A high-powered meeting of stakeholders in the maritime industry has been convened to generate ideas on how best to export Nigerian crude oil to attract maximum benefits for Nigeria.
The meeting with theme: “Free On-Board (FOB) and Cost, Insurance and Freight (CIF) Incoterms Framework for Export of Nigerian Crude Oil and Gas” was organized by the Nigerian National Petroleum Corporation (NNPC) in conjunction with the Nigerian Maritime Administration and Safety Agency (NIMASA).
In his welcome address to participants, Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, said various attempts in the past to transit from the Free-on-Board (FOB) to Cost, Insurance and Freight (CIF) system of exporting the nation’s crude oil had failed and that there was no better time than now to revisit the issue wholistically to determine which of the systems best serves the interest of Nigeria.
He urged participants to come up with recommendations to help the Federal Government take appropriate decision on the issue with a view to enhancing the nation’s the economy.
The Group Managing Director of the NNPC, Dr. Maikanti Baru, in his keynote address, said the corporation’s preference for FOB was informed by the prevailing security situation and the need to guarantee steady revenue into the Federation Account.
He explained that under CIF, petroleum cargoes are legally the property of the Federal Government which could pose a danger to the country’s earning as creditors could procure court orders to confiscate crude oil cargoes as a means of securing payment of Nigeria’s indebtedness.
“The experiences of Nigerian Airways and the Nigerian National Shipping Line both of which had their vessels/crafts and cargoes confiscated on court orders obtained by creditors is unpleasant to recall.
“Due to these peculiarities, we find it most appropriate to transfer the potential risks associated with the ownership of the cargo to the buyer at the load port in Nigeria which FOB incoterm allows. Government/NNPC’s liability ends as the crude oil passes from loading hose at the vessel’s manifold to the loading vessel. The buyer pays for Freight, Marine Insurance, unloading and transportation from the load port in Nigeria to the destination”, he stated.
He said NNPC was, however, not unmindful of the value erosion inherent in the FOB sale arrangement, adding that the corporation was open to new ideas on the proper mix that could enable synergy and collaboration amongst different stakeholders to guarantee security of federation revenue as well as guard against associated risks involved in delivery of crude oil and Gas to customers.
On his part, the Director General of NIMASA, Dr. Dakuku Peterside, said while there was no correct answer to the issue of freight system to adopt, there was need to be open-minded about possible alternatives that could help in the quest to diversify the economy.
He urged participants to be guided by the national interest in their discussion and explore all possible opportunities.