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UN raises alarm that surging freight rates are pushing up import prices

—–as shipping lines are making mega profits
The United Nations Conference on Trade and Development (UNCTAD) has raised the alarm that rising freight rates are threatening to push up global import prices by 11% by 2023 while shipping lines post record profits for the third quarter, according to the UN reports.

The report warned that the high freight prices if sustained, will have a knock-on effect on import and consumer price levels.

The report titled the Review of Maritime Transport, says freight rates are expected to remain high, fuelled by continued strong demand against a backdrop of growing supply uncertainty and concerns about the efficiency of transport systems and port operations.

The average price for a 40-foot container stands at US$9,146.41, according to shipping consultancy Drewry’s World Container Index. The benchmark decreased 0.5% last week but remains 238% higher than a year ago. Drewry expects rates to remain steady this week.

The report comes as container lines are booking hefty profits. Last week, French shipping line CMA CGM reported an eye-watering profit of US$5.6bn for the third quarter, up from US$567mn for the same period last year.

It is a similar story at other major carriers; Maersk, for example, notched up a profit of US$5.5bn for Q3 – a five-fold increase on the same period last year.

“Ocean performance was driven by high rates in an exceptional market during which we kept growing our long-term contract business, thus guaranteeing reliable transportation to our customers,” said Maersk CEO Søren Skou in the company’s financial report.

In what they said was an attempt at calming the market and inflation fears, shipping companies moved to freeze spot rate increases earlier this year and shift to longer-term contracts.

However, experts were skeptical of the impact of such measures. “In other words, setting a cap on spot rates is a different way of saying that a higher willingness to pay on spot is not necessarily what gets you space on the ship. And, of course, if the market is at peak anyway there is nothing lost in implementing such a cap,” Lars Jensen, a shipping container specialist, wrote on LinkedIn at the time.

Steve Saxon, a partner at McKinsey, said in a briefing last week that longer-term contracts are likely to become more common and this will help stabilise the market. He added that shipping rates may “normalise” in the first half of 2022: “When we say normalise, we don’t see rates likely to fall back down to the levels seen in 2019.” In a less optimistic scenario in which there is prolonged congestion at ports or further Covid outbreaks, rates will remain elevated next year, he said.

The potential effect of high freight rates on consumer and import prices varies by country groupings. UNCTAD suggests small island developing states or SIDS, and least developed countries (LDCs) are most at risk of higher prices because they depend more on the international trade system for goods.

The research shows SIDS are facing a 24.2% hike in import price levels, while LDCs could be lumped with an 8.7% rise.

Meanwhile, landlocked developing countries (LLDCs) face an import price increase of just over 3%, with the global average standing at nearly 11%.

“The impact is generally greater in smaller economies. Thus, in Estonia consumer prices would rise by 3.7% and in Lithuania by 3.9% compared with only 1.2% in the United States and 1.4 per cent in China,” states the report.

“This partly reflects their greater ‘import openness’ – the ratio of imports to GDP – which is typically higher in smaller economies – 55% in Lithuania and 60% in Estonia, compared with 11% in the United States and 15% in China.”

The findings also indicate that sustained high shipping rates would not only impact exports and imports, as well as production and consumer prices, but also the prospects for short and medium-term economic recovery from the pandemic. Governments including those of China, the US and Vietnam are “worried” about this and have raised concerns about shipping companies, UNCTAD says. An investigation into carriers has also been launched by competition authorities in Australia.

Elsewhere, UNCTAD’s report predicts that annual growth in maritime trade between 2022 and 2026 will slow to 2.4%, compared with 2.9% over the past two decades. It also states the pandemic has accelerated maritime “megatrends” such as digitalisation and sustainability that are set to transform the industry over the longer term.

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I was never in charge of maritime industry —Saraki

Senator Gbemisola Saraki, Minister of State for Transportation in a hearty discussion with Amaechi when the going was good

 

Eyewitness reporter

For three years after she was named the Minister of State for Transportation in 2019, Senator Gbemisola Saraki said she was never in charge of the maritime sector.
Her assertion contradicted the gentleman’s agreement between her and Rotimi Amaechi, who until his resignation from Mohammed Buhari’s cabinet to pursue his failed presidential ambition, was the Minister of transportation.
Amaechi,  as the then supervising Minister, in 2019, had delineated the duties of the two heads of the ministry to avoid any possible clash of interests.
At one of the public functions held in Lagos in 2019 at the beginning of his second term in office as the Minister of Transportation, Amaechi publicly declared that while he would focus his attention on railways due to the enormity of the project and its importance to the national economy, Saraki will be in charge of the maritime industry with his occasional supervision, especially as it concerns maritime security.
Ameachi had then acknowledged that he had abandoned the maritime industry for the rail sector when he first served as transportation minister from 2015 to 2019 but said his minister of state, Senator Gbemisola Saraki,  will fill the gap during his second term in office.
“In my first term as minister, I completely abandoned the maritime sector to the heads of agencies.
“This time around, that won’t be happening again as I have instructed that the Hon. Minister of Transportation for State should personally supervise the maritime agencies, while I just oversee what is happening” Ameachi had declared.
However, Senator Saraki subtly debunked the claim three years after when she said that she was never in charge of the sector.
The minister was reacting to an inquiry from the curious journalists last week Friday why it took her one year to the end of her four-year tenure to come on a familiarisation tour of the sector she was supposed to be superintending.
“I was never in charge of the maritime sector. I was asked to supervise road transport”  the Kwara State-born politician declared.
Her revelation confirmed the widely held belief among the stakeholders that there was a repressed and smouldering animosity between the two Ministers.
Though Saraki tried to downplay the cat and mouse relationship with her former boss, stakeholders however believed that the two Ministers never got along well with each other.
Sources pointed to instances when the two Ministers were tactically avoiding joint attendance at maritime events.
Impeccable sources whispered to our reporter that the festering feud became noticeable when Saraki began to boycott events in the industry with her former boss.
It was further learnt that the boycott of events in the industry by the Minister of state may be a subtle protest against the apparent arrogation by Amaechi of official duties of the junior Minister which has led to the redundancy of Saraki.
It was gathered that throughout 2019 and the better part of 2021, Amaechi allowed Saraki to take charge of events in the maritime industry.
Sources claimed that towards the end of last year and since the beginning of 2022 up till his resignation as the Minister, Amaechi may have reneged on the gentleman’s agreement between him and his minister of state.
“During this period, the Minister took over the functions hitherto reserved for the Minister of state.
”This development seems to have irked Saraki who felt the Minister was trying to make her reductant.
“That was when she started to boycott functions at the maritime industry where she and her principal were likely to meet” a source who was in the know confided in our reporter.The absence of the minister of State at major maritime events became noticeable during landmark events such as  NIMASA’s unveiling of wreck removal in 2021,  the World Maritime Day, 2021,  and the inspection of the Lekki deep seaport by President Muhammadu Buhari.

It could also be recalled that Amaechi had made a couple of visits to the Lekki deep seaport, even on a Sunday, before the presidential visit, none of which Saraki attended.

Concerned maritime stakeholders claimed that the recent action of Ameachi, who is widely regarded as the ”Lion of the Niger Delta” may appear bossy to Gbemisola Saraki, who is also a strong-willed woman.
“The two Ministers are of strong-willed personalities who don’t brood nonsense.
“We all know the political antecedents of Amaechi who has a domineering posture.

” Gbemi is also made of sterner stuff given her role in the “Otoge” political tsunami in Kwara which eventually swept off  Bukola Saraki, her blood brother, from the political dominance in Kwara politics, a role which earned her the present position in the present dispensation.
“So, I don’t see how Amaechi, who has domineering posture could lord it over Gbemi, who is equally a woman of strong character, without skirmishes” a knowledgeable analyst declared.
However, stakeholders were skeptical if Senator Saraki could achieve much of the promises she made during her week-long tours of Lagos ports last week given barely one year she has as a member of the Buhari Administration before it is wound up.
The Minister came on the tour in the company of some Directors in the ministry.

“Today is my fifth week of assuming the leadership of the Ministry of Transportation”, she declared last week Friday in Lagos.

“We came to take stock of the sector. We had taken the stock of the Road sector,” she said.

Giving her summation of her findings at the end of the tour, she declared” Apapa and Tin Can ports are in terrible need of repairs.

“We will go and come back for repairs.

“We have the short, medium, and long-term plans for this. We need to start with rehabilitation here. Another problem here is power”

The  Minister met various groups who are stakeholders in the industry.

Among them are women groups in maritime, terminal operators, stevedores, maritime workers union groups, haulage, and transport operators, maritime lawyers, freight forwarders, and maritime press.

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We have political will to ensure CVFF is disbursed—-Saraki

Senator Gbemosola Saraki, Minister of State for Transportation
—- expresses sadness over unending delay
Eyewitness reporter

The Minister of State for Transportation, Senator Rukayyat Gbemisola Saraki has expressed willingness to muster the necessary political will to ensure the controversial Cabotage Vessels Financing Funds (CVFF) are disbursed before she leaves office.

She expressed sadness over the delay in the disbursement of the interventionist funds, 19 years after it was set up which she said was critical to the empowerment of the struggling indigenous ship owners.
The Minister made this commitment Friday during the interactive media parley she held in Lagos to round up her week-long tours of Lagos ports.
The Minister, who was fielding questions from journalists, declared that her ministry would work with the National Assembly to expedite action of the disbursement process.
She disclosed that she was part of the senators who passed the Cabotage Act in 2003 which gave birth to the CVFF and it was disheartening that 19 years later the funds are yet to be disbursed.
 “It is really very disheartening that the fund has not been disbursed but we will work with the National Assembly to ensure its disbursement.
“Just watch, it has to be disbursed, especially with the coming on stream of the African Continental Free Trade Area (AfCFTA).

“In the course of this visit, I have also interacted with so many stakeholders, including the indigenous ship owners.

“I know the number of vessels that Nigerians had 10 years ago and I know how many they have now.
“The funds is very critical for the empowerment of indigenous ship owners and we know many of them have gone under”

“It is really a shame that this fund has not been disbursed, I learnt the value is $350 million now and I am not sure any part of it is missing.

” We will work with the National Assembly to pass the guidelines. It is not really about the Federal Ministry of Finance but I think it is more of the political will to disburse it and I think we have the political will to do so.”
The Minister disclosed that the guidelines for the disbursement of the fund have been formulated and awaiting the approval of the  National Assembly.

She added that the disbursement would follow the approval by the National Assembly after beneficiaries must have been shortlisted.

According to her, the approval would soon be secured and the fund disbursed in no distant time.
She regarded the non-disbursement of the CVFF as a national shame and embarrassment.
CVFF is a two percent contribution by indigenous ship owners on every Cabotage contract executed and is meant for fleet expansion and empowerment of the shipping capacity of indigenous ship owners.
Since 2003 when the Cabotage Act was enacted and 2006 when the CVFF guidelines were enacted, no disbursement was made as the funds have become a subject of controversy and subject to serial abuse.
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Headlines

P&ID fraud : Court convicts, winds up Marqott Nigeria Limited.

Owolola Adebola

Justice D.U Okorowo of the Federal High Court sitting in Abuja has convicted and wound up Marqott Nigeria Limited,  one of the 30 companies associated with the  Process and Industrial Development Limited, P & ID,  for money laundering.

The company was convicted on Thursday,  June 16, 2022, after being found guilty of four-count charges bordering on money laundering preferred against it by the Economic and Financial Crimes Commission, EFCC.

Count one of the charges read: “That you, Marqott Nigeria Limited, being a designated Non-financial Institution; and Giovanni Beccarelli, Valentina Fantoli, and Dimitri Duca, being directors of and signatories to the bank account of Marqott Nigeria Limited, sometime in September 2014, in Abuja, within the Abuja Judicial Division of the Federal High Court, failed to comply with the requirements of submitting to the Federal Ministry of Industry, Trade and Investment, a declaration of activities of Marqott Nigeria Limited contrary to Section 16(1) (f) read together with Section 5(1)(a)(ii) of the Money Laundering (Prohibition) Act, 2011(as amended and you thereby committed an offence punishable under section 16(2)(b) of the same Act.”

Count two read:  “That you, Marqott Nigeria Limited, being a designated Non-financial Institution; and Giovanni Beccarelli, Valentina Fantoli, and Dimitri Duca, being directors of and signatories to the bank account of Marqott Nigeria Limited, sometime in September 2014, in Abuja, within the Abuja Judicial Division of the Federal High Court, failed to develop programs to combat money laundering and other illegal acts, to wit: failure to designate at management level a compliance officer within any strata of Marqott Nigeria Limited, contrary to Section 16(1)(f) read together with Section 9(1)(a) of the Money Laundering (Prohibition) Act, 2011 (as amended) and you thereby committed an offence punishable under Section 16 (2)(b) of the same Act”.

At the point of the first arraignment on February 7, 2022,  the defendant pleaded “not guilty” to the charges, setting the stage for a full trial.

In the course of the trial, the EFCC presented many witnesses and tendered many documents as exhibits.

In his judgment,  Justice Okorowo found Marqott Nigeria Limited guilty of all the four-count charges and convicted it accordingly.   He also ordered that the company be wound up  and its entire assets forfeited to the Federal Government of Nigeria.

Marqott was first arraigned on Monday,  February 7, 2022, for being an accomplice in the $9.6bn Gas Supply and Processing Agreement between the Ministry of Petroleum Resources and  P&ID.

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