Piracy sustains high shipping costs on Nigerian waters

Incessant pirate attacks and kidnappings are taking an alarming toll on shipping in Nigeria’s territorial waters and the Gulf of Guinea.This year alone, freight costs have reportedly risen six times, amid fears insurance could also be hit.Statistics from the International Maritime Organisation (IMO) show: “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.”

Last month, 11 crewmembers of FWN Rapide were taken hostage off Port Harcourt, spending four weeks in captivity. The mariners were sailing on board the Dutch-flagged vessel from Takoradi in Ghana when they came under attack.In February, five armed pirates attacked ST Marseille, a Luxembourg-flagged tanker as it anchored in the Bay of Cotonou. They had approached the tanker in a speedboat and opened fire.

The same month, armed pirates attacked two vessels in separate incidents off the Coast of Bonny Island.The development has 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 increase it 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.

The latest report released by Ocean Beyond Piracy (OBP) and obtained by NationReformer.com showed that the economic cost of piracy to West Africa 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,” states the report.Shipping companies patronising West Africa and indeed Nigeria 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.

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 estimates 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 adds: “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.”

Solving the issue of piracy must be on the front burner, else “it may lead to negative economic impact or increase in the cost of insurance or war premium insurance, and ultimately lead to high cost of goods and services,” warned NIMASA Director General, Dakuku Peterside.He noted that securing the nation’s territorial waters is a work in progress that requires the commitment of all stakeholders and neighbouring countries. He said NIMASA has recognised this fact and is implementing international regulatory instruments in collaboration with various countries in the region to checkmate criminal activities.

Former NIMASA boss, Temisan Omotseye, described the worrying situation and the attendant loss to the Nigerian economy: “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 $300 million per year on war risk and there is no claim.”

The Managing Director and Chief Executive Officer, MB Maritime and Security Services Limited, Moses Adewale, noted: “Security threats to shipping affects the predictability of trade flows. The damaging consequence of security-related incidents could affect the poorest people in particular in terms of food security, while also threatening the energy security of the world.”He said government and multilateral organisations responsible for maritime affairs must collaborate on the implementation and enforcement of security requirements under the International Ship and Ports facility Security (ISPS) code.