BusinessDay
Nigeria's leading finance and market intelligence news report.

Piracy could worsen on Nigerian waters as minister ignores Senate directive on anchorage contract

Piracy and criminal activities in Nigeria’s territorial waters, which cost an estimated $2.8 billion in 2018 according to the United Nations Office for West Africa and the Sahel, could worsen as Federal Government agencies seek to scuttle a contracted security arrangement ran by Ocean Marine Solution Limited, and the Nigerian Navy.

With an 853km coastline and rampant piracy, the Nigerian waterways presents a security nightmare. To reduce attacks, the Nigerian Navy and a private security company, OMSL collaborated and designated a secure place where vessels can anchor safely from the threat of pirate attack – Secure Anchorage Area – for a fee.

However, Rotimi Amaechi, minister of Transportation suspended the scheme in February saying it is illegal and does not benefit the Federal Government. The Minister is paying an Isreali security outfit to train Nigerians to manage the security along the waterways at a cost of $195million. He also said some assets including six interseptor boats, six armoured vehicles, helicopter and special mission vehicles will be provided.

But shipping companies are wary. Under government management, scores of pirate attacks occur and the SAA provided respite. In the first three months of this year, there were 47 attacks compared to 38 for the same period last year, according to the International Maritime Bureau (IMB).

The Gulf of Guinea, a key production hub surrounded by eight oil exporting countries in West Africa, is now a global hot spot, accounting for 21 attacks so far this year and 90 per cent of all kidnappings at sea in 2019.

Read also: Cashew processing creates investment opportunities for Nigerian entrepreneurs

They fear that with the decision to nullify OMSL’S contract could jeopardise their operation and actually lead to economic loss for the country as ships could began divert goods destined to Nigeria to neighbouring ports.

Senate investigation

The Senate and the House of Representatives on the Nigerian Navy, Marine transport and Finance investigated claims of illegality in the operations of OMSL in December 2019 and gave the company a clean bill of health.

The lawmakers said the company should be commended for its genuine national interests in investing over $400million into the Security at the Secured Anchorage Area (SAA) in particular and the Nigerian waterways in general by providing the needed platforms and logistics for the Nigerian Navy to effectively perform 24/7/365 patrol operations as well as to provide the required protection for vessels waiting to berth at the Lagos ports.

“That since no fraud is found in the operations of the OMSL and is operating at no cost to government, OMSL should be allowed to continue its operation at the SAA until such a time when a better and more cost effective system is put in place by the government,” the lawmakers said.

The lawmakers further recommended that the Nigerian Navy should be properly funded to enable it procure needed vessels to clear the over one hundred and fifty (150) vessels deficit to enable them carry out their constitutional responsibilities without over depending on Private Maritime Logistics Support Companies (PMLSC).

Suspending the contract imperils OMSL’S over $400 million investments and does not give investors confidence in the country. Those familiar with the SAA project say the cost of vessels acquisitions and operational running cost is at no cost to Government and was never mandatory for ships, rather it involved ships that desire the service under a willing buyer, willing seller arrangement.

OMSL has a fleet of 42 purpose-built and Nigerian Navy (NN) approved Offshore Patrol Boats Ocean Marine Solutions, the Federal Government will be saddled with the task of buying these same equipment alongside training personnel to run operations.

Hosa Okunbo, OMSL chairman, during his presentation at the National Assembly joint committee that investigated its activities said, “The company has always operated on the charges to ships operating under the SAA”

Cost-effective

Enquiries show that it cost vessels that patronise OMSL operated SAA an average of $11,500, which comes to about $2500 for the first day and $1500 for the remaining days in a seven-day period which is a maximum period that vessels must berth at SAA for the service provided.

Operators find it cheaper than hiring mercenaries for protection. For example, a company has to pay $225,000 on a one-month voyage at a cost of $ 2500 per mercenary which comes to $7500 a day over a total one- month voyage of 30 days from Europe and much higher from farther destinations like Singapore and United States and Far East. But with OMSL, they pay only $11,500 for the exact days required their vessels.

The SAA traffic is about 20 vessels at any particular time and they pay on average $1,650 per day, which generates about $ 33,000 daily to OMLS who own 8 vessels operating in the SAA. The company subsidies the cost of hiring its vessels to NPA at an average $4,150 per vessel but hires it to the oil companies for about $8,500 per day.

Meanwhile, NIMASA under the supervision of federal ministry of transport hires similar vessels at $10,500 daily and currently has six of such vessels for enforcement at a total cost of $63,000.

“This is why we say OMSL is on National Assignment rather than perceived misconception of profit making,” the company said.

The Apc-led government has said it would encourage local entrepreneurs even as it strives to encourage investors. Analysts say forcing out a local player runs contrary to this claim.

Operators are concerned that this situation could imperil the sector. Mcgeorge Onyung, managing director of Jevkon Oil & Gas, Nigeria Limited, said his association is very concerned about the safety of the nation’s waterways.

“Our position have always been that we need a sustainable solution to security in our waters,” Onyung said.

He stated that if nation’s waterways are not safe we will loss business, stressing that the country remain a very important vessel destination in Africa. He, therefore, called the parties involved to come to a round table discussion and tackle the grey areas with a view to resolving them in national interest.

“We are ship owners we have high tickets bank transactions on and we carry heavy loans to acquire our ships and we do not want our business disrupt by hoodlums and charlatans and pirates so we would support any action whoever whether it is government or private solution that is going to ensure that our waters are safe from pirates so that we can conduct our businesses properly,” Onyung said.

Also speaking in the same vein, Kennedy Rhima CEO of First Planet Energy, said that the continuous engagement of Ocean Marine Solution Limited will bring about the safety and security of vessels in the Lagos Pilotage district and called for a closer collaboration between the Nigerian Ports Authority, NPA, the Nigerian Navy and other stakeholders involved in the matter.

“The matter has been a controversial, the safety and security of both vessels and personnel manning these vessels should be the goal of parties involved. I will urge Captain Okunbo to liase with the relevant agencies involved and straighten whatever needs to be straighten,” Rhima said.

Since 2007, Ocean Marine Solutions with Operations Centres at key strategic locations in Port Harcourt, Warri and Lagos, provide vital static asset protection to the Oil and Gas industry and much- needed escort and mobile services for commercial vessels transiting through Nigerian water and Gulf of Guinea.

Analysts say the government should consider what it could be giving up by insisting on suspending the contract. The amount paid by shippers can best be seen as a stipend compared to the cost of attacks and import loss that may occur from pirate attacks, which led the shipping companies embracing such idea of operation.

Therefore, while the SAA operations continue to undergo criticism by government agencies, they ( the concern agencies) refuse to accept the obvious and clear fact that the operational and maintenance cost are must to be offset, and such fund has to be included in the charges.

Unfortunately, what is more worrisome in the developing situation is the fact that before the decision to sack OMSL was carried out, stakeholders were not consulted otherwise, it would not be in the interest of any to suggest the later.

There are now concerns Nigerian waters which are vast and ports such as Port Harcourt as well as other coastal areas constantly been ravaged by sea pirates and operators, may get worse a situation that could have been avoided with the SAA. This could put Nigeria at an economic disadvantage and hinder investor confidence.

Operators say the government should be looking at replicating similar services in Warri and Port Harcourt axis to reduce the piracy and increase revenue to these state governments so as to decongest the Lagos port which had now become a safe haven for ships because of OMSL.

Some operators seeing cost savings from the SAA have urged the Federal Government to allow the programme to take over and manage the deep blue project because of the huge investment by the Federal Government which, if not efficiently managed could become another failed project.

Suspending the contract imperils OMSL’S over $400 million investments and does not give investors confidence in the country

Whatsapp mobile

Get real time updates directly on you device, subscribe now.