With a staggering sum of $6.1 billion freight paid to foreign ship owners annually for crude oil transportation, the Nigerian National Petroleum Company now welcomes the idea of having a national carrier that will be involved in the affreightment of the wet cargo under CIF as against the current FOB trade terms, writes Francis Ugwoke
For decades, the nation’s shipping industry did not record significant progress. This has made stakeholders to cry out to no avail. The matter was made worse when the only national carrier, the Nigerian National Shipping Line (NNSL), was liquidated about 21 years ago. Since then, the shipping sector has been dominated by foreigners. Government had moved about 13 years ago to address this by establishing the Cabotage Policy, which limited carriage of local cargoes within the territorial waters to indigenous operators. But this again failed to work.
The cargo owners, mainly the Nigerian National Petroleum Company (NNPC), and the oil majors have not patronised the local operators adequately. The claim by the NNPC executives has always been that many indigenous ship-owners do not have the required capacity for the wet cargo job within the nation’s waters. For the foreign companies, this was a good development and they were issued waivers by the Transport Ministry for most of the jobs. Only few Nigerian companies have been lucky. But no one has been discussing the carriage of crude oil by Nigerian companies because of the trade terms that favour only foreign carriers. But recently, the NNPC welcomed the idea of a national carrier to be able to participate in crude oil transportation.
Multiplier Effect on Economy
At a gala dinner organised by the Ship Owners Association of Nigeria (SOAN) at Eko Hotel, Lagos, the NNPC Group Managing Director, Dr. Maikanti Kacalla Baru, made every stakeholder happy when he stated the readiness of his corporation to support the national carrier project.
Baru said establishment of a national fleet for crude oil affreightment would be of huge economic benefits to the country with multiplier effect on the nation’s economy. Apart from earning billions of dollars which will address the nation’s foreign exchange nightmare, a national fleet programme will also increase capacity building as it will provide a training ground for the nation’s cadets from which Nigeria can earn foreign exchange like other countries.
Baru said that since Nigeria exports her crude oil on FOB basis, a national fleet programme for the country will make the nation transact her crude oil business on CIF basis. Under Free on Board trade terms, the buyers determine who carries the products as against Cost, Insurance and Freight in which the seller will determine who carries the wet crude.
The transportation of the nation’s crude products has been in the hands of foreigners because those who buy the products nominate their own carriers for the products, most times their own liners.
Baru stated that the establishment of a national fleet for crude oil affreightment helps the country save some of the foreign exchange paid to foreign ship owners.
He said that, “The establishment of a National Fleet for crude oil affreightment helps the country save some of the foreign exchange paid to foreign ship owners. A total of 771,689,625bbl (197,179, 115mt) of crude oil was lifted from Nigeria in 2015. The current freight rate for 130,000tonnes vessel from West Africa-UKC/med is $7.99/tonne. Assuming that the total tonnage of the nation’s crude oil was freighted to UKC/Med using a 130,000 vessel (which could take 950,000bbl), it means that a total of about $6,165,800,104 was paid to foreign ship-owners. Some of these monies could have been saved if the nation had a national fleet for crude affreightment”.
Caution by NNPC
For the national carrier to succeed, Baru gave his advice. He cautioned that the establishment of a national fleet should not be considered solely as the responsibility of government, but should be private sector-driven like in other countries of the world. He also said there was the need to be very careful in the choice of the business model, adding this was very important for the success of the business.
He said, “The establishment of a national fleet should not be considered solely as the responsibility of government. Having a national fleet is about ensuring global presence of a nation’s flagged vessels. The shipping industry in Greece which is the largest in the world is mainly driven by private sector. The ship-owners association should thrive to grow the business of its members such that Nigerian flagged vessels are visible globally. The association therefore, should identify what government needs to put in place to make the shipping business of its members extremely successful.
Applauding SOAN for the efforts to have a national fleet, he advised everyone involved in the plans to learn from the mistakes of the liquidated NNSL. He warned about establishing a national fleet that will be operated by foreigners, adding that this will be against the provisions of the cabotage law.
He said, “Owning a ship is no mean feat, considering the amount of money involved in maintaining a ship, her crew, insurance, regulatory dues etc. The association should be applauded for its worthy objectives which are largely aimed at growing the shipping industry in Nigeria.
“I am sure that you all are aware that our country once had a National fleet under a company called Nigerian Shipping Line (NNSL). One cannot speak therefore on the benefit of establishing a National Shipping Fleet for Crude oil affreightment without referring to NNSL.
Views by Stakeholders
To open up indigenous shipping development in the country, SOAN wants the federal government to review some of its policies and programmes to drive the desired growth in the industry. The President of SOAN, Engr. Greg Ogbeifun, called for a review of duties paid on imported vessels, corporation income tax for companies acquiring new Nigerian flagged vessels and port cost concessions. Others include a review of fines and penalties for offences as contained in the Maritime Agencies Act.
Ogbeifun urged the federal government to amend the Act to support the Nigerian shipping fleet, adding that the Sea Protection levy for instance should be stopped. He also demanded that Nigerian ship owners should be allowed to carry at least 50 of government owned cargoes, adding that this was necessary for the development of the local industry. He called for the creation of priority berthing for Nigerian registered ships and a review of the “extant policy that traders should not earn foreign exchange to pay for product if that cargo is already on Nigerian waters”.
The association equally demanded for the amendment of the cabotage law to effectively enforce local content. The body also called for a review of the maritime law to permit the setting up of a Protection and Indemnity (P & I) Club in Nigeria.
As part of the efforts to establish a national carrier, Nigeria and Singapore has already signed a Memorandum of Understanding on the planned re-establishment of a national fleet. A delegation of the committee was in Singapore with the Transport Minister, Rotimi Chibuike Amaechi, to sign the MoU. Since then, there has been a follow up with members of the Ministerial Committee on national carrier committee headed by Hassan Bello who is also the Chief Executive Officer of the Nigerian Shippers’ Council. Bello and other members of the committee were in China last week to continue discussion with the authorities connected with the project. The Chinese contact will handle areas of fish trawling in the national fleet and was referred to the committee by the Singaporean company.