September 26, 2022

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Nigerian importers pay $20m risk surcharge on cargoes daily – Oyewole

Leke Oyewole

Leke Oyewole is the former Senior Special Assistant on Maritime Affairs to ex-President Goodluck Jonathan. In this exclusive interview with Shulammite ‘Foyeku, he speaks on how foreign insurance companies are making $20million daily from Nigerian importers for war risk insurance. He also speaks on other efforts expected of Nigeria beyond the deep blue project to remove the war- risk premium on Nigerian- bound vessels.

Excerpts

With the launch of the deep blue project, there are expectations that there will be an improvement in security in Nigeria waters with the scourge of piracy and other criminality reduced to its barest minimum. What are your thoughts on this?

The deep blue project is a very good development. It is long expected and overdue. The only thing that I hope is that NIMASA will use it effectively to increase their revenues. I am just a bit circumspect when I think about the multiplicity of such platforms across the agencies. Before now, NPA had the C3i platform, I don’t know whether it is still there or not and the Navy, through the office of the National Security Adviser (NSA) has the Falcon eye as well as the new platform put in place by NIMASA. There should be a way of harmonizing these platforms together so that it will form part of the national intelligence surveillance for the maritime domain and be used to address the infractions on the waters adequately. It is a very good development and most of the problems can be solved by different parts of the technologies that are available now through the different agencies. The funding aspect, hopefully will not weigh too much on government resources. Before now, the one that was managed by Global West Vessel Specialist Limited was fully funded by Global West. They bought all the platforms, maintained them and they run them but NIMASA only uses them. To that extent, there was a lot of prudence and it is only when they make money over and above what NIMASA was originally getting that the company was being paid so that brought a lot of efficiency into the project. So now that the government will have to fuel and maintain these assets, hopefully, it will not weigh too much on government resources and it will also provide the same level of efficiency if not better than that provided by Global West. That is just my little concern, other than that, it is a very good thing they have put in place.

Talking about maintenance of the deep blue assets, do you support that visiting ships to Nigeria should be surcharge the same way vessels that visit the now cancelled secure anchorage area are charged as a means to generate funds?

Security is not cheap anywhere. You can imagine what Nigeria is paying for insecurity which has resulted in a risk premium that importers in Nigeria pay. It is a lot of money and it is weighing heavily on the cost of goods that get to town in Nigeria. Whether we know it or not, we pay over $20 million dollars depending on how many vessels come into the ports. If 20 vessels should come in, each of them pays over a million dollar extra which the importers already pay in risk premium because the ship was coming to unsafe waters. If you import to Cotonue for example a car and you send the same type of car to Nigeria, you pay about $300 extra for coming to Nigeria. A ship that carries about 5,000 cars would mean importers of those cars in that ship must have paid $300 multiplied by 5,000 which is about $1.5million. If that kind of rate is what every other vessel pays for coming into Nigeria and we welcome about 20 vessels in a day including tankers, container ships, general cargo and the roro vessels, that is about $30 million. Even if we assume it is not up to that, on the average, if 20 ships come to Nigeria daily, we will still be paying about $20 million on risk premium. I don’t know what the traffic is today but when I was in office, I knew we were getting between 20 and 25 ships per day.

Despite the deep blue project, foreign insurance companies are insisting that Nigeria will remain on the list of war risk countries. What is your take on this?

That is right because the effect of the deep blue project has not manifested. Until it brings normalcy to our waters and no more piracy or sea robbery is reported, that is when they (insurance companies) will say you guys have done well, now we can stop the war risk premium that vessels that come into Nigeria are charged. For now, that we have launched the deep blue project does not mean they would take it off. We have done something and they have acknowledged it so they will watch to see how effective that thing is. So, they are right when they said they will continue to charge the war risk. In 2011, when we started the Global West project, Lagos became calm in no time but piracy went up in the Benin Republic so much so that the President of Benin came to Nigeria to seek help. The then President in Nigeria also agreed that we should go to Benin Republic and our Navy moved to Benin Republic to restore normalcy and that was to the admiration of the international community. It was loudly mentioned at the September United Nations General Conference in New York and Nigeria was greatly applauded there. So, when they see that kind of effect in this one also, they will acknowledge that something is being done. The Global West project slowly spread to the eastern part before the whole thing was finally stopped so that could not make the project claim anything from the insurance companies that they should stop the risk premium on vessels. But if this one becomes very effective and they are able to curtail or minimize piracy and sea robbery, why not? We can demand that vessels coming into Nigeria should stop paying and importers to Nigeria should stop paying

Do you think the deep blue project alone would help remove the war risk premium on Nigerian-bound cargoes?

No, it will not. The deep blue project is a big step towards addressing the issue of piracy. In fact, it will take almost 50 percent of a positive step in the right direction. However, it is a combination of many things. The first thing that constitutes the risk premium that importers pay is sea robbery and piracy. The second one is the turnaround time for vessels that come to Nigeria? Some vessels are delayed beyond normal. If vessels can come in and go out without much delay, then that is okay because each day a vessel wastes within our territorial waters, it is a huge cost to the operators of that ship. So that is also part of it. How easily they retrieve their empty boxes also can be a major thing for them to consider because most of the empties are trapped in the traffic, they don’t get back to the port and they are not easily loaded. Are we as a nation doing anything that the ship can take back when they are going like agricultural produce? Most of the ships that visit Nigeria go back empty because we don’t export. We are a consuming nation. If they know that when they come here, they still get goods to take to another place, there will be a lot of considerations that can be put in place for these insurance companies to ignore this premium we are talking about.