Advocating for a New Deal for Indigenous Ship Owners

Presidential Committee on Maritime Security wants the federal government to change the contract terms of shipment of crude oil in the country in favour of indigenous ship owners.

By Pita Ochai  |  Dec. 2, 2012 @ 01:00 GMT

THE Presidential Committee on Maritime Security is pushing for a better deal for indigenous ship owners. The 15-member committee wants the contract terms for the shipment of crude oil in the country changed from Free-On-Board, FOB, to Cost, Insurance and Freight, CIF. The recommendation is contained in the report the committee recently submitted to the federal government which is yet to be made public. If approved, this policy will empower the Nigerian indigenous ship owners who have been deprived of business opportunities in the oil sector since the advent of oil exploration and exploitation in the country more than 50 years ago.

Under the FOB terms, buyers of Nigeria’s crude oil are responsible for arranging shipment of their purchase. Since Nigeria started shipping oil, indigenous ship owners have not participated much in the shipment of crude oil. If CIF is introduced, the seller of the crude would arrange for the shipment of goods by sea to a port of destination, and provide the buyer with the documents necessary to obtain the goods from the carrier. This would strengthen the operation of the Coastal and Inland Shipping Act, known as the Cabotage Act, and the Nigerian Content and Development Act. While the Cabotage Act is designed to build capacity of indigenous ship owners, the Nigeria Content Act ensures that indigenous ship owners transport at least 90 percent of Nigerian total crude.

Nigeria loses about N1 trillion annually from selling crude oil on FOB terms. But some Nigerians fear that if empowered by the policy, the indigenous ship owners do not have the capacity to ship a large consignment of the crude oil to its destination points.

Shipping cargo in Nigeria
Shipping cargo in Nigeria

On the contrary, Olaniyi Labinjo secretary-general, Nigerian Indigenous Ship Owners Association, ISAN, said that the issue of capacity would not be a challenge to the indigenous ship owners since Nigeria has abundant human resources needed to have things done. According to him, if the petroleum industry begins to sign terms of contract with indigenous ship owners just like their foreign counterparts, it is easy to overcome whatever capacity challenge that exists now.

“If the CIF is introduced, it would create more business opportunities in different sectors of the economy and give Nigerians favourable terms of trade while the banks would be ready to help in executing the projects. That is what is done all over the world,” Labinjo said.

The Maritime committee was inaugurated in July this year by President Goodluck Jonathan to draw up a roadmap for effective maritime operations in the country. The committee recently submitted its report to the President. The report, has 12 major recommendations. Which, if approved would compel the federal government to tilt the scale in favour of Nigerian ship owners. The committee, which has Idris Umar, the minister of transport, Olisa Agbakoba, former President of the Nigerian Chamber of Shipping, NCS, as chairman and vice chairman, respectively, was set up by President Jonathan at the end of a one-day presidential retreat on Maritime Security held in July at the Banquet Hall of the Presidential Villa, Abuja.

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