NNPC, NIMASA, Others Review Crude Oil Regime

ibe-kachikwuEmmanuel Ibe Kachikwu. PHOTO: Kiyoshi Ota/Bloomberg
  • NNPC, NIMASA, Others Review Crude Oil Regime

A meeting of stakeholders in the maritime industry has been convened to generate ideas on how best to export Nigeria’s crude oil in order to attract maximum benefits for the country.

The meeting, which had the theme, ‘Free On-Board and Cost, Insurance and Freight Incoterms Framework for Export of Nigerian Crude Oil and Gas’, was organised by the Nigerian National Petroleum Corporation in conjunction with the Nigerian Maritime Administration and Safety Agency,

The Minister of State for Petroleum Resources, Ibe Kachikwu, said various attempts in the past to transit from the Free-on-Board to Cost, Insurance and Freight system of exporting the nation’s crude oil had failed and that there was no better time than now to revisit the issue holistically in order to determine which of the systems best served the interest of Nigeria.

He urged participants to come up with recommendations to help the Federal Government to take appropriate decision on the issue with a view to enhancing the nation’s economy.

The Group Managing Director, NNPC, Maikanti Baru, according to a statement issued by the corporation’s spokesperson, Ndu Ughamadu, said the oil firm’s preference for the FOB was informed by the prevailing security situation and the need to guarantee steady revenue into the Federation Account.

He explained that under the CIF, petroleum cargoes were legally the property of the Federal Government, which could pose a danger to the country’s earnings as creditors could procure court orders to confiscate crude oil cargoes as a means of securing payment of Nigeria’s indebtedness.

Baru stated, “The experiences of the Nigerian Airways and the Nigerian National Shipping Line, both of which had their vessels/crafts and cargoes confiscated on court orders obtained by creditors, are 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 the FOB incoterm allows. Government/NNPC’s liability ends as the crude oil passes from the 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 said the 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 among different stakeholders.

This, he noted, was to guarantee security of the federation’s revenue as well as guard against associated risks involved in the delivery of crude oil and gas to customers.

On his part, the Director-General, NIMASA, Dakuku Peterside, said while there was no correct answer to the issue of the 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 discussions and explore all possible opportunities.

About the Author

Samed Olukoya
Samed Olukoya is the CEO/Founder of investorsking.com, a digital business media, with over 10 years experience as a foreign exchange research analyst and trader.

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