L-R: Director General, National Institute for Policy and Strategic Studies, Kuru, Prof. Ayo Omotayo; President, the Nigerian Council of Registered Insurance Brokers (NCRIB, Prince Babatunde A. Oguntade; President, Chartered Insurance Institute of Nigeria, Mrs. Yetunde Ilori; Past President, NCRIB, Prince Feyisayo Soyewo; Deputy President, Mrs. Ekeoma Ezeibe; Past President, NCRIB, Mr. Shola Tinubu; Executive Secretary, NCRIB, Mr. Tope Adaramola at the 2024 National Insurance Brokers Conference and Exhibition held at Banquet Hall, State House, Abuja.

Insurance and Blue Economy: Connecting the knot

A Paper Presentation at the 2024 National Insurance Brokers and Exhibition.

 

By H.E ADEGBOYEGA OYETOLA, CON

Honourable Minister of Marine and Blue Economy

 

 

Preamble: Marine and Blue Economy is the sustainable use of ocean resources to benefit economies, livelihoods, and preserving ocean ecosystem health and this paper will underscore the critical role of insurance as a transformative and support tool for marine and blue economy. The Blue economy is the 7th largest economy in the world with an estimated 2.5 trillion USD contribution to global economy annually. The Blue economy is projected to hit 3trillion USD by 2030 so it therefore very important to investigate the role of insurance as support mechanism in the blue economy to manage risk and investment support.

 

 

Marine and Blue Economy Potential in Nigeria:

  1. His Excellency, President Bola Ahmed Tinubu, GCFR recognizes the pivotal role the maritime subsector plays in our national economy. He aptly demonstrated this through the creation of the Federal Ministry of Marine and Blue Economy. There is no doubt that Mr. President understands the significant potential the sector holds for the diversification of the economy. This informs his focus on the Ministry of Marine and Blue Economy as a key catalyst to realizing the Renewed Hope Agenda.
  2. The Marine and Blue Economy is estimated to contribute significantly to the country’s GDP and increase the revenue of the country and potentially creating millions of jobs directly and indirectly, it is therefore important to lay a solid foundation for the sector to position Nigeria as a premier maritime nation.
  3. Maritime sector is the final frontier for economy development in Nigeria and the critical pillars are Maritime security, Maritime infrastructure, Port and Terminal, Inland waterway, marine living (Fishery and Aquaculture), Marine non-living (seabed mining, seabed cabling and piping), Marine Bio engineering, Marine genetics, Blue Energy (Wave, Tidal and offshore winds) and maritime transport and tourism. This presents a golden opportunity for investment to unlock this vast potential.

 

  1. Port Efficiency and Infrastructure: Potential partners keen on opportunities in port and terminal investments should note the significant maritime traffic passing through the Gulf of Guinea (GOG), with 314,000 vessels annually and $5 billion worth of goods daily, as reported by the World Bank. Notably, 74% of GOG maritime activities serve Nigeria, also 82% of all designated cargos coming to west Africa final destination is Nigeria with only 23% of the cargo directly reaching Nigeria ports with the remainder often trans-shipped through other countries To capitalize on this potential, modernization and expansion efforts are imperative, including the development of infrastructure for operational deep-sea ports in Ondo, Badagry, Calabar, and Akwa Ibom. Additionally, existing ports require modernization to accommodate larger vessels, necessitating an increase in sea depth to 16.5m to 17m in Apapa and Tincan Port. Nigeria’s strategic location and substantial maritime traffic underscore the demand for modern, efficient, and competitive ports capable of serving as the trans-shipment hub for Africa.

 

  1. President has approved the modernization of our existing port infrastructure, automated processes, and develop new deep seaports, inland dry ports, and river ports. And with the completion of the modernization project, our goal is to achieve a 4-day average turnaround time for vessels and a 10-day average dwell time for containers which will establish Nigeria as the preferred maritime operations hub in West Africa. The strategic investment in maritime infrastructure that the Ministry of Marine and Blue Economy started since inception has led to an increase in the number of vessels calling at our ports by about 10% which also led to an increase in revenue to the government.

 

  1. Inland Waterways: Our Inland waterways serve a pivotal role as the central nervous system of Nigeria’s maritime trade, historically generating substantial revenue as evidenced by the 1891 British record of 615 million pounds. Despite having over 10,000km of connectible inland channels, only 3,500km is currently navigable, indicating significant room for development. These channels, spanning from the West to the East and from the East to the North Central, present prime opportunities for public-private partnerships (PPP) to flourish. Initiatives such as developing jetties and facilitating the movement of goods and food from the North to the South, as well as transporting mineral resources from mining locations and facilitating easy water transport from the middle belts to Apapa for export, demonstrate the vast potential for economic growth and commercial activity. By opening the inland waterway for the movement of people, cargo, and export products from upper Nigeria into Apapa, investors can stimulate the creation of businesses, employment opportunities, and overall economic development in the region.
  2. Some of the achievement of the Ministry of Marine and Blue Economy was the gazette of the inland waterways’ transportation regulation 2023 for safety regulations on our water ways, the first of its kind in Nigeria, the deployment of water marshals to enforce regulation and safety in our waters, procurement of ferries, patrol boats, search and rescue boats and water ambulance.
  3. Sustainable Fisheries and Aquaculture: Fisheries sector is of critical importance as Nigeria’s major protein source, constituting approximately 60% of protein consumption, as reported by both the Central Bank of Nigeria and the Nigerian Bureau of Statistics. Despite a domestic consumption demand of 4.6 million metric tons, Nigeria currently produces only around 850,000 metric tons, indicating a substantial gap that presents significant investment opportunities. With approximately 1.2 million people employed in the sector, there is a clear need for expansion through initiatives such as aquaculture farming, and small and large-scale trawler fishing activities. Investments in fisheries and aquaculture will enable us to be self-sufficient and transition into a net exporter of fish and fish products to bolster foreign exchange reserves. By tapping into this potential, investors can not only address the domestic demand for fish but also contribute to economic growth by potentially creating an additional 3 million jobs across the fish value chain in Nigeria.

 

  1. The ministry of Marine and Blue Economy has shown it commitment to further developing the fishery and aquaculture and attracting investment into the sector by scoring a perfect 100% in the last Turtle Excluder Device exercise which also is the first time that the department of Fishery and Aquaculture has achieve that perfect score and this will enable the export of our fish and fish product such as shrimp into European and American market.8

 

  1. Maritime Security: Maritime security is another top priority for us. While the Deep Blue Project has been recognized by international organizations for its efficiency in Nigeria, we are continuously striving to enhance it further. Our current efforts include leveraging on technology to drive maritime safety and security to increase efficiency and effectiveness in our waterways. We recognize that maritime security is the cornerstone of all our maritime infrastructure endeavors, and as such, we are committed to continue to improve on deep Blue project and make it more robust and finding new ways to achieve maritime calmness in our blue and brown waters.

 

  1. Emerging Industries: Opportunities exist in untapped areas like seabed mining, offshore renewable energy, and marine biotechnology. We are eager to collaborate with international partners to sustainably harness these resources and create new avenues for economic growth and job creation. Nigeria is positioned for an exciting future in the maritime sector.  With a clear vision, a comprehensive action plan, and a commitment to Public-Private Partner

 

  1. Insurance in Blue Economy: Considering the potential of the blue economy to serve as a significant driver of economic growth and sustainable development, it is exposed to various risks from public and private contracts, tariffs, local and international regulations, natural disasters, climate change, hence the importance of veritable insurance framework in mitigating these risks and fostering growth and development of the sector. Insurance plays a vital role in the blue economy space ensuring risk mitigation covering traditional maritime risks like hull and cargo damage, liability, and piracy, addressing emerging risks like sea-level rise, extreme weather events, and ocean acidification and protecting investments in innovative technologies like offshore renewable energy and aquaculture.

 

  1.  It also play an important role in creating a good enabling environment for investments by fostering investor confidence by insuring against risk in the maritime space thereby attracting investment to the sector, facilitating access to finance for sustainable ocean-based projects, incentivizing sustainable practices by offering lower premiums to businesses with strong environmental and social performance and supporting ecosystem services by protecting and restoring marine ecosystems by covering losses from natural disasters and pollution.

 

  1. Marine insurance is a type of insurance that covers losses or damages incurred at sea or inland waterways. It provides financial protection for ships, cargo, and other property involved in maritime trade. Marine insurance is an indispensable tool for the shipping industry, providing financial protection against a wide range of risks. It ensures the smooth operation of global trade by mitigating potential losses and liabilities.

 

  1. The marine insurance subsector is a significant part of the global insurance market. As of 2023, the global marine insurance market was valued at approximately $33.9 billion and is projected to reach $45.2 billion by 2032, growing at a rate of 3.2% per annum. This growth is driven by factors such as the increasing volume of international trade, the rise in the frequency and severity of natural disasters, and the growing need for comprehensive coverage due to geopolitical tensions.

 

  1. What is clear is that the growth of the marine insurance industry is closely tied to the growth of the blue economy in Nigeria. While my Ministry has commenced the country’s journey towards expanding the scope of economic activities in this sector, what should be of immediate concern is the need to address the issues of financial capacity and other challenges negatively impacting the marine insurance subsector in Nigeria.

 

  1. I wish to use this platform to highlight on some of the aspect of marine insurance in shipping:
  2. Protection of Assets:
  3. Hull Insurance: Covers physical damage to the ship itself, including its machinery and equipment.
  4. Cargo Insurance: Protects the value of goods being transported by sea against loss or damage.
  • Liability Insurance: Covers legal liability for damage or injury caused to third parties.
  1. Risk Mitigation:
  2. Natural Disasters: Covers losses due to hurricanes, earthquakes, tsunamis, and other natural calamities.
  3. Accidents: Protects against collisions, groundings, fires, and other accidents at sea.
  • Theft and Piracy: Provides coverage for losses due to theft, robbery, or piracy attacks.
  1. General Average: Covers losses incurred to save the ship, cargo, or crew from a common peril.
  2. Facilitating Trade:
  3. Confidence Building: Marine insurance instills confidence in shippers and buyers, encouraging international trade.
  4. Risk Transfer: By transferring risk to insurers, shipping companies can focus on their core business.
  • Financial Stability: It helps maintain financial stability in the shipping industry, reducing the impact of unforeseen losses.
  1. Compliance with Regulations:
  2. Mandatory Insurance: Many jurisdictions require ships to be adequately insured to comply with maritime regulations.
  3. Contractual Obligations: Shipping contracts often stipulate specific insurance requirements.

 

  1. It is instructive to note the complex and dynamic nature of the marine environment makes risk assessment a challenge, coupled with emerging issues like climate change with its attendant effect on marine assets and operation. Others are newer risks such as cyber-attacks and geopolitical tensions stakeholders need to understand and address. These challenges provide opportunities for innovative insurance solutions like parametric insurance which involves triggering payouts based on predefined parameters, such as wind speed or rainfall, making it ideal for climate-related risks. Others are Blue Bonds, which is debt instruments linked to specific marine conservation or sustainable development projects, often with insurance components to mitigate risks and provision of affordable insurance coverage to small-scale fishers and coastal communities, thereby helping them manage risks and build resilience.

 

  1.   By addressing these challenges and leveraging innovative solutions, the insurance industry can play a vital role in shaping a sustainable blue economy. By connecting the knots of risk, investment, and sustainability, insurance can ensure a prosperous and resilient future for our oceans.

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