generating over N7trillion before when the oil lifting terms are changed from FOB to CIF.
“What we have lost so far is humongous, we have always said that shipping components of maritime industry is capable of generating N7trillion annually. If the oil is no longer sold on FOB basis, then you can imagine the value that will be added. I can tell you it is no small money at all. The shipping sector is always ready, I have always said that a million ships without cargoes is worthless”, he added.
According to him, “ordinary policy statements can change the game. If for instance the government is saying that our crude will be lifted based on CIF, what it means is that there are jobs on ground for our indigenous owners and when there are jobs on ground, acquiring more vessel increases the skills, all these financial institutions both local and international will be more than willing to render financial assistance”.
Also speaking, a maritime lawyer, Emeka Akabogu explained that the change will boost the shipping sector in the country with about $1.8billion annually.
“CIF sale of Nigerian crude oil makes it possible for the seller, (NNPC in this case) to ship cargo directly to the buyer on the seller’s nominated vessel. It creates the opportunity for the local shipping market to move crude oil to buyers around the world, creating huge job opportunities and expansion potential for the Nigerian shipping cluster. This is on the back of the freight value component of shipping about 700million barrels of Nigerian crude oil per annum, which calculated at a low market assumption of USD2.5/barrel/day sums to about USD1.8billion annually, representing quantum boost to shipping in the country”
Akabogu, however expressed fear that there might be difficulties achieving the move.
“The operational realities of achieving this are a bit more challenging. Crude oil sales contracts are largely based on commercial negotiations, and the proposition of CIF is not always agreeable to buyers. From a policy point of view, it should therefore be driven not as a mandatory term of sale, but a default term for all sales subject to the preference of the buyer.
“This gives the buyers a choice and places the task of achieving the goal on creative and value-driven marketing by the crude oil sales team of Nigeria’ in this case the Crude Marketing Division of NNPC”.
Akabogu however said that, “the role of NIMASA will be to develop a realistic and convincing package which is sellable as a benefit to buyers for NNPC to consider. This involves rallying the Nigerian shipping market and putting up a value-proposition that is sustainable, competitive and rewarding. NIMASA has its work cut out”.
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