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FOB Vs. CIF: Can any crude buyer allow NNPC to determine delivery vessel?

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Whereas Nigerian ship owners’ have lauded moves by the Nigerian National Petroleum Corporation (NNPC) and the Nigerian Maritime Administration and Safety Agency (NIMASA) to incorporate them into the business of crude lifting, maritime logistics expert have picked holes in the emerging deal.

Before now, the federal government through the NNPC, had been selling and delivering crude to international buyers using the trading term of Free On board (FOB).

However, there is fresh moves change the strategy from FOB to Cost- Insurance and Freight (CIF).

Sales of Nigeria’s crude oil have been on FOB terms for more than 50 years. Under these terms, the buyer pays for the products and would nominate the ship to carry the cargo to the destination of choice. This arrangement has left indigenous shipping companies in the cold as the buyers of the products simply reach out to highly capitalised multinational shipping agencies that transport their goods.

Under the CIF terms, the government or NNPC as the exporter of the product will determine who delivers them to the buyer. With this, Nigerian firms can be engaged for such contracts, and where they do not have the capacity, they can form partnerships with foreign firms.

But some experts who spoke to our correspondent expressed fears of inability of Nigerian poorly empowered shippers to strike a good deal with foreign shippers.

Besides, not all crude buyers may wish to have their consignment transported by an arrangement brokered by the NNPC as many international buyers may invested in some shipping companies for the regular delivery of their crude oil from anywhere in the world they had purchased them.

However, President, Shipowners Association of Nigeria (SOAN), Engr. Greg Ogbeifun and several other Nigerian maritime stakeholders have welcomed the CIF policy, saying it will further encourage the establishment of Nigeria-owned tanker fleet to participate in crude export.

According to him, “The emergence of a Nigerian fleet has the benefit of increasing the revenue base from the affreightment. Besides the financial benefit, Nigeria will be flying her flag internationally. There will be an increase in our flag tonnage. It will lead to our flag register being re-jigged to meet international standards. It will create huge job opportunities for the teeming seafarers both for training and employment.

“If we now have a fleet of very large crude carriers, that will inevitably lead to the development of appropriate ship repair yards for the dry docking and repair needs of these fleet. A dry dock of that nature will create jobs, stem capital flight and increase skills development in the maritime sector,” he said.

Ogbeifun warned intending participants in the CIF policy not to rush to acquire tanker fleet without building adequate manpower run and operate such fleet.

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