NIMASA, NNPC to review terms of Nigerian crude affreightment

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Director General, Nigerian Maritime Administration and Safety Agency (NIMASA), Dr. Bashir Jamoh (R) making a presentation to the Group General Manager, Crude Oil Marketing Division, NNPC, Sir Billy Okoye (L) during a courtesy visit by NNPC to the Agency in Lagos recently.

…Seeks new maritime security strategy

For too long, Nigeria has operated a costly and self-effacing policy that has been detrimental to its economic development.

It is therefore, a welcome development that the Nigerian Maritime Administration and Safety Agency (NIMASA) has revived efforts to change the Terms of Trade for the affreightment of Nigerian crude oil from Free on Board (FOB) to Cost Insurance and Freight (CIF).

Director-General of NIMASA, Dr. Bashir Jamoh, disclosed this in Lagos, when he received a delegation from the Nigerian National Petroleum Corporation (NNPC) led by the newly appointed Group General Manager, Crude Oil Marketing Division, NNPC, Sir Billy Okoye.

Jamoh, who had recently paid a similar working visit to the Group Managing Director of NNPC, Mele Kyari, at the corporation’s headquarters in Abuja, expressed NIMASA’s appreciation of NNPC for accommodating the Agency’s interests in transactions where the maritime regulator relied on data from the national oil company.

The NIMASA DG also revealed that the Agency was working towards the implementation of a National Maritime Security Strategy to improve security in Nigerian waters and reduce the cost of shipping.

“Since 2018, NIMASA has championed moves for a change in the terms of trade with regard to transportation of Nigerian crude oil, from FOB to CIF to ensure greater benefits for the country from its oil resources,” the Director-General stated. “A technical committee involving NIMASA, NNPC, and other stakeholders would be set up to develop a template for the desired change, with workable timelines,” he added.

Under FOB trade terms, Nigeria has no reasonable control over the delivery of its crude oil as regards carriage, insurance, and other ancillary services. But under the CIF arrangement, the country maintains ample control over the distribution of its oil, which can be leveraged to enhance the competitive advantage of indigenous operators.

Explaining Nigeria’s preference for FOB, former Group Managing Director of the NNPC, Dr. Maikanti Baru, while speaking at a workshop on Change of Terms of Trade for Nigeria’s Crude Oil Affreightment in 2018 said that under CIF terms, petroleum cargoes in transit are legally the property of the Federation Account. This could put the country’s earnings at risk, as Nigeria’s creditors can seek court orders to confiscate crude oil cargoes as a means of securing payment.

“It is also believed that a transition from FOB to CIF would delay revenue proceeds from crude oil sales by at least 40 days after the conclusion of relevant sales documentations,” Baru stated.

M&P gathered that this singular factor fuels government support for the policy regardless of the inherent value erosion that characterizes it.

Jamoh commended the synergy between NNPC and NIMASA, saying, “Seventy per cent of the Agency’s revenue comes through the sale of crude. Thus, cooperation between NNPC and NNPC cannot be over-emphasised.”

The NIMASA Director-General also disclosed, “The Maritime Intelligence Unit recently established by the Agency is part of efforts to ensure a proactive approach to security in our waters. The focus is to try to nip maritime attacks in the bud by tracking the criminals from the pre-planning and planning stages.

“The ultimate aim is to develop a National Maritime Security Strategy that would help to minimise the cost of insecurity, which NNPC bears on behalf of the country, in the shipment of Nigerian crude.”

The DG recalled NNPC’s grant of the Agency’s requests and generous pledge of cooperation during his recent visit to the corporation and prayed for the continuation of such mutual understanding.

He stated, “We appreciate the NNPC for accommodating NIMASA in its processes. We do not delay vessels in the search for information on them because of the confidence we have in NNPC’s capacity to readily supply such information.”

The Director-General appealed for more local content in the transportation of the country’s crude in line with the Cabotage regime.

While addressing the meeting earlier, Okoye declared that NIMASA was a “critical stakeholder in the business of crude oil sale.” He said his goal was to get the two agencies of government interfacing more closely with each other to resolve challenges and ensure the seamless movement of crude and petroleum products in the country.

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