Nigeria and Politics of Fleet Expansion
By Francis Ugwoke
The seriousness with which the federal government has pushed for even growth in the nation’s transport industry, particularly the maritime sector leaves much to be desired. The Minister of Transportation, Hon Rotimi Amaechi hit the ground running soon after his appointment with great plans, some of which appear to have now fizzled out. Apparently confronted by low participation of indigenous shipping companies in maritime trade, the Minister made serious efforts to ensure that the tide changes. First, he set up a Ministerial Advisory Committee headed by an international maritime expert, Engr. Olu Akinsoji , to advise him. After series of efforts, there was the Nigeria and Singapore Memorandum of Understanding (MOU). It was a Joint Venture ( JV) partnership between Nigerian investors and Pacific International Limited (PIL) which flopped. It was to establish a Nigerian flag ship which arrangement could not see the order of the day. The Transport Minister had named the Executive Secretary/CEO of Nigerian Shippers Council (NSC), Hassan Bello, as the head of the federal government committee on national carrier. Bello had said that as a maritime nation, Nigeria needed to have enough of her own ships. Bello had said, “We cannot pretend to be a maritime nation without a flagship. We are trading all over the world as far as Asia but this is the time for us to have our own ships.” But few months to the end of this administration, the issue of national carrier or fleet expansion appears to have taken a back seat, so to say. Amaechi had at an event in Lagos few months back expressed concerns about the unseriousness of Nigerian investors in partnering with foreign investors. Since government was only providing an interface between the foreign and local investors, both sides have obligations to be met. The Minister, sources said was not pleased about the unreadiness of Nigerian investors in meeting up with expected funding among others to attract the foreign partners. This, it was gathered slowed down either the national fleet expansion or the national carrier project being propagated by all. With the 2019 election project, such serious economic issues have no doubt been put aside, probably to be continued in the second term of this administration or by another administration.
Outcry by Stakeholders
The current situation in the nation’s shipping industry is one of nightmare as many companies are in comatose. The reasons given by the operators are multifarious. They accuse the Nigerian Maritime Administration and Safety Agency (NIMASA) of failing in protecting their interest. For instance, they said NIMASA has over the years failed in addressing the issue of illegalities on the territorial waters where foreign firms without waiver have taken over the jobs of Nigerians in wet cargo affreightment. NIMASA as the regulator in the industry is supposed to check the presence of ships operating without waivers on the Nigerian waters. These foreign vessels are preferred by both the Nigerian National Petroleum Corporation (NNPC) and oil majors on flimsy excuses of not having seaworthy bottoms, a claim that has often been denied by Nigerian shipowners. Hundreds of illegal vessels are operating on the waters. Those that have waivers are reported to be getting their approval after greasing the palms of the relevant personnel of the Ministry of Transport. There was a time that the Nigerian Shipowners Association made efforts at tackling these illegal vessels on the waters but was overwhelmed by the challenges of having to seek court order every now and then to arrest the vessels and the huge costs involved. At one point, the shipowners had asked the DG of NIMASA, Dr. Dakuku Peterside to resign over failure to improve things in the industry. Chairman of Shipowners Association of Nigeria, Engr Greg Ogbeifun had lamented that the Nigerian shipping industry had become a laughing stock by the international shipping community for remaining stagnant in shipping development
Shipowners who spoke to Shipping Day said foreign vessels which are not supposed to operate on the nation’s waters still do so, leading in the distribution of imported petroleum products as against local shipping companies.
Industry operators said this practice goes on through various manipulations of the system with the situation worsened by the failure of NIMASA) to check the perpetrators.
It was gathered that following the widespread criticisms of the flagrant abuse of waiver regime in which the foreigners bribe their way out, a vetting regime has been introduced in the selection of vessels that are used in coastal distribution of wet cargoes, like petroleum products.
A shipowner said under the cabotage regime, a bigger foreign ship brings the petroleum products to the Lagos ports or other ports from where the products are distributed within the coast by local vessels.
However, it was gathered that the same foreign vessels which brought the cargo to the country were the ones dictating which vessel carries the cargo for distribution within the coast under the vetting regime.
This policy, it was gathered, has thrown many indigenous shipping companies out of business as many of them are not selected in the process.
Those who are chosen are then covered under the provisions of waiver as contained in the cabotage regime.
A prominent shipower who pleaded anonymity said the practice was mainly to ensure that indigenous shipping companies do not take part in wet cargo shipping trade.
He said that the introduction of the vetting policy and manipulation of the system was deliberate to ensure that only foreign vessels hanging on the territorial waters illegally are given jobs under the cover of waivers.
He also said it was worrisome that the Nigerian shipowers have been left in the cold with nobody speaking for them, particularly the local apex regulatory agency, NIMASA which should come out boldly to stop the practice that is denying millions of dollar business to local companies.
The shipowner said what is even more worrisome is that the same foreign shipping companies which have interests as competitors were the ones in charge of vetting. One of the operators who pleaded anonymity told our Correspondent how foreign vessels have taken over tanker trade in Nigeria. He said, “ In the beginning, the problem that Nigerian vessels had was that there was no money for them to buy ships, well after sometime, some people found money to buy ships, but remember that this market we are talking about is a very lucrative market and foreigners are actually working very hard to make sure that Nigerians don’t get involved . So. they introduced things like vetting vessels… If a Nigerian ship has an operational vessel and goes with a foreign ship, they will fail you in order to create room for their own preferred vessels, mainly where they have interest. The question is: why is that people that are doing operations with you using foreign vessels vet you. Why should your own competitor vet you on whether you will pass or not. You will expect that that will be a role that should be played by a third party.. not somebody who has an interest to give the ship to another company. A third party who is neutral who does not have foreign vessels or interest should be better, even you can use Lyods. It could be another party charged with the responsibility of vetting ships to make sure that there is fairness. But if you have a situation where the incoming foreign vessels take it upon themselves to carry out the vetting, Nigerian vessels cannot pass the vetting any more. There are lots and lots of Nigerian shipowners standing out there and those ships are rotting in the water because they never work”.
On how to deal with such problems, he said, this was for NIMASA to address. “They (NIMASA) have to deal with those issues. They have to understand the specific problems Nigerian shiponwers are facing and address them rather than running around signing MOUs with the medical people , talking about Heart Disease”.
Failure of Cabotage/CVFF
In the late ‘90s when the first set of indigenous shipping companies benefited from the Ship Acquisition and Ship Building Fund (SASBF), other stakeholders had thought this will be a continuous trend. NIMASA had then doled out between $2m to $2.5m to about 10 indigenous shipping companies to acquire their own vessels as a way of deepening Nigerian participation in shipping. This was as provided by the Act setting National Maritime Authority (NMA) up which was mainly to promote indigenous shipping development. Most of the companies had after taking the loan defaulted in repayment. It was for this reason that government decided to suspend the SASBF and introduced the Cabotage Vessel Financing Fund (CVFF). The latter was introduced with stringent conditions to check the failure of the past. Although CVFF was introduced in 2003, the same year that the Cabotage shipping law came into effect, no penny has been disbursed till date. It has been one excuse after another being given by the management of NIMASA for not disbursing the fund. At least, NIMASA has produced eight DGs since 2003, apart from the present DG, Dr. Dakuku Peterside , yet the story has been the same for not disbursing the CVFF. Incidentally, NIMASA continues to collect the same fees that makes up CVFF from Nigerian shipowners. The current status of the fund is about $180m , according to NIMASA. Industry stakeholders believe that disbursement of the fund in the past 20 years of the suspension of SASBF would have added a lot of value to indigenous shipping with multiplier effect in the economy in the areas of more fleet acquisition, revenue and job creation.
Indigenous Shipowners Make Alternative Moves
In apparent move to look for ways to survive instead of waiting for government assistance, the Ship Owners Association on Nigeria (SOAN) recently signed a Memorandum of Understanding (MoU) with China Complete National Engineering Corporation (CCNEC) for supply of vessels. The target of the association is 23,000 deadweight vessels at 6.5 metres.This was disclosed by the Vice President of SOAN the Dr McGeorge Onyong who explained that the MoU was mainly to enhance indigenous shipping capacity in the country.
Onyong told newsmen . “This business is so big that we cannot afford to fail as a group. So it’s something we need leadership that will be able to see the opportunities that we are craving to harness.
“It is on record that 60 per cent of the world’s oil is being transported by ships so we are not in competition with anyone. If we have to turn this economy into a global one we ought to do it well.’’ The move is seen as a response to the statement credited to the Transport Minister who had said indigenous operators were unserious in partnering with foreign investors.
What Nigeria Loses
The losses being suffered by Nigeria for not being substantially active in shipping are enormous and run into billions of dollars annually. And this is when taking into consideration that Nigerian shipping companies are not part of the crude oil affreightment due to the trade terms of Free on Board (FOB) as against Cost Insurance and Freight (CIF) entered into with our foreign buyers. This is one area that the Ministry of Transport and management of NIMASA have been working hard to address but without success. NIMASA, like other industry stakeholders had pushed for this but NNPC management has made it clear that it is not as easy as that. Changing the trade terms from FOB to CIF has a lot of security and financial implications.
Former Chairman, Ministerial Committee on Modalities for the Establishment of Nigerian Fleet, Engr. Olu Akinsoji, said the country would have raked in as much as $2.2 billion if 50 % of the vessels that carried crude in the past two years were Nigerian vessels. Akinsoji said Nigeria has been suffering huge losses because of the involvement of only foreign vessels in the carriage of crude petroleum products.
“If 50 per cent of the over 5000 ships that came to Nigeria in 2014 were Nigerian ships, crewed by Nigerians, say 20 Nigerians per ship, and earning $3,000 per person, Nigeria would have made $2.2 bn.
“That is apart from the freight that is accruable by carrying Nigerian cargo. The human elements, the seafarer that would have worked on those ships would have earned $2.2 billion and you imagine every family of that sea farer would have benefited from the cargo.
“These are the kinds of losses that we are making by not having ships that are carrying our cargo. All the international cargo we generated is carried by foreign ships. We don’t have a ship in international waters carrying dry cargo”, Akinsoji said.
Initially, the Minister of Transport had said he will not disburse the CVFF even after six companies had been shortlisted. Amaechi had said this was considering what happened in the past. But with pressure, he later assured that he was taking the issue to the Federal Executive Council (FEC) for the approval to disburse the fund. Few months back, NIMASA DG, Dakuku had promised that very soon the agency would start disbursing the fund. However, few weeks to the end of the year and as February 2019 nothing happened.
*Culled from SHIPPING DAY MAGAZINE
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