According to a recent report by Bloomberg, the cost of shipping oil from Nigeria has experienced the most significant surge in over a year, leading some ship owners to steer clear of Africa’s largest oil producer. This development coincides with the resumption of talks between the Nigeria Labour Congress (NLC) and the Trade Union Congress (TUC) and the federal government to address the challenges arising from the removal of fuel subsidies by President Bola Tinubu’s administration.
Data from the Baltic Exchange reveals that freight charges for ships transporting approximately one million barrels of crude from Nigeria to Europe have risen by nearly $16,000 per day, marking the largest increase since April 2022. The cost has reached over $64,000 per day, signaling a significant jump.
Several ship owners have chosen to avoid Nigeria after receiving hefty tax bills, seeking to recover unpaid duties from 2010 to 2019. The imposition of these tax demands has shifted sentiment, as fewer vessels are willing to venture into Nigerian waters, as noted by Halvor Ellefsen, a tanker broker at Fearnleys Shipbrokers UK Ltd.
In line with reports from international news agency THISDAY, two tanker owners have already opted to keep their ships away from Nigeria due to the backdated tax bills amounting to millions of dollars. These demands, issued by Nigeria’s Federal Inland Revenue Service (FIRS), range from $400,000 to $1.1 million per vessel, with some claims totaling tens of millions of dollars.
The reluctance of certain ship owners to dock in Nigerian ports due to the risk of vessel arrests has resulted in a 42% surge in tanker earnings for shipments from West Africa to Europe over the past three days, according to Baltic Exchange data. This scenario allows the remaining vessel owners willing to operate in Nigeria to command higher rates for their services.
The tax bills issued by the FIRS refer to a previous law introduced in July 2021, which holds any vessel carrying crude oil, gas, or refined fuels from Nigeria liable for taxation.
Meanwhile, protests have erupted in Angola, with demonstrators taking to the streets to express their discontent over a recent fuel price hike. President Joao Lourenco responded to the clashes by dismissing the economic coordination minister and appointing the central bank governor in his place. Angola, Africa’s second-largest crude oil producer, followed Nigeria’s lead in reducing gasoline subsidies, resulting in a nearly doubled pump price. The move is part of efforts by both countries to curb government spending amid economic challenges.
As negotiations continue between the NLC, TUC, and the federal government in Nigeria, the impact of fuel subsidy withdrawal and the subsequent price hikes remains a significant concern. The labor unions will stand firm on their demands and the implementation of the agreements reached during previous discussions. These talks aim to find solutions and alleviate the hardships faced by the population following the removal of fuel subsidies.