Nigeria-bound cargo to pay $100 million war risk insurance after piracy red list removal

Despite Nigeria being delisted from piracy ‘red list,’ cargoes destined for the country, will continue to pay $100 million on war and ransom risk insurance.

This comes as the International Maritime Organisation (IMO) has cited fresh obstacles with certain conditions to be met by Nigeria. This was disclosed by the Director General of the Nigerian Maritime Administration and Safety Agency (NIMASA), Dr. Bashir Jamoh.

The war-risk phenomenon was applied to countries with an established high rate of piracy such as, Somalia. However, due to the involvement of Niger Delta youths in militant activities a decade ago and the general state of insecurity in the Gulf of Guinea, Nigeria was included in the list of war-risk countries.

This, consequently, saw Nigeria bearing the biggest brunt of the increase in war-risk insurance on cargoes coming to its ports, especially since the country accounts for about 70 per cent of maritime trade in the Gulf of Guinea.

According to Oceans Beyond Piracy’s 2020 report, the total cost of additional war risk area premiums incurred by Nigeria-bound ships transiting the Gulf of Guinea was $55.5 million in 2020, while 35 per cent of ships transiting the area also carried additional kidnap and ransom insurance totaling $100.7 million.

Recall that the NIMASA DG, in July 2022, confirmed that Nigeria had been delisted from the ‘red list’ of countries affected by piracy and may no longer pay war risk insurance by the end of September 2022.

Jamoh, who spoke at the 16th Maritime Seminar for Judges, held in Abuja, disclosed that between January and June 2022, no incident of piracy in Nigeria had been reported by the International Maritime Bureau (IMB); implying that Nigeria is now free from piracy.

He said after the country’s removal from the red list of piracy, its waters were no longer the most dangerous to trade on in the whole world as they used to be.

But Jamoh, while speaking at the just concluded three-day National Transport Summit of the Chartered Institute of Transport Administration of Nigeria (CIOTA) in Abuja, last week, said the 2022 date was no longer feasible and that concerned global bodies have rebuffed all entreaties for the premium’s removal.

Jamoh, who was represented by the Executive Director of Finance and Administration, NIMASA, Chudi Offodile, said the International Maritime Organisation hinged the removal on the sustained reduction or total eradication of attacks on ships coming to Nigeria.

According to him, NIMASA made moves to ensure international ships coming to Nigeria remove the war risk insurance on Nigeria-bound cargo, but the IMO has insisted that success in reducing piracy must be sustained for that to happen.

“They claimed we have been on the list for more than 25 years and a short time cannot be a yardstick to remove the War Risk Insurance,” adding, “we shouldn’t bring a few examples. We compiled our report and they told us last month that they have concluded their Executive Council meeting for the second quarter and by the third quarter in September, they were going to consider other countries.

“They asked us to bring up our short, medium and long-term plans that will convince them that we have permanent and sustainable reasons to maintain the yardstick of the drop in piracy, so they can then remove the War Risk Insurance,” he explained.

Jamoh said the essence of the NIMASA’s investment in the Deep Blue Project was to improve security in Nigeria’s waters and to reduce the payment of war risk insurance by ships coming to Nigerian Ports.

He said NIMASA invested over $200 million in acquiring assets for the implementation of the Deep Blue Project.

Jamoh said he had hoped that by the end of September 2022, Nigeria should be able to rejoice and see a drastic reduction in freight rates, since the country was import-dependent country.

Worried that despite the promises, the war risk premium is still being paid by Nigeria, stakeholders blamed insecurity on the nation’s waters as the main reason Nigeria-bound cargoes are still forced to pay the premium, thereby, increasing the cost of doing business at the nation’s ports.

They noted that despite the presence of the deep blue asset, Nigeria needs to sustainably invest in securing its waterways for the safety of ships coming to the ports.

Speaking at a panel session with the theme, ‘Maritime Safety and Security Administration in Nigeria,’ the Executive Secretary of the Nigerian Shippers’ Council (NSC), Emmanuel Jime, confirmed that shippers still pay high freight on goods coming to the country’s ports.

He said cargoes that are supposed to go to the Eastern ports, especially Calabar and Port Harcourt, are being diverted to Lagos ports due to the high rate of insecurity in the Niger Delta waters.

Jime, who was represented by a director at the NSC, Cajetan Agu, said there is a high freight differential between Lagos and Eastern ports due to the payment of war risk insurance charges on cargoes.

He said shippers’ pay between $1,000 and $1,500 as freight on Eastern port-bound cargo when compared to the freight for Lagos port-bound cargo.

On his part, the Deputy Vice Chancellor of the Maritime University of Nigeria, Okerenkoko, Delta State, Prof. Innocent Ogwude, said achieving safety in Nigerian inland waters is about risk reduction.

He said if the waterway is free and goods with free services movement, the cost would be reduced.

He added that Nigeria needs to spend money to deploy technology to track security threats on the waters; noting that spending to build security on waterways shows how the country values human lives.