CIF: Ship owners lack financial muscle to lift crude – Stakeholders

 

The new arrangement by the Federal Government to make indigenous ship owners participate in the lifting of Nigerian crude oil has come under attack of some stakeholders.

According to them, local ship owners do not have enough vessels to compete effectively with their foreign counterparts.

They argue that any effort geared towards changing the trade term from Free On Board to Cost Insurance and Freight is an exercise in futility. They maintained that indigenous ship owners will merely collect the Standard Purchase Order (SPO) and still give it to their foreign counterparts.

The Federal Government recently adopted the Cost Insurance and Freight (CIF) trade term rather than Free On Board (FOB) which will make the Nigerian ship owners participate in the business of crude oil lifting.

This method which is likely to attract over N.5 trillion to the coffers of the Ship Owners Association of Nigeria (SOAN) is expected to make crude oil affreightment more attractive and competitive.

Cost, Insurance and Freight (CIF) means the seller pays costs, freight and insurance expenses against the buyer’s risk of loss or damage in transit to destination while FOB gives obligations, costs and risk involved in the delivery of goods from the seller to the buyer under the International Chamber of Commerce (Incoterms).

Before now, stakeholders have condemned the preference of foreigners dominating the shipping business, a situation that resulted in the cabotage vessel financing fund (CVFF). CVFF is a contribution by ship owners with a view to save enough fund to acquire vessels.

Stakeholders had said that the new arrangement is an exercise in futility because not only that the indigenous ship owners do not have enough vessels to lift oil, their vessels do not meet International Ship and Port Facility Security Code (ISPS Code).

A freight forwarder and co-ordinator of Save Nigeria Freight Forwarders, Dr Patrick Chukwu, doubted the success of the exercise because, according to him, the ship owners do not have enough ships not to talk of having ships that are ISPS compliant.

“Do they really have vessels to compete with their foreign counterparts? They will just collect SPO and sell it to the same foreigners. How many of their vessels have ISPS code? They are not telling them the truth” he said.

President, Merchant Navy Engineers, Matthew Alalade submitted that there will be crisis if indigenous ship owners take over the lifting of oil from foreigners.

He suggested that rather than totally remove the foreigners from the business, the domestic vessel owners should partner with them. The government should also help the local ship owners to acquire vessels through cabotage vessel financing fund.

“Let them encourage Nigerians to charter vessels. There should be crisis if foreigners hands off lifting of Nigerian crude because we don’t have ships. The government should help the local ship owners to acquire vessels because they don’t have enough vessels” he said.

An importer, Mr Eddy Akwaeze submitted that although 75 per cent foreign liners hire their vessels, indigenous mariners can partner with them to understand the intricacies of sea piracy. He suggested that the indigenous shippers should take over the business on the understanding that the captains of the vessels must be a foreigner because the foreigners understand the Nigerian territorial waters more than the local ones.

“Our local shippers don’t understand what it takes to withstand the sea pirates. I am not part of the people who say that foreigners should completely hands off the business. Rather, the foreign counterparts should partner with the domestic ones, train them and gradually hands off” he said.

The importer recalled how foreigners formed a cartel in the lifting of Nigerian crude and how Togo made over $20 billion last year from Nigerian crude. To this end, he said that Nigeria loses close to $8 billion on daily basis to neigbouring countries.

“If they had allowed the modular system of refining oil in Nigeria, the losses would have been minimized. The crude oil Nigeria gets is one- tenth of the total production” he regretted.

However, the President of the Ship Owners Association of Nigeria (SOAN) and Managing Director of Starz Marine Group, Engineer Greg Ogbeifun observed that what is needed to make the CIF initiative to grow the Nigerian shipping industry and the economy is the government support, which is coming at the right time, when the country wants it most to diversify the economy.

A ship owner Barrister Temisan Omatseye pointed out that there is a lot of benefits in the CIF trade term. He stated further that it would eliminate crude theft, create employment and ultimately compliment the diversification drive of the Federal Government.

Similarly, other stakeholders and members of the Nigerian Ship owners Association (NISA) and Master Mariners unanimously agreed that the CIF trade term would be more beneficial to the country than the present FOB on which the crude lifting is currently based upon.

 

Source: The Sun

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