Stakeholders in the maritime sector under the umbrella of the Sea Empowerment and Research Centre (SEREC) have revealed that Nigeria pays an annual sum of $500m for war risk insurance, amounting to $1.5 billion in the last three years.

War risk insurance is a type of coverage that protects against losses caused by war, terrorism, or other similar events.

It typically covers damage to property, goods, or vessels resulting from: War and conflict, Damage or loss caused by armed conflict, invasion, or civil war.

SEREC in a statement revealed that the annual payment of $500 million is a significant financial burden on Nigeria, and that efforts to reduce or eliminate these premiums could have substantial economic benefits.

SEREC?s reaction came in the light of a statement credited to the Minister of Marine and Blue Economy, Adegboyega Oyetola, that Nigeria has recorded zero piracy attacks in the last three years.

?Over $1.5bn paid in three years?

Dr. Eugene Nweke, Founder SEREC and a former National President of the National Association of Government Approved Freight Forwarders (NAGAFF) in the statement, disclosed that 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.

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?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.

?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, Nigeria can potentially save significant amounts on War Risk Insurance premiums and redirect these resources to more pressing economic development needs,? he revealed.

Speaking further, Dr. Nweke said SEREC wants the Ministry, through the Nigerian Maritime Administration and Safety Agency (NIMASA), to do more than mere pronouncement, insisting that ship owners still pay between $5000 to $8000 daily to hire Nigeria bound security vessels.

According to him, SEREC understands that, though the NIMASA has invested over $200 million in the Deep Blue Project to improve security in Nigerian waters and reduce war risk insurance payments, but that despite these efforts, insecurity continues to affect port costs.

?Take note that, the ship owners in Nigeria still incur significant costs for security measures despite the reduction in piracy. According to recent reports, maritime security operators have increased offshore shipping charges by $1,500 due to rising operational expenses.

?However, there isn?t any specific information on daily costs ranging from $5,000 to $8,000 for hiring security vessels, as taunted, but, the ship owners are in a better position to unravel and report on this base on daily operational experiences.

?What is known to SEREC is that, Security Escort Vessels are still in operation. For instance, companies like Castor Vali Services Nigeria provide security escort vessels to support clients operating in Nigerian waters and within the Economic Exclusion Zone.

Another notable concern is the maritime security costs. You recall that, before the Deep Blue Project, ships coming to Lagos ports paid around $2,500 at the Lagos secure anchorage zone.

Although this charge was terminated, insecurity still impacts the cost of doing business at Nigerian ports, with costs being transferred to consumers.

So, if there are such claims by ship owners, that despite piracy reduction, ship owners still pay between $5000 to $8000 daily to hire security vessels, they should come out boldly and speak out? he explained.

The economic burden of piracy

The threat of piracy continues to loom large over the global shipping industry, with shipowners bearing the significant economic burden of protecting their vessels and crew.

Despite a decline in piracy incidents, shipowners are spending a staggering $8,000 daily on security measures to mitigate the risks of piracy.

The Gulf of Guinea, the Singapore Strait, and the Gulf of Aden remain high-risk areas, with pirates continually adapting their tactics to evade detection.

In response, shipowners are investing heavily in advanced security measures, including armed security guards, surveillance systems, and Ship Security Alert Systems (SSAS).

The costs of these measures vary widely, ranging from $5,000 to $8,000 per day for hiring security vessels to escort ships. Additionally, shipowners are incurring significant expenses for: Initial setup costs range from $15,000 to $25,000, with ongoing costs of $10,000 to $20,000 per voyage, installing advanced surveillance equipment, such as CCTV and radar systems, can cost between $25,000 to $50,000 as well as ship security system which gulps between $3,000 to $10,000.

Stakeholders in the Maritime sector disclosed that these expenses are not only a significant financial burden but also divert resources away from other critical areas of the business.

The stakeholders opined that the economic impact of piracy extends beyond the shipping industry, with consequences felt across global trade and commerce.

The Chairman of the Nigerian Port Consultative Council (NPCC), Mr. Bolaji Sunmola, recently disclosed that the federal government?s failure to effectively implement the Cabotage Law has resulted in significant economic losses, estimated to be within the neighborhood of about nine billion dollars.

The Cabotage Act, enacted in 2003, aims to promote the development of indigenous tonnage and restrict the use of foreign vessels in domestic coastal trade.

Despite its potential to boost the Nigerian economy, the law remains largely unenforced.

This is coming just as the federal government on Thursday promised to revive critical fishing terminals to boost local fish production.

Sunmola stressed that Nigeria and the international community must continue to work together to address the root causes of piracy and develop effective strategies to prevent and respond to incidents. In the meantime, shipowners will remain vigilant, investing in the necessary security measures to protect their vessels, crew, and cargo.

Alhaji Aminu Umar, Managing Director of Sea Transport Services Nigeria Limited, as well as the President of the Nigerian Chamber of Shipping & ICS Board Member, Nigeria, disclosed that despite all these challenges, there are still enormous opportunities in the nation?s maritime sector.

He revealed that, what indigenous shipowners need from the government is the enabling environment for Nigerians to invest in the sector.

What you should know about WRI

The War risk insurance (WRI) 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.

According to Wikipedia, War risk insurance is a type of insurance which covers damage due to acts of war, including invasion, insurrection, rebellion and hijacking.

The premium which is considered as an additional financial burden was introduced at the peak of Niger Delta insurgency and piracy in Nigeria?s maritime sector.

With the WRI, the global maritime community believes Nigeria is at war and so the insurance premium is placed on cargo coming to Nigeria to cover damage or possible hijacking of ships.

Since its introduction, it is estimated that Nigeria has incurred billions of dollars in losses paid as war risk insurance premium.

Recently, the Director General of Nigerian Maritime Administration and Safety Agency (NIMASA), Dr. Dayo Mobereola, urged the Danish government to join hands with other countries of the world to end war risk insurance placed on Nigeria bound cargo.

Mobereola spoke earlier in the year when a team from the Danish Maritime Security Project visited NIMASA?s headquarters in Lagos.

Speaking at the meeting, the DG said it is high time war risk insurance placed on vessels or cargoes coming to Nigeria be removed as way of acknowledging efforts by the federal government in ensuring that piracy is reduced to the lowest level in the Gulf of Guinea

He told the visiting team that Nigeria invested heavily in ensuring that the entire water is crime free.

?I wouldn?t go as far as calling it an international conspiracy, but I think that given the commitment NIMASA and the federal government of Nigeria have made in maritime security to ensure almost zero incidents of piracy and robbery within the Gulf of Guinea in the past four or five years, there?s absolutely no reason for the current War Risk Insurance Premium paid by vessels coming down this area.

?And we expect that given the commitment we?ve made as an agency and as a country, that the War Risk Insurance Premium ought to have come down. And so with this cooperation we seek with the Danish government, we expect that that premium and freight costs and other issues will have to be addressed by the international communities.? (Daily Trust)

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