Stakeholders in the oil and gas as well as the maritime industry, converged in Abuja, sought leeway to export Nigerian crude oil in order to attract maximum benefits.
The meeting led by the Ministry of Petroleum Resources, and the Nigerian Maritime Administration and Safety Agency (NIMASA), is expected to fast track the country’s transition from the Free-on-Board (FOB) to Cost, Insurance and Freight (CIF) system of exporting the nation’s oil.
Speaking at the forum, which focused on: “Free On-Board (FOB) and Cost, Insurance and Freight (CIF) Incoterms Framework for Export of Nigerian Crude Oil and Gas,” the Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, insisted that Nigeria is in urgent need of improving its oil export. He decried that various attempts in the past to transit from FOB to CIF system of exporting the nation’s crude oil had failed.
According to him, there is no better time than now to revisit the issue holistically, 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.
Kachikwu also applauded the clamour for local participation in the industry, while commending the organisers that the event came at an opportune time following the recent launch of 2018/2019 crude oil term contracts.He added that the event would ensure clear cut resolutions and propositions that would form policy inputs that will set the pace for the industry.
The Group Managing Director, Nigerian National Petroleum Corporation (NNPC), Maikanti Baru, however defended that 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 argued 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 oil cargoes as a means of securing payment for Nigeria’s indebtedness.
“The experiences of Nigerian Airways, and the Nigerian National Shipping Line, both of which had their vessels/aircraft 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 it was open to new ideas on the proper mix that could enable synergy and collaboration amongst different stakeholders to guarantee security of revenues. Also this will also guard against associated risks involved in delivery of oil and gas to customers.
On his part, the Director General of NIMASA, Dakuku Peterside, said while there was no correct answer to the issue of freight system to adopt, there was a 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.