Nigerians to pay more as shipping lines set to increase cost of freight insurance

The decision by the Baltic and International Maritime Council (BIMCO) to approve a new standard contract for Security Escort Vessels (SEVs) in volatile maritime regions may have profound impact on cost of cargo clearance at Nigerian seaports, investigations have revealed.

BIMCO  is a commercial shipping trade organisation headquartered in Copenhagen, with membership of over 60 percent of the world’s leading shipping lines in its fold.

According to BIMCO’s Deputy General Counsel, Stolt-Nielsen, who was quoted in a statement issued by the group last Thursday, “BIMCO Documentary Committee has approved a new standard contract for Security Escort Vessels (SEVs). The standard is a balanced contractual framework for SEVs that accompany merchant ships in high threat areas such as the Gulf of Guinea (GoG) which has recently seen a rise in piracy activity as the dry season has begun.

“The new contract is dubbed SEV-GUARDCON because it is based on BIMCO’s GUARDCON contract for the employment of security guards on board ships.

“The escort vessel’s capabilities, and what should happen if the vessel does not arrive at the rendezvous point as agreed, are key issues for ship-owners and operators trading in high threat areas. SEV-GUARDCON addresses these and other aspects to consider when transiting areas such as the Gulf of Guinea.”

In shipping, security escorts are used when merchant ships transit dangerous areas and call ports where the use of on board maritime security personnel is not desirable due to local practices or regulations.  Checks  by the Nigerian Tribune however confirmed that Nigeria currently does not allow onboard maritime security due to the presence of the Nigerian Navy, a situation that has forced many ships that transit her waters to hire private security escort vessels.

With the approval of this new standard contract for security escort vessels, ships might be forced to jack up insurance freight cost to recoup their expenses on security, a shipping agent who doesn’t want his name in print told the Nigerian Tribune exclusively.

In the words of the shipping agent, “The decision by BIMCO to approve a new standard for security escort vessels means Nigerian cargo owners might have to pay more to get their cargoes. In the first place, cost of doing business in Nigerian ports is high because of the insecurity in and around her waters. The shipping lines charge what is called War Risk Insurance on cargoes coming to Nigerian ports because they pay so much to private security escort firms to provide security for them when they transit Nigerian waters.

“The money that the shipping lines pay private security escort, which ranges from $7,000 to $10,000 per trip, is then recouped from cargo owners in the form of War Risk Surcharges paid on the cargoes carried by these ships. The new standard that BIMCO wants to enforce will definitely bring about new charges by these security escort vessels. BIMCO is asking for more in terms of security, and these private security firms are not saying they won’t deliver, but it will come at a cost.

“Whatever cost that the new BIMCO initiative is going to attract will be transferred on cargo owners by the shipping companies. It’s as simple as that. The shipping lines won’t pay more money to the security escort vessels and not charge more in terms of insurance freight on cargoes. Don’t forget that the shipping lines are business men who are in business to make profit. “

When asked why BIMCO, which boast of about 60 percent of the world’s leading shipping lines, is trying to approve a new standard for security escort vessels at this time, the shipping agent explained that insecurity on the waters is usually high during the dry season.

“You know that the risks of maritime threats are much higher during the dry season than the wet season. What BIMCO is doing is based on the forthcoming dry season which is already here. There is a feeling that maritime threats in the GoG might become more profound, thus the need to prepare ahead before any of its members get caught in the insecurity confusion.

“Whatever BIMCO agrees as regards its new standards for security escort vessels, one thing is certain; there will be adjustment as regards amount paid as insurance freight on cargoes by the cargo owners. Whatever extra cost comes out of the new BIMCO security arrangement, it will be transferred on the cargoes carried by these ships. So people should brace up to spend more to clear cargoes along ports located in the GoG.”

Also speaking on the development, an Importer Mrs. Bola Banjoko explained that whatever changes made that affects cost of insurance freight on cargoes and ultimately affects cost of cargo clearance, it will also affect the prices of goods in the markets since NIgeria imports virtually everything.

“Our markets are filled with imported items. Even some that are made here, their raw materials are sourced abroad and brought here by ships. So, if the shipping companies make any changes that will affect the cost of clearing cargoes at our ports, it is the man on the streets that will pay the difference because the importers are also in business to make profit. If I have to pay more to clear cargoes, then the difference of what I pay will be added on the commodities that I have brought in. So who pays? It is the man on the streets who buy these products at the markets. It’s a simple logic,” Mrs. Banjoko told the Nigerian Tribune

Recall that the issue of maritime insecurity is gradually rearing its head in the last two months along Nigeria’s waters, with both recent attacks ending unsuccessful due to the presence of foreign navies around the nations territorial waters.

On the 27th of October, 2021, a Russian Naval Destroyer, Vice-Admiral Kulakov avoided what would have been a maritime security threat in Nigerian waters when she helped scare away pirates who had already boarded a container vessel, MSC Lucia at 86 nautical miles Southwest of offshore Agbami Oil Terminal. The pirates fled the ship through the aid of a small speedboat when they saw a Kamov Ka-27PS helicopter, which had been dispatched by the Vice-Admiral Kulakov, approaching with sea soldiers.

Again, on the 25th of November, a Danish warship, Esbern Snare was conducting an operation protecting shipping routes in the Gulf of Guinea when it spotted a fast-moving vessel carrying eight suspected pirates near a number of commercial ships.

“After the Danish frigate fired warning shots, the pirates opened fire on the Danish navy special forces, who in turn shot and killed four pirates and wounded one. The remaining four pirates were taken on board the frigate, and no Danish personnel were hurt in the incident. It is the first time the frigate has opened fire during its current mission in the Gulf of Guinea,” the Danish military said in a statement.

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