Nigeria’s maritime sector has undergone a significant transformation in recent years, achieving remarkable progress in security. The implementation of the Deep Blue Project, a collaborative effort involving the Nigerian Maritime Administration and Safety Agency (NIMASA), the Nigerian Navy, and other relevant agencies, has effectively suppressed piracy in the Gulf of Guinea. This success has garnered international recognition, including commendation from the International Maritime Organisation (IMO) and Nigeria’s removal from the list of high-risk maritime zones by the International Bargaining Forum (IBF). Despite these advancements, Nigerian shipping continues to be burdened by hefty war risk insurance (WRI) premiums, a financial imposition that stakeholders argue is no longer justified given the improved security situation.
WRI, which covers both vessel and cargo liabilities in times of conflict, became a significant cost for Nigerian shipping during periods of heightened piracy and militancy. While these threats have substantially diminished, international shipping firms and insurers, including Lloyd’s of London and Protection & Indemnity Clubs, continue to levy these premiums, costing Nigeria an estimated $1.5 billion over the past three years. These charges, which can reach hundreds of thousands of dollars per voyage for large vessels, alongside additional cargo surcharges imposed by shipping lines like Maersk, represent a substantial financial drain on the Nigerian economy. This is particularly concerning as the risks that these premiums were initially designed to mitigate are now virtually non-existent, with Nigeria recording no piracy incidents in over three years.
Stakeholders within the Nigerian maritime industry have voiced strong concerns about the continued imposition of these premiums. The Sea Empowerment and Research Centre (SEREC) acknowledges the ongoing costs associated with maritime security, including the hiring of security vessels, but emphasizes the need for greater transparency from shipowners regarding these expenses. Former NIMASA Director-General, Temisan Omatseye, has characterized the continued payment of WRI premiums as “unfair exploitation,” citing the arbitrary nature of the premium increases by the Joint War Risk Committee (JWRC) in London. He points out that Nigeria’s premiums have, at times, exceeded those imposed on Pakistan even during periods of intense insurgency, highlighting the disconnect between risk assessment and premium levels.
Omatseye further reveals past attempts to establish a local insurance framework to challenge the dominance of foreign insurers. These efforts, however, were thwarted by a combination of lack of political will and resistance from powerful international reinsurers, exposing the vested interests at play. He warns that without local insurance solutions, Nigeria’s growing importance as an energy hub, driven by increased oil refining and LNG exports, will only exacerbate its vulnerability to excessive WRI premiums. This dependence on foreign insurers also poses a threat to Nigeria’s sovereignty in global trade, creating a potential avenue for economic manipulation through sanctions and control over cargo movements.
The disparity between improved security and persistent high premiums is further highlighted by the Nigerian Navy’s success in apprehending over 80 piracy suspects between 2019 and 2020, including individuals linked to foreign vessels operating in Nigerian waters. While acknowledging progress in dismantling piracy networks, the Navy also identifies funding constraints as a significant obstacle to sustaining maritime security efforts. The Maritime Security Providers Association of Nigeria (MASPAN) president, Emmanuel Maiguwa, concurs, questioning why Nigeria continues to be penalized with high premiums despite the significant reduction in piracy incidents.
Experts within the Nigerian maritime sector advocate for several key solutions to address the issue of exorbitant WRI premiums. Omatseye strongly recommends the establishment of a Nigerian-backed war risk insurance pool to foster competition and drive down costs, arguing that this is essential to break the dominance of foreign insurers. He further emphasizes the need for enhanced inter-agency collaboration between the Marine Police, the Navy, and NIMASA, advocating for a unified approach to maritime security that mirrors the collaborative models employed by other nations. Maiguwa adds that unless Nigeria addresses systemic issues within its justice system, improves inter-agency cooperation, and optimizes maritime cost structures, the burden of WRI premiums will persist irrespective of security improvements.
In conclusion, Nigeria faces a paradoxical situation. Despite significant strides in maritime security, its shipping industry remains burdened by outdated and inflated WRI premiums. This financial strain represents a significant loss of resources, estimated at over $1.5 billion in just three years, that could be invested in further developing the maritime sector and other critical areas of the Nigerian economy. Addressing this issue requires a multifaceted approach that includes establishing a local insurance mechanism, fostering stronger inter-agency collaboration, and reforming related aspects of the justice system. By taking decisive action, Nigeria can unlock the full potential of its maritime sector and ensure that its hard-won security gains translate into tangible economic benefits. This will not only protect Nigeria from undue financial exploitation but also strengthen its sovereignty in international trade.
