Eight years after government initiated steps to increase indigenous participation in coastal shipping trade, the effort has failed to reverse the trend where more than 80 per cent of Nigerian shipping trade is controlled by foreign shipping companies, leaving indigenous shippers with crumbs
Their anger and frustrations can hardly go unnoticed. At most local and international fora focused on the opportunities and challenges facing the Nigerian maritime industry, indigenous ship owners wear long faces, openly lamenting their age-long exclusion from the Nigerian coastal shipping trade acknowledged by operators and stakeholders as the most lucrative in West and Central Africa. Their frustrations and lamentations particularly over the use of foreign shipping lines in the movement of petroleum products through the nation’s coastline are not new though. It had long been the case until what promised to be a breather came their way on May 1, 2004. That was when the Coastal and Inland Shipping Law 2003, otherwise known as Cabotage Law, became operational amidst fanfare. With the law, which sought to increase the participation of indigenous ship owners in coastal shipping trade, Nigerian shippers hoped that a reversal of the trend where over 80 per cent of the coastal shipping trade is controlled by foreign shipping companies, leaving the local operators picking crumbs was in the offing.
Modelled after the Jones Act in the United States, US, the law provides that all vessels operating in Nigeria’s territorial waters are expected to be built in Nigeria, owned and crewed by Nigerians as well as maintained in the country. Given that the country does not have the capacity to build ships, the legislation made provision for waivers in this regard, which is to be granted by the minister for transport. This means that a cabotage craft could be one built outside Nigeria. Essentially, the law, hailed as one capable of increasing local participation in the maritime industry, restricted the use of foreign vessels in domestic coastal trade in order to promote the development of indigenous tonnage, create employment opportunities for local seafarers, as well as increase indigenous human resource capacity. The icing on the cake is the establishment of the Cabotage Vessel Financing Fund, CVFF, to allow indigenous ship owners access to funds to acquire vessels for the trade.
However, eight years down the line, all the provisions of the legislation are being observed only in the breach. For instance, foreign ship owners still call the shots in the coastal trade and inland shipping business statutorily reserved for Nigerians, going by the provisions of the law. In some cases, the foreign ship owners, in a bid to circumvent the provisions of the law, allegedly use some unscrupulous Nigerians as fronts. At present, it is easier for a camel to pass through the eye of a needle than for a Nigerian ship owner to be involved in lifting crude oil. Yet, oil fleet, rather than cargo fleet, is where the money is in the domestic maritime trade. But because of alleged lack of political will by the government to implement or enforce various local content initiatives, particularly cabotage, and the activities of a strong cabal within the maritime industry, indigenous ship owners and operators find it extremely difficult to get contracts from the Nigerian National Petroleum Corporation, NNPC, its subsidiaries and other major oil companies.
Recently, the Indigenous Ship Owners Association of Nigeria, ISAN, the umbrella body of local ship operators, took a swipe at NNPC, accusing the oil industry behemoth of deliberately sidelining ships owned by Nigerians from lifting imported fuel both locally and internationally during the fuel subsidy regime. Isaac Jolapamo, chairman of ISAN, told the House of Representatives Ad-hoc Committee on Subsidy Management that NNPC sets unnecessary bulwarks that make it impossible for Nigerian vessels to take part in the lifting of oil that was either imported or locally sourced. “No Nigerian ship was used throughout the subsidy regime except a handful of vessels used by the foreign ships that brought in the fuel…” he said, expressing concerns that the Carbotage Law has been flagrantly violated by Nigerian agencies who continued to patronise foreign ship owners to the detriment of their fellow Nigerians.
Jolapamo lamented that despite having 100 per cent capacity, indigenous ship owners are doing less than 20 per cent of the total coastal trade. “We have 100 per cent capacity to perform as there are more than 250 ships owned by Nigerians but we are easily disqualified, not based on the issue of de-certification, but because our only crime is that we fly the Nigerian flag,” he complained. He accused NNPC of sidetracking local operators by changing their biding methods from international standards to a bogus standard to reflect special interests. As far as the ISAN chairman is concerned, the corporation’s pre-qualification process is deliberately skewed to exclude local ship owners. He also denied insinuations that lack of adequate insurance coverage was responsible for the exclusion of Nigerian vessels from petroleum products importation, insisting that local ship owners have sound insurance coverage and capacity. Capacity here, according to NNPC, includes not having ships that meet international standard.
If the rules were to be strictly adhered to, big or mother vessels bringing products from other countries should stop at the entry points from where small Nigerian ships would lift the products for local distribution. But this has not been the case as foreign vessels still do all that. The international oil companies that require service boats in their oil exploration have not helped matters either as they are reluctant to engage the services of local operators. This is why indigenous ship owners who are now sailing against the tide are kicking that their continued exclusion from the trade is not only taking a heavy toll on their businesses but also resulting in loss of huge foreign exchange and employment opportunities. For instance, it is estimated that on account of the preferences given foreign ship owners over the indigenous operators, Nigeria loses as much as N3.7 trillion monthly, about N45 trillion annually in freight or shipping costs that the country should be earning.
That is not the only grouse of indigenous ship owners. Currently, no Nigerian ship owner has benefited from the CVFF. Over $150 million, about N22.5 billion, so far pooled into the fund is yet to be disbursed to the local operators. Rather than do so, the magazine learnt that the fund is now a subject of controversy in the industry because of alleged underground moves by some desperate politicians and top officials of the Nigerian Maritime Administration and Safety Agency, NIMASA, the custodians of the fund, to access the money for purposes other than acquiring vessels. Patrick Akpobolokemi, director general of NIMASA, confirmed that politicians are desperate to get their hands on the funds. Although he declined to mention the politicians, he said that many of them, especially those who lost the last April 2011 general elections, have been making several moves either personally or through their fronts aimed at accessing the fund. Some, he said, have even upped their game by floating shipping companies that exist only on paper.
The fund is sourced from a surcharge of two per cent of the contract sum performed by any vessel engaged in coastal trading, monies generated under the act including tariff, fines, and fees for licences and waivers as well as interest on its fund and repaid loans. Although the NIMASA boss assured that the agency would resist moves by desperate politicians and individuals to get their fingers on the fund, the fear of indigenous operators and experts in the industry is that the fund may go the way of its predecessor, the Ship Acquisition and Building Fund. Under that fund, lots of people were given facilities which they never paid back. Many who took the facility did not buy vessels and some of them who did only bought very old vessels. There were also many people who are not in the shipping business but got the facility for purposes other than acquiring ships.
There are also allegations of some top officials of NIMASA attempting to abuse the use of the fund. That could not be substantiated, as efforts by the magazine to get more clarification on the management of the fund were not successful. Ego Nkwocha, head of public relations, NIMASA, neither took her calls nor responded to a message sent to her mobile phone. A reliable source close to the agency, however, informed the magazine that many indigenous ship owners have since applied for the fund and their applications have been processed and are now awaiting disbursement. Four commercial banks have also been named as primary lending institutions for the disbursement. They are Skye Bank, Equatorial Trust Bank, Diamond Bank and Fidelity Bank. The modalities for the disbursement and repayment of the loans have also been worked out by NIMASA and the commercial banks.
Mike Igbokwe, a Lagos-based maritime lawyer, said that the fund is supposed to alleviate the problems encountered by indigenous ship owners in getting soft loans on long-term basis of up to 20-25 years for acquisition and repairs of vessels. He, however, regretted that as things stand, cabotage is a total failure in the area of providing finance for indigenous ship acquisition, as no local operator has been able to access the fund. He told the magazine that some Nigerian ship owners are complaining that the conditions set by NIMASA for accessing the fund are too stringent. The terms must be attractive to the users who are Nigerians or indigenous ship owners,” he argued, noting that lack of political will is responsible for the non-implementation of the law. “The law is there for implementation. The implementation and monitoring should go hand in hand; if they implement they should monitor what they have implemented to know or find out whether or not you have been achieving set objectives, and to what extent you actually used this law to grow the local shipping industry. I think it boils down to lack of political will,” he said.
Chuks Nwanna, another maritime lawyer, expressed similar sentiments, putting the blame of Nigeria’s failure to harness the huge potential of the maritime industry through cabotage on policy somersault and lack of proper implementation of laws and policies. He told the magazine that most of the laws and policies guiding operators and regulators in the industry are inconsistent, which is why a regulatory institution like NIMASA has had many directors-general, DGs, who were political appointees. “This is not the standard international maritime organisation expected from us. No DG has been there up to three years and what that translate to is that there is always a break in policies with each DG coming with his own agenda. Yet, maritime is suppose to be a global business; you have to follow modern trends and appoint technocrats who are competent people that would follow the trend of the business internationally,” he pointed out.
The Lagos-based maritime lawyer also identified policy inconsistency as the bane of the fund. According to him, the guidelines for accessing the fund continue to change. Hear him: “Every day a new committee is set up; every day they are selecting new banks. As I speak to you the Senate Committee on Marine Transport has sent a memo suggesting to the minister that they have to play a role in the management of the fund. And you know what that means in the final analysis is that you will find out that people who get those facilities are people who are not engaged in shipping and for that reason the sector remains comatose.”
Nwanna went further to paint a grim picture of local operators in the shipping and maritime industry. His words: “Most indigenous operators are seriously indebted; they don’t seem to have the capacity. Most shipping companies are groaning and they are groaning for several reasons: their ships are out of class; they need insurers; they need vibrant and competent crew; they also need their vessels to be dry ducked at least once every two years. And to dry duck a vessel is like buying a new one. If a vessel has been in operation for three years and you want to dry duck, which could take between three and four months, it costs nothing less than $1 million.” According to him, it is only when the ship owner finished dry ducking that he gets a certificate for insurance purposes, as nobody wants to do business with a vessel that is not under class.
What this means is that the plight of Nigerian ship owners has worsened more than it was before the Cabotage Law was enacted. But Igbokwe believes that there is still hope for the indigenous ship owners and operators if the provisions of law are properly implemented, enforced and monitored with the necessary political will. Also, stakeholders must play all the necessary roles to make the Act work positively. This, he suggested, could be done by forming a Cabotage Task Force similar to the one in the US, which monitors the implementation and success of the Act and makes recommendations to the implementation authority and government on how improvements could be made on same.
But until and unless these recommendations are adopted, it will continue to be a tale of woes for indigenous ship owners while their foreign counterparts smile to the banks with proceeds from the country’s lucrative coastal trade.