The Federal Government, Monday, said it has commenced engagement with stakeholders in the maritime industry to explore the most viable and cost-effective options in the export of Nigeria’s crude oil.
Speaking at a maritime forum in Abuja, , Mr. Ibe Kachikwu, Minister of State for Petroleum Resources, 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.
He argued that there was no better time than now to revisit the issue holistically to determine which of the systems best served the interest of Nigeria.
He also urged participants to come up with recommendations to help the Federal Government take appropriate decisions on the issue with a view to enhancing the nation’s the economy.
The meeting, with the theme: ‘Free On-Board (FOB) and Cost, Insurance and Freight (CIF) Incoterms Framework for Export of Nigerian Crude Oil and Gas’ was organised by the Nigerian National Petroleum Corporation, NNPC, in conjunction with the Nigerian Maritime Administration and Safety Agency, NIMASA.
Also speaking, Mr. Maikanti Baru, Group Managing Director of the NNPC, explained 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.
According to him, 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.
He said: “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.”
However, Baru disclosed that the NNPC was 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.
He said the meeting was convened to generate ideas on how best to export Nigerian crude oil to attract maximum benefits for Nigeria.
On his own part, Mr. Dakuku Peterside, the Director General of NIMASA, 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 the stakeholders to be guided by the national interest in their discussion and explore all possible opportunities.