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Maritime piracy: Nigeria loses US$2.74bn in four years

Piracy attacks in the Nigerian maritime domain are taking alarming toll on shipping in Nigeria’s territorial waters and the Gulf of Guinea. Aside earning the Nigerian waters the notorious status of been the most dangerous in the region, the situation was also said to be partially responsible for the nation’s bleeding economy as over US$2.74 billion was paid by the country in the past four years as insurance surcharges and other sundry surcharges imposed on Nigerian shipments simply because the country’s territorial waters is not safe for navigation.

These surcharges, Sunday Telegraph learnt, were passed on to the final consumers of goods and services imported into the country by the shippers.

This year alone, freight costs have reportedly risen six times, amid fears that insurance could also be rising as the menace of piracy and other criminalities continue to rise in the Nigerian waters. Meanwhile, statistics from the International Maritime Organisation (IMO) shows that, “in the first four months of 2018, the number of incidents significantly increased in the region, with 36 reported, against 17 the same period in 2017.”

The same month, armed pirates attacked two vessels in separate incidents off the Coast of Bonny Island. The development left stakeholders worried that foreign shipping companies may introduce a minimum of $200,000 (about N72 million) as insurance premium before calling at the nation’s ports.

“The cost of shipping is now very high because they now increase freight almost on a monthly basis. They have increased it more than six times this year. At a time, it was increased by $500 or $600. Now, it’s over $5,200, from $2,200 for one container. This increase is affecting the prices of commodities because we will have to add the cost of shipment to determine our market price,” lamented importer, Okechukwu Nwobi.

Economic cost piracy rising

The Ocean Beyond Piracy (OBP) in a recent report showed that the economic cost of piracy to Nigeria has been on the increase in the last three years, reaching over $818.1 million in 2017, while about $213.7 million was spent to contract maritime security personnel protecting vessels in the region.

It revealed that regional spending on law enforcement and naval patrols increased by $13.2 million in the year. The report also showed that 1,726 seafarers were affected last year, while 100 crewmembers were taken hostage.

Two persons were killed. It suggested that attacks on cargo vessel are currently on the rise, as crude oil prices assume an upward swing.

“While only one incident of hijacking for cargo theft was recorded in 2017, incidents in early 2018 may suggest a return to the model,” the report notes.

Shipping companies patronising Nigeria and other West African ports are incurring additional expenses, as they are compelled to engage the services of private security guards, even though the Federal Government recently declared that such violates Nigeria’s constitution. A breakdown of the security cost by OBP showed that coastal states incurred personnel costs of about $213.7 million; affiliated escorts, $9.4 million; and private patrols, $134.9 million per year. It noted that Nigeria spends about $6.6 million yearly to protect its security anchorage area.

These are clearly demarcated areas where ships could safely anchor and wait to berth or conduct ship-to-ship (STS) cargo transfers. About four major international shipping companies operate in the country including Maersk Line, Mediterranean Shipping Company, Grimaldi and CMA/CGM in addition to smaller foreign and local shipping companies call at the Nigeria ports. According to the OPB report, the Nigerian Maritime Administration and Safety Agency (NIMASA) is estimated to have spent about $217.8 million on counter-piracy.

On insurance cost, the report states: “In addition to war risk insurance premiums, a number of ship operators take out risk insurance as additional protection for their crew. OBP further estimated that that in 2017, approximately 35 per cent of all ships transiting the Gulf of Guinea Listed Area carried this insurance at a cost totaling $20.7 million. It added that “the threat of piracy may lead to increased cargo insurance premiums.

While a comprehensive estimate of the piracy-related costs is impossible, it can be determined whether the costs associated with this type of insurance were higher or lower than in the previous year, based on the risk score assigned to the region by the Joint Cargo Committee (JCC) Cargo Watchlist. “In 2017, the risk score for the Gulf of Guinea remained classified as ‘high’ and Nigeria continued to have the highest risk score of all littoral states,” the report stressed.

Speaking on the worrying situation and the attendant loss to the Nigerian economy, a former director general of NIMASA, Temisan Omotseye, said; “Ship owners will tell you that they are not going anywhere east. They call it ‘five degree east’. Any ship that goes five degree east will have what is called, ‘war risk premium’. And each day a vessel stays in that domain, it pays $1000 to the insurance company. The insurance companies collect up to $300million per year on war risk and there is no claim.”

Nigeria leads in piracy attacks

Despite efforts by the Federal Government to reduce the cases of piracy and banditry in Nigeria’s territorial waters, the country still leads in pirates attack in the Gulf of Guinea in the first nine months of 2018, a report by the International Maritime Bureau (IMB) has revealed. IMB in its latest quarterly report said a total of 156 incidents of piracy and armed robbery against ships were reported to its Piracy Reporting Centre in the first nine months of 2018 compared to 121 for the same period in 2017. According to IMB, a total of 156 incidents of piracy and armed robbery against ships were reported to the IMB Piracy Reporting Centre (PRC) in the first nine months of 2018 compared to 121 for the same period in 2017.

The 2018 figure is broken down as 107 vessels boarded, 32 attempted attacks, 13 vessels fired upon and four vessels hijacked –although no vessels were reported as hijacked in Q3 2018.This is first time since 1994when no vessel hijackings have been reported in two consecutive quarters. Speaking in Lagos during the 2018 World Maritime Day celebration, Secretary to The Government of The Federation, Mr. Boss Mustapha disclosed that the Federal Government plans to invest in maritime security and local capacity development to reduce maritime piracy in the Nigerian waters so as to get a sizeable chunk of the N$6 billion (N2.16 trillion) of the annual freight cost for the country retained in the Nigerian economy.

Also speaking at the event, Minister of Transportation, Rotimi Amaechi said shippers spend between $5 billion and $6 billion annually on freight cost, while the maritime component of Nigeria’s oil and gas industry is worth an estimated $8 billion alongside seaborne transportation, oceanic extractive resource exploitation and export processing zones.

He said, “It is worthy to note that for effective contribution of shipping activities to the development of Nigeria’s economy, there is urgent need to curb and combat these illegal maritime activities in our waters as these crimes continue to constitute impediments to economic development. “As long as these crimes continue to pose danger to the Gulf of Guinea and our maritime domain, the benefits of the theme of this year’s World Maritime Day celebration will continue to be elusive,” he said.

Solution

It is commendable that the proposition by the Minister of Transportation to award a contract of over US$152million to an unknown Israeli security firm to import security platforms, operate them and train Nigerian security personnel (Navy) to secure Nigerian waters, has reportedly been cancelled by President Muhammadu Buhari, after the contract was roundly condemned by the Nigerian media. However, there is no gainsaying the fact that the Federal Government needs to up its game in the security of the Nigerian territorial waters to make it safe for seaborne trade.

It is against this backdrop that it is of utmost importance that the Federal Government deploys the platforms which the country acquired under its Memorandum of Understanding (MoU) with the Global West Vessel Specialists Limited, especially the much reported Danish fast armored boats, which the company purchased for the country. If those are not enough, more could be purchased and the contract needs to be awarded to a local firm, since the last time Nigeria awarded the contract to a local firm, Global West, they did well in securing the nation’s maritime domain.
Source: New Telegraph

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