Hurdles In Nigeria’s Shipping Development

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With enormous potential in Nigeria’s maritime, the country’s shipping industry remained largely undeveloped, with local investors’ vessels in a comatose state. In this report, SAMSON ECHENIM x-rays the challenges and possible solution to the industry’s age-long problems.

“The main problem with Nigeria’s shipping industry is that we have not accepted Nigerians to be able to do the shipping business.”

The above assertion appears to capture the underlying reason for the decay in Nigeria local shipping industry, as expressed by the chairman of Morlap Shipping Company Ltd and the Indigenous Shipowners Association of Nigeria (ISAN), Dr Isaac Jolapamo.

On Nigerian waters, foreign-flagged vessels are ever busy lifting the country’s 2.5 million barrels of oil per day and her aquatic resources, while the vessels owned by Nigerian shippers idle away in their already rickety and outdated state into oblivion.
Former Nigerian President, Olusegun Obasanjo recently at the third Nigerian Maritime Expo in Lagos, raised the alarm and warned that the trend portended great economic detriment to the country and its citizens.

The ISAN is able to come up with some concrete figures about how much the country loses in capital flight due to non-engagement of local shipping industry in oil and other cargo lifting in its waters. According to statistics provided by ISAN, Nigeria loses N2 trillion annually from shipping business, that is, the transport element in shipping.

“Now from fisheries, because we are not protecting our waters and other nations are taking our fish away and we are instead importing fish, we are losing about $2 billion, that is about N300 billion from fisheries alone. Then we are also losing the entire insurance of that amount, because if these ships are working, they will be insured. So our insurance companies also lose N16.5 billion. In terms of employment, Nigeria is losing five million jobs,” says Capt Niyi Labinjo, ISAN’s secretary.

Nigeria imports 100 million tonnes of cargo, general goods annually, according to 2010 estimates. In 2009 the country imported 93 million tonnes, 87 million in 2008 and 80 million in 2007.

Labinjo explains, “If you look at the number of ships to be engaged, the total number of ships that called in Nigeria for one year is over 4,000, so you can imagine where 4,000 indigenous ships are working. Then we have our oil. We produce 2.5 million barrels per day. In one month, that gives us about 70 million barrels.

“Over 20 ships are needed to lift the oil. So, we calculated the number of ships that are required in every sector. We also realised that we need about one million direct employments. But you know that shipping also has auxiliary services providers, including the financial sector—banks and insurance.

“So if the indigenous ships are working well, won’t these people be working well too? If you empower Nigerian ships and make sure the system is working well, which we can do, because there’s cargo to lift. What determines whether a ship is working or not is the cargo. Once the cargo is there, we have no problem. So we have analysed all these and have found out that about five million jobs would be created if we allow the indigenous ships to be in the centre.”

A former president’s headache
Former President Obasanjo has decried the dominance of foreign-flagged vessels in Nigerian waters, saying the development was causing the country serious loss in revenue and employment.

The former president noted that at the moment, the Nigerian maritime sector is characterised by the domination of foreign-flagged vessels, especially those of developed market economies of Western Europe and America.

“This situation has led to a loss of billions of naira annually in freight revenue. Even efforts by my administration to procure vessels for the defunct Nigeria National Shipping Line did not yield the expected results, as those vessels were ill-managed, and, subsequently, the NNSL was liquidated,” he said.

Obasanjo also lamented the situation of indigenous ship owners, noting that their huge investment in the shipping sector had not yielded returns.

The Federal Government in 2003 enacted the Inland and Coastal shipping Act, now commonly known as the Cabotage Act to give the indigenous shipping companies a competitive advantage in the country’s waters as is obtainable in other countries.

Now 10 years later, the fortunes of local shippers only dwindled as the Act remained unimplemented by relevant government agencies. The enactment of the Cabotage Act, according to Obasanjo, has not improved the lot of the indigenous ship owners.

“With the demise of our national shipping and tanker companies credit to our indigenous ship-owners who saw it fit to have investment in shipping. I am told that funds in excess of two billion dollars have been invested in various ship types, but no appreciable returns on their investment yet. The reason for this must be properly addressed as no nation can fund a non-performing maritime industry gobbling billions of dollars of either private or public investment.

“Still to help indigenous investors and participants in the maritime industry, we brought about Cabotage Law. When the law was being promulgated, it took the government along with it, because it was a private bill. Maybe we will have put in it the process of implementation that would have made it achieve the purpose of which it was meant to achieve,” he lamented.

The obvious danger in the dying local shipping
Many Nigerian youths have acquired one or the other form of shipping capacity, but the non-development of the local shipping industry means no job to do. But there are other ways they are helping themselves, albeit illegal.

The ISAN chairman, Jolapamo says seafarers are disgruntled. “The shipowner, who hires them, cannot pay them, because there are no jobs and they have become easy tools for piracy. This is why I say piracy is a monster that we created ourselves. I have purchased four vessels in the last four years, spending up to $40 million but no jobs.

“When we started indigenous shipping, we were about three leading companies. My company, Al-Dawood Shipping Line owned by Capt Niyi Labinjo and Genesis Shipping Company owned by Capt Iheanacho. Today, I have only one vessel, Labinjo has none and Genesis Shipping is just managing to exist. There are many shipping companies that have come into the industry, but there is no positive progression.

Nigerian ships are not classed and behind recommended global standard. In fact some of the operators are still using single hall vessels which have already been phased out. Operators say ships are not classed here because it’s very difficult to maintain ships that are classed.
A Cabotage and its four problematic limbs
The Cabotage Act is premised on four pillars—that the vessels must be owned by Nigerians, built in Nigeria, maintained in Nigeria and with total Nigerian crew. Experts have criticised these conditions on which they blame the inability of government agencies to be able to implement the law.

They say it’s impossible to have a ship constructed and maintained in Nigeria, especially because there are currently no facilities for such services in the country. The law is currently at the National Assembly for possible review.

But players in the industry believe agencies have enough to work with as provided by the law. Agencies such as the Nigerian Content Development and Monitoring Board (NCDMB) recently tried to exercise some implementation of the Act when it warned Chevron against discriminating indigenous shipping firms in awarding its oil lifting businesses.

In a letter to the managing director of the oil firm, the local content board said such “discrimination is a violation of Section 3(2) of the NCDMB Act.”

The NCDMB wrote the oil company in a response to a petition written by the Indigenous Ship-owners Association of Nigeria (ISAN), and directed Chevron to withdraw a marine notice it published to counter the one published by the Nigerian Maritime Administration and Safety Agency (NIMASA).

The letter, with reference number: NCDMB/ES/18/13, dated January 14, 2013, and signed by the Executive Secretary, Mr Ernest Nwapa, said that the Board in collaboration with NIMASA was empowered by law to enforce the Cabotage Act (the local shipping Act, 2003) in matters pertaining to Nigerian Content Development.

The letter read in part, “The discrimination against Nigerian Ship owners’ Association is in violation of section 3(2) of the NOGICD Act 2010 which stipulates that first consideration shall be given to Nigerian companies. Furthermore, Section 105 of the NOGICD Act 2010 empowers the Board in conjunction with NIMASA to enforce compliance with relevant sections of the Cabotage Act in relation to matters pertaining to Content Development.

“In view of the aforementioned, the Board urges CNL to withdraw the said Marine Notice and adopt the Classification Societies authorised by NIMASA.”

ISAN believes the NCDB walked the right path. Its chairman, Jolapamo, who used to have six vessels 10 years ago, but now has only one, says the situation is further aggravated by lack of standards for being a broker in oil trading. Oil trading activities should be streamlined, warning that the nation is “going back on the Cabotage law.”

An Idle Cabotage Vessel Financing Fund
There is the Cabotage Vessels Financing Fund (CVFF) meant to aid the local shipping industry. As at June 2012, the fund rose to about $150 million. The agency in charge of disbursement of the fund, the Nigeria Administration and Safety Agency (NIMASA), started the process of disbursement since August last year, appointing four commercial banks and directed shipping firms to apply. But till this moment, nothing else has been heard about the fund’s disbursement, while indigenous shippers go deep in indebtedness.

“I have not been able to pay loans. The CVFF has been sitting in the bank with no one taking benefit of it. We are handicapped.

About 80 per cent of indigenous shipping companies have closed shops,” Jolapamo says.

But NIMASA maintains the process of disbursement is still in progress.
Driving shipping through competition
Taking a studied look at the sector, which has contended with stunted growth in Nigeria, former Vice President of Africa Region, World Bank, Mrs. Obiageli Ezekwesili, says only competition can drive development of the shipping sector.

Ezekwesili, who delivered a paper on Financing Options for Shipping Development at the second day of the Nigeria Maritime Expo (NIMAREX) 2013 held at Eko Hotel and Suites in Victoria Island, Lagos, recently, says the sector has not opened up effectively, because the players have not formulated effective communication strategy with other players in the Nigerian economy.

Ezekwesili advises Nigerian ship owners to do away with sentiments and rely less on government in taking control of trading on Nigerian waters, while driving their arguments with economic data to attract funds.

“Stimulating the maritime industry requires a more creative policy framework that will make shipping attractive to investors, ease access to cheap funding and encourage mergers,” she notes.

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