Steve Agbota

Nigeria has a growing shipping sector that is blighted by many challenges. One of the challenges is the failure of government to implement policies that will drive the sector.

As a result of inconsistence policy or policy summersault, about 98 percent of the sea freight in Nigeria are still being done by foreign companies from developed market economies of Western Europe and America.

Those foreigners also make up about 85 per cent of the maritime workforce in Nigeria today. This scenario creates huge losses for both indigenous shippers and the nation economy at large.

Understandably, global freight rate is estimated to be around $360 billion, but Industry experts have predicted it would increase by 15 per cent before the end of 2019.

With over 95 per cent of Nigerian trade, by volume, and more than 70 per cent of its value being moved around aboard ships and handled by seaports nationwide, it is sad to know that Nigeria is not benefiting from the annual global freight rate due to negative trade terms adopted by government. Free on Board (FOB) regime instead of Cost Insurance and Freight (CIF) wasting the nation’s income opportunities.

Nigeria’s crude oil is being sold on a Free On Board (FOB), basis, an agreement whereby the seller arranges for the transport of goods to a designated port or other points of origin. Once the goods are onboard the ship, the delivery is considered accomplished.

However, Cost, Insurance and Freight (CIF), is a term used in international trade covering both sea and inland waterways, requiring the seller to arrange for the carriage of goods by sea from the port of origin to a port of destination, and also provide the buyer with the documents necessary to clear the goods from the carrier.

In FOB, the point at which responsibility shifts from the seller to the buyer occurs when the shipment leaves the point of origin. While in a CIF agreement, the seller assumes responsibility and pays costs until the goods reach the buyer’s chosen port of destination.

But renowned maritime experts have decried government’s refusal to reverse the negative trade terms despite their disadvantage to the nation’s economy.

They however, beckoned on the Federal Government to quickly reverse the nation’s foreign trade terms from the current FOB to CIF so as to benefit from the $360 billion annual global freight rate, which most countries across the world use because of its economic benefits, before the end of the year.

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At public event recently, the Former Minister of Interior and Executive Chairman, Genesis World Wide Shipping Nigeria Limited, Emmanuel Iheanacho, emphasised the need for government to quickly reverse the trade terms to help grow shipping business and the nation’s economy.

According to him, government should create conducive environment for the shipping industry to provide more job opportunities for Nigerians. He also said government should leave shipping operation in the hands of private sectors to run.

Speaking with Daily Sun on telephone interview on why Nigeria is not benefiting from $360 billion global freight rate, Managing Director of Kamany Marine Services Limited, Charles Okorefe said that it has to do strictly with the Nigeria’s trade terms.

He explained: “Nigeria over the years had talked about exporting of our crude on FOB. And what is the implication of FOB for the shipment of our crude oil is that the buyers of Nigeria’s crude oil also have the prerogative to nominate the vessels that will come to pick the crude oil. And in that case, Nigeria loses out completely from earning freight from such shipment.

“Conversely, if we are operating the CIF regime, Cost Insurance and Freight, it means that you the seller, Nigeria in that case will be the one to nominate the vessels to freight the crude oil cargo, in which case, that $360 billion you talked about, Nigeria will be beneficiary out of it.”

According to him, but because Nigeria is operating FOB regime and until that trade term is changed in favour of CIF, it would continue to earn zero freight.

He added: “And don’t forget that Nigeria is not a net exporter of dry cargo. What we export in most cases are agricultural produce, which most of the time, it rejected by buyers because of excuses of sometimes deterioration and spoilages. You cannot totally blame them too because the gridlock an entering Apapa for the most parts add to deterioration of such produce.

“So we are not net exporters of dry cargo like I said, where will we freight earning coming from? We don’t own ships. So that basically is where the problem lies. Until that trade term is amended in the NNPC Act, we will continue to earn zero freight from the crude oil sector, which of course is our main source income, which is basically where the problems lie.”

For Nigeria not to be completely losing out year in, year out, he urged the Federal Government to take a second look at the NNPC Act at particular portion that deals with our trade terms with the outside world.

He said that trade term should be reversed from Free On Board (FOB) to Cost Insurance and Freight (CIF) that will give Nigerians the prerogative to nominate the vessels to be carrying their crude oil and as corollary, freight earning will come in through that process.

Besides, he said that Federal Government should try to empower the indigenous players via the instrumentality of the Central Bank of Nigeria (CBN) freight fund so that indigenous players can be empowered to purchase newer vessels and tankers that will be able to play the role that they are looking at now, that is lifting of the nation crude oil and it has to be in the hands of Nigerians in line with the provision of the Cabotage Act.