Nigerians missing out in N2trn shipping business over funding, lack of policy enforcement
Shipping is a very lucrative business and when properly handled, it presents enormous wealth for the ship owner, job opportunities for seekers and economic advancement for the government. For shipping liners, the business is capital intensive because it requires huge financial resources for the acquisition of fleet and for putting the ships into use.
A global school of thought believes that shipping is indispensable to the world given the fact that 90 percent of the global trade is transported by sea, and this contributes to the economic development of maritime nations. The opportunities in shipping business, if properly harnessed, are enormous and can lift a nation’s economy to greater heights.
As an import dependent nation with little export volume, Nigeria, which has 200 nautical miles of Exclusive Economic Zone (EEZ), is positioned as a big maritime nation that can grow its economy and create thousands of jobs. However, Nigeria remains the only member of the Organisation of Petroleum Exporting Countries (OPEC) that does not lift her own crude oil due to lack of fleet but depends on foreign owned vessels, as a result, the nation loses billions of dollar worth of revenue as capital flight. In the area of job creation, Nigerians are losing opportunities to Filipinos, Indians and others who dominate seafaring jobs onboard ships visiting Nigeria. This was attributed to the moribund state of Nigeria’s ship owners blamed for lack of incentive and finance to play with foreign vessels.
“Nigeria has long depended on oil revenue to the detriment of other vital sectors of the economy. Our dependence on oil has made us blind to economic reality and has given us false hope for Nigeria’s future, which is bleak. If we are to turnaround our economy, we must turnaround our thinking and explore alternative revenue sources,” says Bisi Akodu, partner at Olisa Agbakoba Legal (OAL).
Nigeria, Akodu stated, is an import dependent economy and this gives rise to the flight of foreign exchange.
According to the United Nations Code on Trade and Development (UNCTAD), Nigeria needs to adopt the 40: 40: 20 codes that cover ship acquisition, cargo sharing and shipping activities. Under the code, 40 percent of the total volume of cargo traffic and revenue was reserved for indigenous ships, another 40 percent for carriers of cargo originating in destination countries while the remaining 20 percent goes to third flag carriers.
However, Akodu opined that if the UNCTAD call for cargo sharing is implemented, it would go a long way to correct the imbalance in shipping trade in Nigeria. This would also enable shipping to develop a vibrant industry that would generate revenue for Nigeria and Nigerians.
The lending system adopted by Nigeria’s commercial banks creates serious challenges for ship owners such that a credit facility from Nigerian banks, which is mostly short-term, attracts over 20 percent interest rate. This has proven to be counter-productive for Nigerian ship owners, who are competing with foreign players that obtained loan at a single digit rate. Investment in shipping business has long gestation period, thus the need for loan with long-term repayment plan.
In 2003, the National Assembly enacted into law, the Coastal and Inland Shipping (Cabotage) Act, developed to discourage foreign ships from engaging in local seaborne trades on Nigerian waters and to create needed capacity for indigenous shipping business to grow.
Thirteen years on, Cabotage, which has been in the custody of the Nigeria Maritime Administration and Safety Agencies (NIMASA), has failed to build capacity among Nigerian ship owners.
“Unfortunately, the Nigeria’s Coastal and Inland Shipping (Cabotage) has done little to boost indigenous participation in shipping due to weak structures and regulations,” says Akodu.
There is need to implement the provisions of the Coastal and Inland Shipping (Cabotage) Act, promoted to increase the participation of indigenous shipping firms in Nigeria’s shipping business, says Emmanuel Ihenacho, chairman of Integrated Oil and Gas Limited in an interview recently.
Ihenacho, who stated that Nigerian shipping firms are dying because there is no policy provision that ensures they have access to finance, cargoes and proper training, also pointed out that the Federal Government needs to put in place, a proper development plan to help develop different kinds of ships under Nigerian ownership.
To address the issue of funding, which is partly why Cabotage Act has failed to succeed, the Federal Government established the Cabotage Vessel Financing Fund (CVFF). A pool of fund, containing 2 percent of the total freight carried by all Nigerian registered vessel, but years after, no Nigerian owned ship has benefited from the fund that has grown to over N51 billion.
“Local ship owners can be empowered from the CCVFF to enable them have money to buy bigger ships and to fly Nigerian flags in foreign nations,” Ihenacho added.
Nigeria is a diverse economy where different kinds of ships are used to bring in imports like roll-on roll-off vessels, general cargo ships, tanker vessels, barges, tug boats, supply vessels and others, thus the need to develop fleet that will match Nigeria’s diverse international trade and reduce the level of foreign domination of shipping business.
“NIMASA needs to release the money accumulated in the Cabotage fund to finance and empower local ship operators, which is the original reason for setting up the fund. Disbursement of this fund to credible shipping firms can help the nation’s economy especially in the wake of dwindling crude oil price so as to reduce pressure on government in terms of job creation,” said Adewale Ishola, a ship operator.
While urging the Federal Government to implement the recommendations of the maritime committee that was set-up in 2012 by the former President Goodluck Jonathan, Ishola notes that disbursing the available N52 billion Fund to the six companies listed years back then by NIMASA as beneficiaries and using the fund to repair the 20 shipping firms shortlisted for repair by the agency, will go a long way in reviving the industry.
To him, the fleet of seafarers, numbered 2,600, who benefited from the ongoing Nigerian Seafarers Development programme (NSDP), which NIMASA is currently training overseas, would be gainfully employed if Nigerians start developing fleets. The current government can support local shipping by empowering ship owners through access to cheap finance for vessel acquisition.
AMAKA ANAGOR-EWUZIE