Terms of trade: Nigeria loses N2 trillion yearly

Minister of Finance, Dr. Ngozi Okonjo-Iweala  

Nigerian maritime and insurance industries may have lost over N20 trillion in the last two and half decades due to bad shipping policy operative since 1986. This amount represents two trillion yearly.
The loss is attributed to the carriage of the country’s crude oil on Free on Board (FOB), which has denied indigenous shipping and marine insurance companies of the accruable foreign exchange earnings.
Maritime experts said with the FOB terms, buyers of Nigeria’s crude oil are responsible for arranging shipment of their purchase, against the Cost Insurance and Freight (CIF) which requires the seller to arrange goods to a port of destination and provide the buyer with the documents to clear them.
Dr. Alex Okwuashi, Rector of Certified Institute of Shipping of Nigeria (CISN), lamented that Nigeria has lost some N2 trillion every year, saying the change to CIF by the Federal Government would immediately enrich the portfolio and balance sheet of Nigerian shipping sector.  He explained that this would also create new opportunities for the country’s ailing insurance firms through freight earnings.
Okwuashi noted that the clause in the 1986 Shipping Policy that the Nigerian National Petroleum Corporation (NNPC) must sell its crude oil on FOB basis “has led to capital flight and poor capacity building of the country’s shipping sector. The government ought to have introduced CIF since.”
He advised the Central Bank of Nigeria and Federal Ministry of Finance to issue guidelines to back up the government’s decision in the next fiscal year. The CISN rector said CIF should be the 2013 incoterm, a term of trade which explains the responsibility of importers and exporters in the international trade. The National President of Nigerian Institute of Freight Forwarding (NIFF),   Dr. Zebulon Ikokide, said no Nigerian shipping company could lift crude oil because of poor government policy in the sector. He observed that Nigeria was not trading on a balanced economy, noting that the introduction of the new term of trade will improve the country’s economy tremendously.
“If Nigeria operates on CIF, the insurance companies would be revived; they would be able to insure cargo lifted here to other countries,” adding that the new policy “should extend to cocoa rubber and other agricultural products.”  The push for change of the trade term came from the 15-member committee inaugurated in July, 2012, by President Goodluck Jonathan. The committee, mandated to draw up a roadmap for effective maritime operations in the country, had the Minister of Transport, Senator Idris Umar; and former President of the Nigerian Chamber of Shipping (NCS), Mr. Olisa Agbakoba, as Chairman and Vice Chairman respectively.
DailyNewswatch