FOB policy: Nigeria creates wealth, jobs for crude importing nations, says Iheanacho
Foremost Master Mariner and Chairman of Genesis Worldwide Shipping, Captain Emmanuel has said that Nigeria creates wealth and job opportunities for nations importing her crude oil due to the Free On Board FOB, trade policy adopted for the sale the black gold.
He said that Nigeria would not derive maximum benefit in terms of creating wealth and job opportunity until she adopts the Cost Insurance and Freight CIF trade term for the carriage of her crude exports.
It is estimated that at the 2.7 million barrels of crude oil exported per day at the freight cost of $2.5 per barrel, Nigeria loses over N2.2 trillion annually in terms of shipments of her crude oil export, which if ploughed back into the economy would create a lot of jobs and help check high youth unemployment rate.
FOB is a trade term under which the price invoiced or quoted by a seller includes all charges up to placing the goods on board a ship at the port of departure specified by the buyer. It is used in shipping to indicate that there is no charge to the buyer for goods placed on board a carrier. Under this term, the buyer determines the vessel used for the shipment.
Conversely, the CIF policy under which Nigeria’s imports including refined petroleum products are carried is a trade term requiring the seller to arrange for the carriage of goods by sea to a port of destination, and provide the buyer with the documents necessary to obtain the goods from the carrier on arrival.
Captain Iheanacho, who is also chairman of Integrated Oil and Gas Limited, observed that in adopting the FOB term for her crude oil export and CIF for all her imports including liquid bulk, the country loses in all the three components of the trade, thereby creating wealth and job opportunities for foreign countries.
According to him, Nigeria loses in terms of the freight components of the trade, through which lots of wealth and job opportunities would have been created for the country by engaging indigenous ship owners.
He also noted that the country also loses because it does not have the refining capacity, which would have also been a huge source of wealth creation for the economy.
Another area of loss to the country in the crude oil trade business is in the importation of the refined petroleum products, which foreigners also determine and control the shipment to the detriment of indigenous shipping companies.
He regretted that the only benefit the country derives from her God-given natural resource is the proceeds from the sale of the crude at $50 or $100 per barrel as the case may be, which is the minimum derivable benefit in the entire chain.
Stakeholders have however criticised the Nigerian National Petroleum Corporation NNPC for the continued carriage of the nation’s crude on the basis of FOB while the nation’s imports are carried on the basis of CIF.
Some of them have alleged that it was in a bid for the NNPC to perpetrate fraud that it connives with International Oil Companies IOCs to ensure that the nation’s crude oil shipments are lifted on the basis of FOB, which excludes indigenous shipping companies.
They argued that allowing indigenous ship owners to participate in the lifting of crude oil would create a minimum of 5,000 direct jobs annually, which would help reduce the high rate of youth unemployment in the country and the attendant increasing crime wave.