Written by Bolaji Akinola
The decision by the federal government to ban some 113 vessels from lifting crude oil from the 27 oil terminals within the length and breadth of Nigeria’s territorial waters in July could not have been justified.
Reasons adduced for the ban by NNPC Group General Manager, Crude Oil Marketing Division, Gbenga Komolafe were neither convincing nor supportable by facts.
In a letter dated July 15, Komolafe merely stated that, “The NNPC has prohibited 113 tankers from engaging in crude oil/gas loading activities in any of the terminals within the Nigerian territorial waters until further notice.”
He said the affected vessels had also been barred from movements within Nigerian territorial waters forthwith.
I expected more but when none was forthcoming, I raised alarm over the implication of such move especially as it involved sovereign interests. You don’t just place a blanket ban on ships without adducing cogent reasons for your action. If Nigeria had ocean-going vessels, a reciprocal action would have been taken against them by affected countries.
I think some NNPC officials, in their desire to look good before President Muhammadu Buhari misled him to ban these ships. Some of the so-called banned vessels had not visited Nigeria in five years. Some had even been scrapped and were no longer trading.
As I expected and predicted, the international community kicked. Global oil tanker industry association, INTERTANKO kicked.
It sent a letter of protest, demanding that the ban be lifted immediately as no grounds had been established for the rash measure.
INTERTANKO, whose independent members own the majority of the world’s tanker fleet, said in a letter to the NNPC, dated July 22, that there were no “evidence or grounds” given for the ban.
“INTERTANKO protests in the strongest possible way that these bans should be lifted with immediate effect until grounds and evidence for the ban have been given to each vessel and vessel owner/operator, and the owner/operator has had an opportunity to respond,” the association’s General Counsel, Michele White, wrote in the letter.
“The timing of the ban is clearly a political signal to show the Buhari administration is clamping down on oil theft,” said Alex Vines, head of the Africa Programme at Chatham House.
“The challenge now is for the Nigerian authorities to provide credible proof that these indexed vessels were engaged in illicit activities,” he added.
But credible proof could not be provided and a volte-face became inevitable. The face saving measure was for NNPC to claim that it had obtained some form of undertakings and “Letter of Comfort” from oil terminal operators and “off-takers of Nigerian oil and gas” – a guarantee that nominated ships would be free and would not be used for any illegal activity whatsoever.
The point here is that such decisions should never be taken again without due diligence because it creates a dent on Nigeria’s image and further pushes us down the ladder of Ease of Doing Business.
Again, the 113 tankers flip-flop highlights the importance of the urgent need to empower Nigerian shipping companies to own vessels that will be engaged in crude oil lifting.
Nigeria loses about 30% additional value that would accrue from its crude sales if it controls the shipping component.
It is a shame that top NNPC officials have worked hard over the past 50 years to deprive Nigerians the opportunity to transport the nation’s crude oil because of pecuniary gains.
President Buhari will carve his name in gold if he reverses the trading terms of Nigeria’s crude oil from Free on Board (FOB) to Cost, Insurance and Freight (CIF).
For emphasis, FOB is a trade term in international commercial law specifying the point at which the seller transfers ownership of the goods to the buyer. Under the Incoterms 2010 standard published by the International Chamber of Commerce (ICC), FOB is used to define ownership transfer – usually at the point of sale. The seller of the cargo does not control the means of transportation while in the case of CIF, the seller is required to arrange for the carriage of the goods to the port of destination and provide the buyer with the documents necessary to obtain the goods from the carrier.
According to the ICC, the official definition of CIF stipulates that, “The seller delivers the goods on board the vessel or procures the goods already so delivered. The risk of loss of or damage to the goods passes when the goods are on board the vessel. The seller must contract for and pay the costs and freight necessary to bring the goods to the named port of destination.”
The seller is also responsible for insuring the goods to cover the risk of loss or damage during carriage. Further insurance beyond the required minimums must be agreed upon between the buying and selling parties, or must be arranged for separately by the buyer.
Ironically, we import on CIF terms but export FOB. Nigeria is reputed to be the only OPEC nation selling its crude oil FOB.
If our crude oil sales term is then changed to CIF, a minimum of one trillion naira will accrue into the coffers of this nation annually. Shipping companies will flourish, insurance companies will blossom and a minimum of 50,000 additional jobs will be created every year over the next four years.
NNPC’s usual argument advanced at various fora that I have attended had been that Nigerian shipping companies lack requisite capacity and expertise to acquire and operate very large crude carriers and ultra large crude carriers.
I say not so. Give them the chance and see if they won’t perform.
Copyright 2017 Ships & Ports Ltd. Permission to use quotations from this article is granted subject to appropriate credit given to www.shipsandports.com.ng as the source.