•Urge global lobbying to scrap punitive surcharges
By Steve Agbota
styvenchy@yahoo.com
Maritime and trade enthusiasts are genuinely worried over the scathing charges slapped on Nigerian shippers by offshore insurance firms despite the country being declared piracy-free since 2021.
As if the declaration holds no water, the foreign insurance companies have, over time, increased the premiums paid on the Nigerian-bound cargoes, which is estimated at over $500 million annually on a conservative estimate.
The flip side of the increasing cost of the premium is that costs incurred by importers and exporters are automatically transferred to the citizens who pay far more than would have been required if the surcharges were scrapped.
Tongues are wagging as to why the development subsists since there has not been any incidence of attacks on the nation’s waters up to the Gulf of Guinea.
Ironically, Nigeria has paid a staggering $1.5 billion in War Risk Insurance (WRI) premiums over the past three years alone to Lloyd’s of London, Protection and Indemnity (P&I) insurance and other foreign insurance firms.
Shipowners and importers have repeatedly described it as unjustifiable and fraudulent.
For clarity, war risk insurance is an additional surcharge imposed by international shipping companies on cargo bound for Nigeria. It comprises two key components: war risk liability, which covers people and goods aboard the vessel and is calculated based on the indemnity amount, and war risk hull, which covers the vessel itself and is determined by its value.
This financial burden was initially introduced during the peak of the Niger Delta militancy and piracy.
Operators lamented that the impact of this scathing amount on Nigeria’s economy is worrisome.
For instance, for a Very Large Crude Carrier (VLCC) valued at $130 million, the WRI surcharge per voyage is approximately $445,000.
And for new container vessels valued at $150 million, the cost rises to $525,000 per voyage. Maersk, one of the world’s largest shipping companies, has also introduced a transit disruption surcharge of up to $450 per container, while other shipping lines impose a war risk surcharge of $40–$50 per 20-foot container.
Due to the economic implications of this financial burden, the Nigerian Maritime Administration and Safety Agency (NIMASA), under the leadership of Dr Dayo Mobereola, has launched an aggressive campaign to eliminate war risk insurance on Nigeria-bound cargo.
The NIMASA Act and the Merchant Shipping Act mandate the agency to promote shipping development, and removing the WRI premium has become a central focus of its maritime reforms.
The security concerns that originally justified these premiums no longer exist. Nigeria has not recorded a single piracy incident in over three years, so there is no justification for paying WRI on Nigerian-bound cargoes.
In 2021, the International Maritime Bureau (IMB) officially removed Nigeria from its list of piracy-prone countries. Over the past five years, NIMASA, in collaboration with the Nigerian Navy, has led an unprecedented crackdown on piracy in the Gulf of Guinea, earning global recognition from the International Maritime Organisation (IMO). Despite these achievements, international shipping companies have continued to impose war risk insurance premiums on Nigeria-bound cargoes.
In 2023, the International Bargaining Forum (IBF) further validated Nigeria’s progress by delisting the country from the list of high-risk maritime nations. With piracy no longer a concern, why has the international shipping community continued to impose these excessive premiums?
The shipowners who spoke with Daily Sun said that they couldn’t understand why international insurance companies still impose war risk surcharges on the vessels and cargoes coming into the nation’s ports.
The NIMASA boss, Mobereola, said the agency has initiated discussions with key international partners, including taking the matter to the United Nations (UN).
He hinted that with the backing of the UN and other international stakeholders, Nigeria would be in a stronger position to challenge the insurers, forcing them to adjust the premiums in line with the actual risk.
“We’ve engaged them, and we’re taking it to the United Nations. The UN is going to support us, and we will be able to take it to the insurers who will have no choice but to reduce it as well,” he said.
Speaking with Daily Sun on why Nigeria still pays high premiums despite reduction in piracy attacks on the nation’s waters, the Managing Director of Sea Transport Services Nigeria Limited and President of the Nigerian Chamber of Shipping, Alhaji Aminu Umar, said: “We don’t know why we are still paying WRI premium to foreign insurance companies even though there is no incidence in the last three years. It is a financial burden on us, the shipowners, because we continue to pay this money.
“It is NIMASA, together with the stakeholders, which is the industry, should engage them, and to engage the committee, which is called the Joint War Committee, they are the ones that have the responsibility to either waive off the war risk insurance or continue to put it on vessels that are within this zone.
“We have engaged NIMASA and we believe the agency is putting efforts to ensure that this issue is addressed holistically.
“We, the Nigerian Chamber of Shipping, are also going to present a paper on this issue. We believe that the WRI will be removed from vessels and cargoes coming to Nigeria” he said.
However, he sees a silver lining, explaining that despite all the challenges, there are still enormous opportunities in the nation’s maritime sector.
He said what indigenous shipowners need from the government is the enabling environment for Nigerians to invest in the sector.
Meanwhile, the President of the Nigeria Shipowners Association (NISA), Mr. Sola Adewunmi, said there was no justification whatsoever for foreign insurance companies to continue collecting WRI premiums from Nigerian shipowners and importers.
“The whole thing is about politics. It is an international politics that is being played out. What is the justification for collecting such money when we haven’t had piracy incidents on our waters in the last three years? The waters are safe now, and there is no justification for that money being paid to these foreign insurance companies. It is international politics. I won’t say more than that,” he said.
However, the Head Research of the Sea Empowerment and Research Centre (SEREC), Eugene Nweke, said that the over $1.5 billion Nigeria paid in War Risk Insurance premiums to international insurers in the past three years translates to approximately $500 million per year.
He said this annual payment of $500 million is a significant financial burden on Nigeria, and efforts to reduce or eliminate these premiums could have substantial economic benefits.
“However, the claim that eliminating these premiums could save Nigeria over $400 billion annually seems to be an estimate of potential annual savings, rather than a direct calculation based on the $1.5 billion paid over three years.
“SEREC notes that the relationship between the $500 million annual premium payment and the $400 billion potential annual savings is not directly proportional.
Further clarification on the figures would require more specific and up-to-date data from NIMASA or other authoritative sources.
“Nonetheless, it is clear that War Risk Insurance premiums pose a substantial financial burden on Nigeria. NIMASA’s campaign to abolish these premiums, citing Nigeria’s improved security status and elimination of piracy in its waters, is a step in the right direction,” he said.
He said SEREC commends NIMASA’s efforts and encourages the agency to continue working with international insurers to reassess Nigeria’s risk profile and adjust premiums accordingly.
By doing so, he said Nigeria could potentially save significant amounts on War Risk Insurance premiums and redirect these resources to more pressing economic development needs.
An importer, Moses Godfrey, said the WRI remains an international scam, saying “if it is not a scam, why are they still slamming surcharges on cargoes and vessels coming to the country that is free from piracy attacks and other maritime-related crimes?
“Since the Deep Blue project was inaugurated in 2021, it has curbed piracy, sea robbery, sea-kidnapping and other maritime-related crimes on the nation’s waters and up to the Gulf of Guinea (GoG). This improvement earned Nigeria a recommendation from the International Maritime Organisation (IMO) and the International Maritime Bureau (IMB), which removed Nigeria from the international list of countries prone to piracy,” he pointed out.
He lamented that despite significant improvements in maritime security, the likes of the Lloyds Insurance Company and many others are still slamming war risk surcharges on the vessels and cargoes coming into the nation’s ports.
He said this premium continues to inflate the cost of freight for Nigerian-bound cargo for both import and export.
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