How FX scarcity, recession threatened acquisition of ship spare parts in 2016
Scarcity of foreign exchange and economic recession that drastically reduced the volume of businesses in the nation’s shipping sector were the defining issues for ship owners in the year that ended in 2016. As a result, indigenous shipping business in Nigeria passed through severe economic hardship due to low patronage and lack of jobs, which resulted to high availability of idle vessels.
Ship owners, who took turns to examine the nation’s shipping business in the past 12 months, blamed the development on economic downturn that forces international oil companies (IOCs) operating in the nation’s upstream sector, to cut down demand for service and supply vessels during offshore exploration and crude oil production.
According to them, over 40 percent of oil tankers, passenger carriers and service supply vessels owned by Nigerians are no longer engaged to lift crude oil, lift workers of oil majors, supply goods and services to IOCs at their various offshore operational bases.
Greg Ogbeifun, President of Ship Owners Association of Nigeria (SOAN), who said that many IOCs have reduced the number of vessels being used in the upstream sector, added that about 40 percent of vessels owned by indigenous ship owners have lost their contracts while the remaining 60 percent struggle over high operational cost as the rate of inflation eats into companies bottom lines.
Ogbeifun, who doubles as the chairman of Starzs Investments Company Limited, said that the current economic situation has reduced the rate of vessels chartered by oil majors to about 25 percent.
Adewale Ishola, former president of Association of Master Mariners, said that the scarcity of foreign exchange is also affecting the acquisition of ship spare parts needed for maintenance of vessels. This, according to him, has also pushed many seafarers whose employers could not pay their salaries, to the labour market.
“Nigeria does not manufacture ships and ship spare parts are also imported from abroad but the difficulty in accessing foreign exchange to import these spare parts have kept many vessels owned by indigenous ship operators out of business and they are losing money due to this,” Ishola said.
To grow the nation’s shipping business valued at N2 trillion annually, Ishola pointed out the need for government to change the present crude oil trading policy of Free-on-Board (FoB) to Cost, Insurance and Freight (CIF), as obtainable in oil producing countries of the world.
“CIF would create more jobs for Nigerian ships because Nigerians would be the ones to bring ships that would carry the nation’s crude oil for export to the destination ports. Alarmingly, Nigeria is the only country among the OPEC members that does not lift its crude oil and we are losing freight, business and money by doing so. CIS policy allows the seller of the crude oil to be the one to carry oil to its destination while FoB allows the buyer to bring ship that would carry the crude,” he explained.
Olu Akinsoji, a ship owner, who affirmed that economic recession is affecting importation of spare parts because the parts used for the maintenance of ships are not manufactured in-country, also said that the operational cost of shipping is also affected by increased price of fueling vessels.
“Shipping is an international business that requires foreign currency for buying of ships and payment of insurance. And Nigerian government needs to make shipping attractive and competitive with what is happening in other parts of the world. There is need to give concession to ship owners by reducing the tariff on imported spare parts for Cabotage vessels involved in carriage of locally generated cargoes,” Akinsoji added.
Uzoamaka Anagor-Ewuzie