Analysts see new revenue creation opportunity in Nigeria’s N2trn shipping business

Following the fall in crude oil price in the international market, which is the mainstay of Nigeria’s economy, maritime analysts say the nation’s shipping business has untapped opportunities that could serve as an alternative means of generating income into the Federal Government coffers.

The Federal Government, they say, needs to diversify Nigerian economy from being oil driven and explore alternative revenue sources in other lucrative sectors like shipping.

Precisely, from June 2014 till date, oil price has witnessed dropped by close to 60 percent from $115 per barrel to the current market price.

BusinessDay findings show that Nigeria’s shipping business, which has an estimated value of N2 trillion annually, is fully dominated by foreign shipping liners. And as an oil producing country, Nigeria does about 2 million barrels per day amounting to 60 million barrels per month, yet the indigenous ship owners handle less than 20 percent of the entire oil shipping jobs.

The nation’s maritime industry has the capacity to generate close to N7 trillion annually for the economy if properly harnessed. The development of Nigeria’s maritime sector would have a spinoff effect on other related industries such as insurance, steel for the use of ship building and repair yards that would spring up, according to Olisa Agbakoba, a maritime lawyer, in Lagos recently.

In her own view, Bisi Akodu, a legal practitioner, also affirmed that despite the potentials in the maritime industry, it had also been totally neglected.

“Nigeria’s shipping sector is estimated to be capable of generating N7 trillion annually. However, in order to tap revenue from this sector there is need for an overhaul of policy, institutional, regulatory and legal framework. We need to develop a new national shipping policy,” she said.

Continuing, she said: “Ours is an import dependent economy that gives rise to the flight of foreign exchange. Unfortunately, cabotage regime has done little to prevent this due to weak structures and regulations. Nigeria’s ship owners are moribund with no incentive or finance to play in the big league with foreign vessel owners; hence, they have been excluded from the lucrative opportunities in Nigeria’s oil and gas industry.”

According to the United Nations Code on Trade and Development (UNCTAD), 40 percent of the total volume of cargo traffic and shipping revenue was reserved for indigenous Nigerian carriers, another 40 percent reserved for carriers of cargo originating in destination countries while the remaining 20 percent for recognised third-flag carriers.

“If implemented this would have gone a long way to correct the imbalance in shipping trade as it affected Nigeria. The purport behind the Nigerian Shipping Policy was to develop a vibrant shipping industry that would generate revenue for Nigeria and Nigerians,” she said.

Niyi Labinjo, a ship owner, who said recently in an interview that there was urgent need for the Federal Government to diversify the nation’s economy by developing its maritime sector especially in the wake of the falling price of crude oil, also believed that Nigeria could only tap into the opportunities available in the shipping industry “if the government changes the trading policy of the nation’s crude oil from Free on Board (FoB) to Cost, Insurance and Freight (CIF).”

To him, selling crude on FoB shows that Nigerian economy is not adding value to its oil before exporting the product, and value addition will enable the country to benefit from the insurance and shipping opportunities provided by crude oil exploration and production.

This, he said, will not only create opportunity that would enable Nigerian ship owners take over Nigerian shipping business from foreign vessels but would also create millions of business opportunities for the nation’s insurance industry.

“The slide in crude oil price calls for a special reaction by all Nigerians, especially those in the private sector. It means Nigerians must look inwards for services and goods that are locally available and consume in order to reduce the volume of import. We have no option than to encourage the growth of our economy by patronising our own goods and services, and this is the only way we can mitigate the effect of the current recession,” he said.

UZOAMAKA ANAGOR