Nigeria’s maritime industry, a crucial driver of trade in West and Central Africa, is losing potentially huge revenues stemming from the dominance of foreign shipping companies in its freight trade. This reliance on foreign vessels has led to Nigeria losing an estimated $86 billion annually—an alarming increase from the previously reported $9.2 billion, according to the Managing Director of Genesis Shipping, Capt Emmanuel Iheanacho. The absence of a strong domestic shipping capacity, coupled with ineffective government, policies have compounded the issue, with broad economic consequences.
Despite accounting for approximately 70 per cent of the cargo generated in the West and Central African regions, Nigeria has no substantial indigenous fleet to benefit from this trade volume. Consequently, a large portion of the freight fees—money that could be retained within the economy—leaves the country.
Iheanacho points out that when the freight cost of petroleum products is included, Nigeria’s annual losses in shipping operations far exceed the initially reported $9.2 billion, reaching a more alarming $86 billion.
By implication, each time Nigeria imports or exports goods, these freight costs are paid to foreign shipowners, resulting in substantial capital flight. This loss reflects deep structural problems in Nigeria’s maritime sector, which have worsened since the collapse of the Nigerian National Shipping Line (NNSL) in 1995.
Efforts to establish local shipping lines have struggled due to unfavourable policies, a lack of government support, and an economic environment that discourages local ownership of ships, stated Iheanacho.
Chairman of Starzs Investments Company Limited, Greg Ogbeifun, harped on the issues. He noted that Nigeria’s strategic position along the Atlantic Coastline should position it as a major maritime hub, yet government inaction and unfavorable policies have allowed foreign shipowners to dominate. This has left Nigerian operators unable to compete, resulting in massive capital losses and stunted growth for local industries.
It is noteworthy that ports such as Apapa, Tin-Can, Onne, Warri, and the newly-established Lekki Port are vital for Nigeria’s trade. However, foreign-owned vessels dominate traffic at these ports, increasing the cost of goods for Nigerian consumers. The lack of indigenous capacity not only drains the country economically but also stifles local business growth.
For example, Nigerian shipping experts, Chief Isaac Jolapamo and Temisan Omatseye, who once bought ships to break into the market, notably faced numerous obstacles, including difficulty accessing capital, unfavourable tax regimes, and high operational costs. Competing in a global market where foreign competitors enjoy lower taxes and zero import duties has crippled their efforts.
Speaking, the advisory head of Kamany Marine Services Limited, Charles Okorefe, stated that this trend will continue until Nigeria changes its trade terms from Free On Board (FOB) to Cost, Insurance, and Freight (CIF).
According to Okorefe, Nigeria’s practice of exporting crude oil on a Free On Board (FOB) basis means that foreign buyers nominate the vessels to transport the oil. In this arrangement, Nigeria earns no freight revenue. Okorefe advocates for a shift to a Cost, Insurance, and Freight (CIF) basis, which would allow Nigeria to own or charter vessels, earning freight from transporting its own oil. “Unfortunately, this practice has yet to be implemented, costing the nation billions of dollars in potential revenue. The same applies to dry cargo, where Nigeria’s lack of vessels prevents it from capitalising on CIF trade,” he said.
Speaking further, Okorefe said, “Since 1958, when Nigeria began exporting crude oil, the country has not earned freight on crude oil because it trades on an FOB basis. The same applies to our dry cargo as we lack vessels.”
Indigenous shipowners face further challenges when foreign oil companies refuse to engage them for crude oil shipments, setting stringent conditions that exclude local operators. A maritime stakeholder, John Osakwe, highlighted that major oil companies, including the Nigerian National Petroleum Corporation (NNPC), often overlook local operators. Without contracts from major players, banks are reluctant to finance Nigerian shipowners, leaving them without the necessary resources to compete. Moreover, according to Osakwe, even when indigenous operators manage to secure vessels, foreign operators set parameters, often deemed unnecessary by local maritime authorities, to exclude them.
“Nigeria only supplies the crude to the vessel’s tank, and once it removes its hose, Nigeria’s responsibility ends. Nigeria receives payment for the crude oil and then has no further involvement. The buyer assumes responsibility from the loading point, whether from Bonny or Escravos, to the final destination. Any issues with the vessel or the crude are at the buyer’s risk.
“But if it were a CIF arrangement, Nigeria would be responsible for either owning or chartering the vessel that transports its crude oil. In this case, the country would earn freight from the movement of that crude oil, as it would be responsible for delivering the product to its destination before receiving payment for its services. Unfortunately, that is not the current practice,” he said.
He pointed out that Nigeria has lacked ocean-going vessels since the collapse of the Nigerian National Shipping Line (NNSL), adding that it is not profitable for Nigeria to trade its dry cargo on a CIF basis when there aren’t enough cargoes to transport.
“In the crude oil business, even when there is sufficient cargo, we still trade on an FOB basis. This explains why Nigeria continues to lose potential earnings from freight on cargo shipments.
“The problems stem from indigenous operators’ lack of access to contracts from major oil companies, including NNPC. Major oil companies fail to engage indigenous operators. If companies like NNPC awarded contracts to local operators to provide vessels, banks would be more willing to finance them, seeing that there is cargo.
“Practice makes perfect. If they claim local operators lack capacity, it is inaccurate. We need to continue efforts to build capacity because some local operators are managing their freight excellently,” the anonymous shipowner.
“Vessels are built and purchased to be self-financing, maintained, and cared for. It is the revenue from the services provided that is used to maintain the vessel. Indigenous operators are deprived of contracts, while foreign vessel owners bring in additional vessels for ship-to-ship (STS) transfers, often with questionable requirements that are not applicable in our waters,” he stated.
Shipping expert Fred Godwin, pointed out additional barriers to the development of Nigeria’s shipping fleet, such as complex ship registration processes, lack of incentives for local operators, and limited human capacity. He emphasised that without an institutional framework supporting indigenous operators, foreign vessels will continue to dominate Nigeria’s shipping trade.
Development economist at Adeleke University, Professor Tayo Bello, on his part, said the government must urgently rethink its policies and prioritise creating an enabling environment for Nigerian shipping companies.
He said by offering tax breaks, reducing import duties on ships, and providing financial incentives to local operators, Nigeria could build its shipping capacity, reduce capital flight, and create jobs.
