Nigerian ports are some of the most expensive in the West African region, no thanks to the numerous fees paid on Nigerian-bound cargoes, including the WRI premium, ANOZIE EGOLE writes
The maritime industry has experienced a significant increase in war risk insurance premiums in recent years, particularly for Nigerian-bound shipments. This trend is driven by a confluence of factors, including geopolitical instability, piracy, and terrorism, particularly in the Gulf of Guinea, where Nigeria’s ports are major hubs for global trade. As the cost of war risk insurance continues to rise, stakeholders in the global supply chain – shippers, insurers, and importers –are feeling the pressure as it pertains to the causes, impacts, and implications of these premium increases.
War risk insurance is a specialised form of coverage that protects vessels and cargo against damages or losses caused by acts of war, terrorism, or piracy during transit. For shipping companies, securing war risk insurance is a necessary measure to protect against these volatile risks, especially in regions with high geopolitical tensions or areas known for piracy.
According to the International Maritime Bureau, piracy off the coast of Nigeria and surrounding waters has been a significant threat to global shipping, leading to higher insurance premiums. Since 2018, piracy incidents in the Gulf of Guinea, which includes Nigerian waters, have contributed to higher insurance costs. Insurers classify these regions as “high-risk”, requiring additional premium charges.
The war risk insurance premiums for Nigerian-bound cargoes have seen a dramatic increase over the last decade. A report by the International Union of Marine Insurance indicates that, in 2020, war risk premiums for Nigeria-bound shipments had risen by 20-30 per cent compared to the previous years, mainly due to the worsening piracy activities and threats from armed groups operating along the Nigerian coast. In 2015, premiums began rising in response to increased piracy incidents in the Gulf of Guinea. Between 2018 and 2019, the situation worsened, with Nigeria experiencing an uptick in piracy, kidnappings, and other violent activities, pushing premiums higher. In 2020, it experienced 25 per cent increase due to political instability, militant activities in the Niger Delta, and maritime insecurity. It continued to rise in 2021-2023, with some shipping firms reporting increases of up to 35 per cent for high-risk zones, especially along the Nigerian coast.
By 2023, premiums rose as high as $50,000 to $100,000 for a single voyage, depending on the size of the cargo and the specific route taken.
Impact of rising premiums on the Nigerian economy
