Despite notable progress in reducing piracy on Nigerian waters and the Gulf of Guinea, findings by Shipping Position Daily have revealed that Nigeria has paid over N465 billion in war risk insurance premiums since 2022.
War risk insurance is a type of insurance that covers damage due to acts of war, including invasion, insurrection, rebellion and hijacking. It has two components: war risk liability, which covers people and items inside the craft and is calculated based on the indemnity amount, and war risk hull, which covers the craft itself and is calculated based on the value of the craft. The premium varies based on the expected stability of the countries to which the vessel will travel.
The war risk phenomenon, which was only known to countries with high rate of piracy such as Somalia, also found its way into Nigeria following massive involvement of youths in the Niger Delta in militant activities.
In 2020, Oceans Beyond Piracy (OBP) report revealed that the total cost of additional war risk area premiums incurred by Nigeria-bound ships transiting the Gulf of Guinea was $55 million in 2020, while 35 percent of ships transiting the area also carried additional kidnap and ransom insurance totalling $100 million.
But, recent checks by Shipping Position Daily reveal that Nigeria has been burdened with an annual payment of N110 billion ($155 million) in war risk insurance premiums since 2022.
For a period of two years, this amounts to N220 billion. Adding this to the previous year’s additional insurance costs, the total expenditure on war risk insurance premiums totalled ₦465 billion. This substantial figure includes both the annual premiums and additional costs incurred from past insurance practices.
The Director General of the Nigerian Maritime Administration and Safety Agency (NIMASA), Dr Dayo Mobereola, during a recent stakeholders’ engagement said that the agency would be engaging foreign insurance companies to tackle the issue of war risk insurance placed on Nigeria- bound cargoes. Mobereola expressed confidence that engagement with the insurance firm would yield positive results.
“Of course, we want the maritime space to be clean, safe, and, most importantly, secure. You spoke about war risk insurance, and I like the discussion that we are going to sit together and approach the insurance companies, the likes of the Lloyds Insurance Company and many of them and ask them questions as to why we are being compared to Sudan and Somalia when there has not been a war in Nigeria since 1966, and why are they charging us on the same premium,” he noted.
Also speaking recently at Elele Military Base in Rivers State, Dr. Mobereola noted that Nigeria has recorded 24 months of zero piracy in its continental shelf. According to him, this ensures that the higher insurance rates on vessels coming to Nigeria’s continental area as War Risk Insurance (WRI) will be removed. He said such a feat was very remarkable because of the huge impact in the economy, especially the push for a deepened blue economy.
But, a viral video on social media sighted by our correspondent last week, revealed a recent piracy incident in Nigerian waters where a smaller boat suspected to be ferrying pirates attempted to attack a larger vessel, forcing the ship’s crew to defend themselves with firearms.
Speaking with Shipping Position Daily last week, a security expert and Secretary General of the Merchant Seafarers Association of Nigeria (MESAN) Captain Alfred Oniye highlighted the urgent need for political solutions to address the ongoing security challenges in Nigeria’s maritime sector.
Capt Oniye emphasized that the current security measures are insufficient and that high-profile authorities often benefit from piracy on Nigeria waters which according to him, complicates the security landscape. He stressed that relying solely on military approaches scares away potential and genuine foreign investors and fails to provide a sustainable solution to the maritime security issues.
The Security expert affirmed that foreign ships operating in Nigerian waters often have to take matters into their own hands, due to the lack of guaranteed safety, adding that many vessels are heavily armed to protect themselves from piracy.
According to Oniye, international law permits the use of arms for navigation safety only with proper approval, and countries must ensure the safety of the ship, crew, and cargo. He stressed that if a country cannot guarantee this safety, it must permit the ships to carry arms. To legally carry arms, foreign ships must apply for waivers; if the host country’s security cannot ensure their safety.
Also speaking, former National President, Nigeria Merchant Navy Officers & Water Transport Senior Staff Association, Engr. Matthew Alalade emphasized that until robust security measures are established, the confidence of international ship owners will remain low. He noted that advanced nations have established Coast Guards to ensure proper engagement with all stakeholders, including local communities, to effectively combat piracy and other maritime threats. He advised that Nigeria, as a littoral state, should follow suit.
Despite efforts by the Nigerian Navy, Alalade asserted that the current security situation is inadequate for the international community. He also pointed out that the security issues in Nigerian waters affect the entire Gulf of Guinea and West Africa, making it imperative to address these challenges comprehensively.
On his part, the National President of the Nigerian Association of Master Mariners (NAMM), Captain Tajudeen Alao emphasized the importance of international indicators over local information in determining insurance and war risk premiums.
Captain Alao acknowledged that currently, Nigerian waters are relatively safe. On the other hand, he added that some ships arriving at Nigerian ports declare Security Level 2 (SL 2), despite NIMASA designating all Nigerian ports at Security Level 1 (SL 1). Alao clarified that SL 1 is the lowest threat level, indicating a relatively safe environment.
The Master Mariners’ boss stressed the need for Nigeria to continuously enhance its maritime security measures to align with international standards and reassure the global shipping community. He noted that discrepancy in security levels declared by in-coming ships highlights the need for continuous improvement and clear communication to international stakeholders.
“Shipping is an integral part of international trade. The international community relies on specific indicators to assess insurance and war risk premiums, rather than local information. Yes, I am aware that some ships calling at our ports declare Security Level 2 as opposed to Security Level 1 declared by the Designated Authority, NIMASA. As far as we are concerned, our waters are relatively safe, hence the declaration of SL 1 at all our ports.” Alao said.
When contacted, the Deputy Director Public Relations of NIMASA; Mr Osagie Edwards failed tio avail our correspondent any response, as phone calls and text mesages sent to him were not responded to as at press time.
