How UK Influences Nigeria’s War Risk Crisis

How UK Influences Nigeria’s War Risk Crisis

·  $90billion ‘war risk insurance’ fleeced  from Nigeria yearly

·  Nigerian ship-owners initiate plans to form P&I Club

By Kenneth Jukpor

There are indications that the British Authorities are linked to the unending extra war risk charges paid by shippers in Nigeria and other parts of the Gulf of Guinea (GoG) in Africa which has been classified as a war risk zone, while global insurance companies fleece over $90billion from Nigeria annually.

Despite commendations from renowned global maritime bodies on the improved safety and reduction in piracy attacks on Nigerian waters, the nation is still placed on the “war risk zone”; international politics has been highlighted as a bigger problem to eliminating the high insurance premiums for vessels and crew members coming to the country, rather than insecurity or piracy.

Experts have lamented that the colossal sums labeled ‘free money’ would continue to be collected by global insurance firms because any solution would require the Nigerian President endorsing the solution which would have a damaging effect of the economy of United Kingdom.

Speaking with MMS Plusrecently on the underlying factors responsible for the high war risk insurance premiums in Nigeria, a former President of African Shipowners Association (ASA) Barr. Temisan Omatseye stated that if anything happens to correct the problem, the British Prime Minister or the Queen of England would call the President and the Minister or those involved may lose their jobs.

Omatseye who is also a former Director General of NIMASA stated that he made efforts to deal with the issue when he was Director General of NIMASA.

“If the Nigerian government doesn’t play its role the solution we proffered wouldn’t work and the British Prime Minister or Queen of England would visit Nigeria. Whoever initiates such solution without the President’s consent could lose his or her job and be in a mess because this is international politics,” he said.

He recalled his experience on the menace, “NLNG came to us complaining that anytime they cross five degrees east they would be charged war risk premium which was about $1000 per day. This war risk zone goes all the way through Bakassi and Calabar and it is irrelevant which flag vessel you have, you must pay the war risk premium”

“War risk issue is something that can only be tackled as a national issue. These global companies are making a lot of money from us as a result of the Joint War Committee (JWC) report of Lloyds. As at the time we made the research, we discovered that they were collecting between $150million to $200million per year for just NLNG vessels and crude on war risk. This is free money because there was hardly any claim paid. These insurance companies were making over $600million from Extra War Insurance premium from Nigeria as at the time we did that research. The prices would have gone up today. This sum was for just vessels, not including rigs, supply vessels, SFIVs, FPSOs, among others”, he added.

Another indication that the EWRI is a fraud is the fact that one year after these premiums are paid and there has been no claim by the insured, part of the money ought to be returned to but the global insurance companies never reimburse their clients.

Meanwhile, the Chief Executive Officer of Sopetro Marine Limited and Chairman of Shipping and Logistics Group of the Nigerian Content Consultative Forum (NCCF), Mr. Mina Oforiokuma told MMS Plusin 2016 that the EWRI premium cost $15,000 per day which amounts to $90billion annually when compared to Omatseye’s findings more than a decade ago.

Oforiokuma said; “Across the West African coast, the negative effect of pirate attacks gave rise to the Joint War Committee (JWC) of Lloyds’ of London. JWC pronounced that the area from the limit of Togo and Benin republic maritime boundaries all the way along the gulf of Guinea to the maritime boundary of the republic of Nigeria and Cameroon are a ‘War Risk Zone’. The effect of JWC’s action was that the foreign mother vessels which are usually insured by the Protection and Indemnity club would not risk going into the ‘war risk’ areas because the moment they transgress, their insurance premium increases by more five times.

“We are talking about tankers of about 100,000 deadweight tons and most of them were made in the 2000’s and they could cost 60- 70 million dollars. The insurance premium for these vessels ranges from $300,000 to $500,000. If any of these tankers transit into the war risk zone, for the period they are in the zone, they are uninsured with the normal insurance except they take an extra war risk insurance (EWRI) premium. A tanker that has an annual insurance premium of $500,000 for example, the EWRI premium will cost $15,000 per day. So, imagine if such a tanker stays in Nigeria for 30 days, its EWRI premium will be $450,000 for 30 days while its annual insurance is $500,000. This is the primary reason why most of these foreign mother vessels refuse to come to Nigeria,” he said.

Mina urged the Nigerian government to wake up to its responsibility, lamenting why the federal government of Nigeria hasn’t made any entreaty to Lloyds of London.

“We have the Nigerian Maritime Administration and Safety Agency (NIMASA). We also have representatives at the International Maritime Organization (IMO), we have a ministry of transportation and we have an embassy in London. It beats my imagination that nobody has taken any step in that direction to ask why or to provide the necessary protection to the zone in order to give confidence to the international insurance community so that they could lift the restriction,” he said.

Meanwhile, as part of efforts to correct this trend and domicile a large chunk of the capital flight in Nigeria, Nigerian ship-owners have begun plans to float a national or regional P&I Club.

Capt. Taiwo Akinpelumi, the Lagos Coordinator, Nigerian Indigenous Ship-owners Association (NISA) revealed this during an exclusive chat with MMS Plus in Lagos last week.

“Nigerian ship-owners and other stakeholders are coming together to see the possibility of floating a P&I. This is a mutual association because of the humongous capital flight associated with the P&I insurance. This is still at the elementary stage but we have realized that the volume of insurance undertaken by the industry is enormous,” Akinpelumi said.

He expressed confidence that the P&I Club would correct the capital flight, noting that the non-profit platform would be a better alternative to the global insurance companies that are solely profit- driven.

“Recall that the concept of P&I insurance started in London when ship-owners met in a coffee shop and decided to adopt the procedure as an avenue to protect themselves against the third party liabilities,” he added.

Similarly, the President of Ship Owners Association of Nigeria (SOAN), Dr. Mkgeorge Onyung toldMMS Plus that SOAN was aware of the plans to float the P&I and was in total support of the initiative.

“We are aware of the plans to float a P&I. At SOAN, we support it because it is for the benefit of ship-owners. It is something that is doable but we would need to devote time and money to it. At this stage, we shouldn’t be making any noise about it because it is still at the rudimentary stage. One of the problems with our business is that something comes up as just an idea and it is thrown into the public. It is just an idea that is yet to go through due process. It should be allowed to thrive before we begin to appraise it,” he said.

Aside the extra war risk surcharge, other questionable charges to Nigerian ports include congestion surcharge, freight tax surcharge, low sulphur surcharge, currency adjustment factor, waiver surcharge, Nigerian Ports Surcharge Destination (NSDP), ISPS surcharge, peak season surcharge, IMO surcharge, heavy weight charge, among others.

Nigerian shippers have been made to pay these charges because the nation has no national carrier and the country isn’t in a position to negotiate at the IMO Council.

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