Nigeria to save $400bn annually by abolishing war risk insurance – NIMASA

The Nigerian Maritime Administration and Safety Agency says Nigeria paid over $1.5 billion in war risk insurance premiums to international insurers in the past three years.

In a statement on Friday, NIMASA’s head of public relations, Osagie Edward, said the impact of WRI premiums on the economy is staggering.

War risk insurance covers losses and damages resulting from acts of war, including invasion, insurrection, rebellion, and hijacking, and is commonly used in the shipping and aviation industries to protect against hostile acts and specific risks in high-risk environments.

NIMASA said the WRI is an additional surcharge imposed by international shipping companies on Nigeria-bound cargoes.

The statement said it comprises two key components, including war risk liability, which covers people and goods aboard the vessel, calculated based on the indemnity amount; and war risk hull, which covers the vessel itself and is determined by its value.

The agency said the financial burden, initially introduced during the height of the Niger Delta militancy and piracy, has overstayed its purpose.

The statement read, “Although the Nigerian Bureau of Statistics does not have precise data on the total WRI payments made to international insurers, available figures indicate that Nigeria has paid over $1.5 billion in the past three years alone to Lloyd’s of London, Protection and Indemnity (P&I) insurance, and other foreign insurance firms.

“The impact on Nigeria’s economy is staggering: for a Very Large Crude Carrier (VLCC) valued at $130 million, the WRI surcharge per voyage is approximately $445,000. For new container vessels valued at $150 million, the cost rises to $525,000 per voyage.

“Maersk, one of the world’s largest shipping companies, has also introduced a transit disruption surcharge of up to $450 per container, while other shipping lines impose a war risk surcharge of $40–$50 per 20-foot container.”

However, Edward said NIMASA has engaged global stakeholders, including Chatham House, UN, BIMCO, and INTERCARGO, to recognise Nigeria’s progress and remove the premiums.

The statement, however, noted that the agency has unveiled a campaign to abolish the payment of war risk insurance premiums on Nigerian-bound cargoes, noting that the move is expected to save “the country over $400 billion annually”.

Edward said Nigeria was declared piracy-free in 2021, hence the payment must be halted.

“Recognizing the severe economic implications of this financial burden, the Nigerian Maritime Administration and Safety Agency (NIMASA) under the leadership of Dr. Dayo Mobereola has launched an aggressive campaign to eliminate war risk insurance on Nigeria-bound cargo,” Edward said.

“The NIMASA Act and the Merchant Shipping Act mandate the agency to promote shipping development, and removing the WRI premium has become a central focus of its maritime reforms.

“The security concerns that originally justified these premiums no longer exist. Nigeria has not recorded a single piracy incident in over three years, and in 2021, the International Maritime Bureau (IMB) officially removed Nigeria from its list of piracy-prone countries.

“Over the past five years, NIMASA, in collaboration with the Nigerian Navy, has led an unprecedented crackdown on piracy in the Gulf of Guinea, earning global recognition from the International Maritime Organization (IMO).

“Despite these achievements, international shipping companies have continued to impose war risk insurance premiums on Nigeria-bound cargoes.

“In 2023, the International Bargaining Forum further validated Nigeria’s progress by delisting the country from the list of high-risk maritime nations.

“With piracy no longer a concern, why has the international shipping community continued to impose these excessive premiums?”

He noted that Nigeria has made significant strides in maritime security, with the deep blue project by the ministry of marine and blue economy, eliminating piracy in its waters for over 30 consecutive months.

“In addition, Nigeria collaborates closely with the IMO and other international bodies to combat maritime threats, further reducing its risk classification,” Edward said.

He said Arsenio Dominguez, the IMO secretary-general, has publicly commended Nigeria’s efforts in securing the Gulf of Guinea.