Senate queries $120 million revenue loss to petroleum products’ shipment
The Senate yesterday expressed displeasure at reports that the nation loses over $120 million annually to the patronage of foreign shipping firms in the shipment of petroleum products.
It has, therefore, directed the Nigerian National Petroleum Corporation (NNPC) to patronise and boost the capacities of local shipping firms.
The yearly capital flights, due to the patronage of the foreign shipping companies came to the fore at an investigative hearing of the Senate Committee on Local Contents had with the NNPC management and Ship Owners Association of Nigeria.
The Senate Committee, headed by Senator Teslim Folarin (APC Oyo Central), discovered at the meeting that the preference for foreign firms by NNPC and other stakeholders in the shipment of petroleum products had resulted in huge revenue losses part of which is $120 million loss to demurrage.
Irked by the arrangement, in a ruling after a marathon debate, Folarin directed that the NNPC should allow local ship owners to operate in the transportation of petroleum products.
He said: “It is very important we patronise indigenous shipping. The whole essence of this investigative hearing is not to trade blame. We understand that they don’t have enough vessels; they don’t have capacity and capacity cannot come from heaven.
“The GMD of NNPC, Malam Mele Kyari, who is here with us, has the capacity to help build capacity. It is very important that we patronise indigenous shipping companies.”
The committee decried the disregard to the Local Content Act, which stipulated, among others, that local firms be encouraged in the conduct of businesses of any public company transactions.
Another member of the committee, Senator Solomon Adeola (APC Lagos West), who is also the chairman of the Senate Committee on Finance, lamented that the failure to carry indigenous shipping companies along has dealt a serious economic blow on the country.
Adeola dismissed submissions that Nigerians do not own vessels that could be patronised.
There are local vessels owned by Nigerians, it depends on the type of vessels we are talking about. There are two types of vessels,” he said.
Kyari, who had informed the committee earlier that there were no indigenous vessels to patronise, assured the Senate that he would assist the local firms to build the required capacity.
“I am going to work to support these companies. We will engage our partners,” he said.
In a presentation to the committee earlier, the Ship Owners Association of Nigeria (SOAN), led by its President, Dr. Mkgeorge Onyung, told the committee that the provisions of the Nigerian coastal and local content laws with regards to the shipping of petroleum products in the downstream sector of the oil industry is being breached in favour of foreign vessels, a situation he stated has encouraged capital flights.
“In the 2019/2020 DSDP disposition, a contract valued at 9 billion USD was undertaken. Freight expenditure on Import Tankers was approximately 60 million USD monthly or 720 million USD annually,” he stated.
According to him, this involved the average monthly importation of 2.4 billion litres (1.8 million metric tonnes) of gasoline in foreign-owned tankers of 35,000 to 90,000DWT capacity (approximately 40 shiploads monthly).
“Between July and August 2020, 320 foreign tankers arrived Lagos offshore with imported PMS.
“This 100% foreign-dominated supply chain activity creates no in-country value for the Nigerian maritime industry with no multiplier-effect on other sectors of the economy. Foreign fleet is chartered by NIDAS Marine, NNPC subsidiary, via foreign shipbrokers namely Clarksons, E.A. Gibson, Brassington, Braemer and Affinity,” he added.
He said foreign ship owners account for 95 per cent of freight spending associated with this downstream activity which is repatriated overseas as capital flight to the detriment of the local economy.
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