Proposed national shipping carrier and growth paths for efficient operations

State of Nigerian shipping business

For over a decade now Nigeria as a maritime nation has been in serious need of ships that would not only fly the national flag but also position the country to compete favourably with other maritime nations.

Before its demise in the 1990s, the Nigerian National Shipping Line (NNSL) was the nation’s foremost shipping line. It not only gave Nigeria a competitive edge as a maritime nation but also helped the nation in building a pool of master mariners who, unfortunately, are currently ageing. 

The importance of acquisition of vessels to serve as national shipping line cannot be over-emphasised as Nigeria, a viable maritime nation that depends largely on importation of finished consumables for domestic use and semi-processed raw materials as well as machineries for industry use, has for over a decade now practically left its shipping business in the hands of foreigners. As such, the nation loses in diverse ways, including proceeds from effective shipping of Nigeria-bound imports and Nigeria-originated export, proceeds from having qualified manpower to man Nigerian vessels, opportunity for job creation, proceeds from marine insurance, among others. 

Rising hope for a national carrier

Recently, the Federal Government, through the Nigerian Maritime Administration and Safety Agency (NIMASA), declared its intention to float a new national carrier within the next six months.

Patrick Akpobolokemi, director general of NIMASA, who made the announcement recently in a forum in Lagos, solicited for the partnership of interested investors in the establishment of the new national shipping line. “We want our shipping line back. National carrier can be done and it must be done because the presidency is very committed to see the project take-off in the present regime,” he said, adding that it would help Nigeria to conserve the millions of dollars lost to capital flight via Federal Government investment in overseas training of cadets on sea time programme.  

But industry stakeholders say it is important that Nigeria looks properly and tie every loose end before setting up a new national carrier in order to ensure the survival of the new venture.

Why NNSL was liquidated

Bolaji Akinola, a renowned maritime analyst who doubles as the chief executive officer of Ships and Ports Communication Company, said in position paper made available to BusinessDay that excessive interference by top government officials played an important role in the eventual demise of the defunct Nigerian National Shipping Line (NNSL), adding that the shipping line was seen as a cash cow by officials of the Federal Ministry of Transport.

The management of NNSL, according to him, did not enjoy independence in the management of the lucrative shipping business as their top officials were changed as often as the transport ministry officials liked, such that every NNSL managing director who was seen as uncooperative by the ministry officials found himself in the labour market.

“Frequent changes in the management were not for the right reasons and management programmes for turning around the shipping line were not given due consideration. The company and government could not react without delay to situations dictated by market and technological changes in the trade,” he explained, noting that, for instance, it took the Federal Government almost five years to approve the tonnage expansion programme and modernisation of NNSL ships in the 70s.

“By the time the vessels were eventually built and introduced into the market, a measure of obsolescence had set into the original concept. It took another five years to convince the government on the need to phase out the 19 combo vessels with a view to introducing appropriate vessels that were technologically up to date and capable of meeting market demands,” Akinola said.

H e further observed that part of the major factors that led to the demise of the shipping line was the inability of the Federal Government to pay for the services rendered to it by the shipping company, while some services were paid in local currency to a company that racked up operational expenses in foreign currency – based on the fact that ships incur running and maintenance costs whether in operation or not.

Days of NNSL

NNSL ships played a vital role in moving troops and materials into Liberia during the peace-keeping operations of the Nigeria-led Economic Community of West African States Monitoring Group (ECOMOG) in that country. Ironically, a dime was not paid for the service.

Accumulated debts of NNSL to trade creditors originated from government’s failure to pay NNSL for the shipment of government project materials, such as Aluminium Smelter Company, Ajaokuta and Alaja Steel projects. Efforts made by the management of the company to diversify into ancillary activities such as terminal operations, clearing and forwarding, oil tanker operation, etc, were not approved.

From facts gathered from former managers of the defunct shipping line, government interference was a major stumbling block to the operation of the company. As at the time it was drafted into the ECOMOG Liberia mission in 1990, NNSL was already in a deep financial mess. Several of the company’s vessels have been seized in different parts of the world for alleged breach of contracts and unpaid bills.

In 1994, Sani Abacha, then military head of state, approved the direct injection of cash into NNSL to enable it pay its creditors and secure release of some of its ships. The late dictator approved $45 million and another $20 million for NNSL, but, as a matter of fact, this act pushed the last nail into the company’s coffin. This was so because of avarice of some officials who colluded with outsiders to defraud the company as much as they could.

By early 1995, all of the vessels owned by NNSL had either been sold as scraps or downright shipwrecked without any hope of redemption. In September 1995, Ibrahim Gumel, then minister of transport, shut down the operation of the NNSL after 36 years. He appointed Cosmos Niagwan, then a captain, as liquidator of the company.

The NNSL story is a reminder to the decision makers of today that government has no business being in business.

The new shipping line

To achieve efficiency in running the new shipping line if set up, Akinola believed that the business should be a private sector-driven venture with government’s role being that of providing an enabling environment for the business to thrive.

He recommended the Nigeria Liquefied Natural Gas (NLNG) model for structure of the new national carrier where the Nigerian National Petroleum Corporation (NNPC) owns 49 percent of NLNG while Shell, Total and ENI own 25.6, 15 and 10.4 percents of the entity, respectively. A structure like this has ensured the buy-in and ownership of the NLNG project by critical industry stakeholders.

“I suggest that the indigenous ship owners under the aegis of the Nigerian Shipowners Association should own 49 percent while three oil majors – it could be the three mentioned above – should own the remaining 51 percent share,” said Akinola, who advised that NIMASA should not own shares in the new venture because it is a regulatory agency. “Its role in the entire arrangement should be that of a facilitator in line with its mandate of promoting shipping development in the country,” he said.

Uzoamaka Anagor