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To operate a truly deregulated market there must be clarity and predictability of policy – Akabogu

In this interview with LEGAL BUSINESS, maritime, petroleum and international trade expert, Emeka Akabogu, shares some insight on the impact of COVID -19 on the downstream oil and gas industry and discusses recent reform initiatives within the sector. He also shares his experience working remotely and discusses the role of technology in the world of remote work. EXCERPTS…

 To mitigate the spread of Covid-19 in Nigeria, government a few months ago imposed a lockdown and many businesses including law firms had to learn to work remotely. What was the transition to the world of remote work like for you?

It was actually a blessing for me and many other professionals who have now realized that we

are able to do much more than we previously thought possible. Things that we assumed could only be done in the office, we are now able to do from home. The impact has been a significant amount of savings in resources, in terms of time and money.

 

What adjustments have you had to make as a firm?

Primarily, we have made adjustments technologically and with regard to human resource implications.  In terms of technology, we had to very quickly transit to the use of available platforms to conduct our in-house meetings. Although we had always had these platforms, we never really optimized them because we had the opportunity of being together in the office. We have also moved the knowledge-sharing initiatives which we offer to market operators in our practice areas online, resulting in considerably increased reach, including to all corners of the globe.

 

Interestingly, with regard to human resources and tracking performance, we have seen that we are better able to track work. The office environment sometimes presents opportunities for a lot of motion without movement. Now that staff can only be assessed based on tangible deliverables, it is easier to see who is adding value and who is not and apply necessary consequences.

 

Are there any tools that you have found particularly useful or you would recommend above others?

I would not say that I am able to recommend any tools above others. However, the primary tools that we have had to depend on have been video conferencing tools for facilitating meetings and webinars.

 

What about documentation and remote access to your files?

 We use Next Counsel and it gives us the opportunity to collaborate in terms of task tracking and related matters. Google drive is also quite effective to ensure that we are able to store and locate our documentation. One of the things which we were able to do pre-COVID was to have a continuous process of uploading our documents to the cloud. The current circumstances highlight the importance of that activity. Some of our clients have occasionally called for access to important documentation including court processes, and we were happily and readily able to oblige them even though we were working from home. This reinforces the importance of technology. However, we need to make continuous, ongoing progress.

 

How would you say Covid-19 has impacted the Nigerian Judicial process?

I would say positively. I choose to see only the positives in this situation. For a long time, we have been wondering the extent to which it would be possible for courts to go virtual. There has been a significant reluctance on the part of major stakeholders both at the bar and on the bench to take advantage of the technology we have. People have a set mindset and are afraid of exploring new options and this has been a challenge to things taking off over the years. The Covid-19 situation has now placed us in a position where we have to make immediate decisions and adjustments.

 

We have now realized that we are able to do more with the resources that we have and states like Borno and Lagos State as well as the F.C.T have already taken advantage of technology to conduct virtual court proceedings which we did not think would happen anytime soon. This of course needs to be transitioned from the occasional ceremonial hearings for the benefit of the media to standard, routine practice, as most courts, particularly the Federal High Court are still hearing only a handful of matters.

 

However, there are still naysayers. Just yesterday, I was contributing to a thread on LinkedIn, the core of which was that virtual proceedings could potentially be trumped for not complying with constitutional provisions regarding making trials public. I also recently listened to a Senior Advocate of Nigeria say on a TV programme, that remote hearings should not yet be adopted by the country because of challenges regarding power and the constitutional requirements for a public trial. To me, that is looking at the cup half empty, rather than half full. The question I posed was, what is the definition of public? Is it public enough if the link for a zoom meeting is printed and posted on the cause list and pasted on the court’s board and also posted on the court’s website? My position is that it is public enough as long as it allows anyone who has access to the link to gain access to the court.  As for power supply, everyone who has a laptop knows that you do not require power supply consistently to power your laptop. The courts should also be able to afford inverter systems for the individual courts.

Covid-19 has presented an opportunity for the legal industry to re-invent itself. It is crucial that we seize the opportunity

Let’s take this to the downstream sector where you are a key stakeholder and advisor.  How would you say the COVID-19 Pandemic has affected the sector?

In addressing this question, I will limit my answer to particular areas which have to do with law and the areas in which I work, which are essentially shipping; and shipping relationships with the downstream oil and gas industry.

Covid-19 has affected the market both positively and negatively. Its most immediate impact is the unprecedented global slow-down in the consumption of oil. The world virtually came to a halt and as a result, the price of oil not only fell, but fell into negative territory. This in turn resulted in a reduction in the price of petroleum products, with NNPC even announcing a further reduction in the ex-depot price of petrol to N108.00. For a majority of Nigerians, this is a positive impact of Covid-19.

However, since the reduction in our petrol price appears to be market driven rather than arbitrary, we are likely to see the flip side when the economy starts running again, even as the market is gradually rebounding. NNPC has announced that the market will determine prices going forward. Although, the Federal Government (by which we mean the President of the country) has not made any clear declaration on this matter, the immediate indication is that Post-COVID, we will indeed operate a deregulated market, because as at today, Nigeria is broke and one of the very quick solutions to this problem would be to ensure that we have cost-reflective pricing of petroleum products going forward. If this happens, it will be a very positive outcome for market operators because for about four years or more, a lot of petroleum market operators have been comatose due to the inverted pricing realities imposed by price caps without subsidies.

However, to operate a truly deregulated market and ensure market equilibrium there would need to be clarity and predictability of important policy and operational issues. For instance, we would need to have uniformity in relation to access and rates of foreign exchange. We would also need to implement legal reforms to create a regime under which deregulation can operate. We would need to revisit the PIB and amend or repeal certain statutes such as the Price Control Act, the Petroleum Equalisation Fund Management Board Act and the Petroleum Products Pricing and Regulation Agency Act which by their current provisions are inconsistent with a fully deregulated market regime. We would also need to implement a robust competition regulatory framework to deal with legitimate concerns about cartelization and abuse of dominant positions. I recently moderated the Nigerian Petroleum Downstream Consultative Summit with all the market’s key stakeholders, and the overwhelming and near unanimous position was that the sector should be deregulated.

Coming back to Covid-19 and arising implications, we have a situation now where one of the first declarations made by the president was that vessels coming into Nigeria should wait 14 days before being allowed to berth in the ports. This directive was given to allow for a quarantine period for those that might potentially be infected with the virus.

The order has naturally resulted in delays to vessels that are coming in. For every day a vessel stays beyond what is agreed to in its charter party, it is subjected to demurrage. So, there are pending significant claims waiting to be made with regards to demurrage. The impact of these will be on the bottom line of ship owners, who will in turn, where their contract allows, transfer same obligation to the owners of the cargo. So quite a number of legal issues will arise.

Another development, which we have seen is around tank farms and tanker vessels. As a result of the glut, tank farms are full. So, tanker vessels that should ordinarily be ferrying products from place to place are now being used for storage. This has led to a shortage of good tanker vessels, which has in turn resulted in an increase in the rates of tanker vessels, and so ship owners are smiling at this point but of course, these will have implications later on.

Can you please expand on some of these implications?

If going forward, we truly operate a deregulated market, what will happen when the economy is back on full steam is that the price of petroleum products will go up very quickly. And this will happen, not necessarily because of the price of the products, but because of the associated cost of logistics surrounding it; cost of storage, tanks and even cost of haulage. So that is one immediate implication.

Another thing to note is that tanker rates will remain high for a very long time. Ordinarily this should be good news for ship owners, but in Nigeria, we don’t have many people who are big ship owners, many of the ship owners are foreigners. So, it’s not great news for those operating in the Nigerian market. If anything, these are cost drivers, which ultimately have an impact on every other thing down the line and it may take a while for the market to stabilize.

Is there anything we could be doing to mitigate some of these potential impacts?

It will be good at this point to see what some people would call a backward integration. We need to encourage local value addition because there is value accretion resulting from volatility in forex and reliance on foreign variables as far as local dynamics, production and consumption are concerned. Over the years, this has been discussed. But it is time to start actioning our words and intentions.

This is a period where we really need leadership, not just politically, but on the economic front.  Of course, the economic front requires political backing, so that there is investment in things which matter. Petrochemicals for instance need a lot of investment. But we need the government to create policies which encourage the investors. We also need the market operators to think more as a corporate group as opposed to thinking individually. So, I personally would encourage a lot of mergers and possibly acquisitions, but generally collaborations among market operators in terms of scaling operations and taking advantage of numbers. That way, it’s easier to deal with the challenges which they are faced with.

Also, don’t forget that there is a continuing challenge of infrastructure. For example, there is a concentration of effort in Lagos as far as infrastructure for the petroleum products market is concerned. There are so many tank farms in Apapa and over the years there have been many complaints that these pose a significant threat to human life in the event of any incident. But yet we have sub-optimal utilization of opportunities on the flanks of the country. However, because government has failed to do what it should do many of the other options have significant constraints that limit them from being optimally utilized. For instance, the Calabar port, which should have been dredged years ago, is constrained by very shallow approaches and this puts a limitation on the size of vessels that can berth there. Consequently, a port that could have served as a very useful window for products to reach other parts of the country quickly and cheaply is not fully taken advantage of. There is therefore a lot of responsibility on the government and in this case NPA to do what they are there for. We need to have a better approach to governance and focus on those things which would drive economic and commercial activities and ultimately help everyone get out of the situation in which we find ourselves.

In discussing these issues however, I will always focus on the legal aspects. So, I won’t end this interview, without again calling for, an immediate review of the legal framework relating to downstream markets so that the PIB is passed and the relevant regulatory framework is clear. That way we can have clarity as to what direction the market will go.

 

I read recently, that the IMO recommended a framework of protocols for ensuring safe ship crew changes during the Pandemic. Why is this an important issue, and to what extent has Nigeria been able to comply with this Protocol?

Typically, crew on ships have to be changed periodically to safeguard their mental health. They cannot stay on board indefinitely. That is why for instance we know of oil men who go onshore for two weeks and are offshore for another two weeks.

However, as a result of Covid-19 and the quarantine measures in place, crew changes are now difficult to implement. In some cases, a ship may not be allowed to enter into a Port and even when they eventually get in, the persons on board are quarantined and required to remain on board. The second and perhaps more important issue is that if the crew is able to disembark, they are unable to leave the country or to be replaced by another crew due to the shutdown of the airports.

In a nutshell crew replacement has posed a challenge in these times and is affecting the mental health of crewmen. However, the IMO is working with ship owners to resolve the problem, issuing recent guidelines, just as NIMASA has also done.

 

Moving away from COVID-19, it was recently reported that the Maritime Law Association, of which you are Honorary Secretary, constituted a Committee to contribute to the reform of key procedural rules and substantive law in the sector. What’s driving this initiative at this time?

Yes. You know, maritime law thrives on uniformity across jurisdictions. However, over the years, decisions coming out of Nigeria courts are out of sync with global expectations and its been a bother to the international maritime community. In addition to that is the fact that the admiralty jurisdiction which was originally constituted with the mindset of ensuring that proceedings are undertaken speedily has seen that mindset significantly eroded over time by procedures and dispositions of judicial authorities and registries. We spoke earlier about losses occasioned by delay; those kinds of issues make it expedient that matters should be undertaken speedily.

The Nigerian Maritime Law Association is concerned about the considerable accretion of these important elements and has decided to lead the initiative towards reform, so that, where the problem is with the law, the law is changed and where it is with procedure, up to date procedures are put in place.  The Association also seeks to undertake sensitization across the bar and the bench to ensure that the important fundamentals which drive the success of any maritime or admiralty jurisdiction are brought back for Nigeria. The Committee that was constituted is made up of great minds and has put in excellent work, so we are on the right track.

You are the chairman of OTL Africa Downstream, which is widely acknowledged as the biggest platform for downstream oil & gas businesses in Africa. Given the current situation, what are the plans for OTL this year?

OTL will always hold every year, usually in October. For us it is an opportunity to engage the market. The nature of the event this year will be determined by the state of the global society at the time. Our options are open and fluid.  But for now, we are planning towards OTL properly and working with our partners to ensure that the event holds in a manner that ensures market needs are optimized.

 

PROFILE

EMEKA AKABOGU is a practicing lawyer and a widely recognised expert in the field of maritime law and policy in Nigeria. He is the Senior Partner at the law firm, AKABOGU & ASSOCIATES, which is active in shipping, maritime, petroleum and international trade representation. His book, ‘Maritime Cabotage in Nigeria’, was the first published work on the subject in Nigeria, in addition to numerous other publications. He is the Chairman of OTL Downstream Development in Africa Ltd./Gte., a Pan-African initiative for promotion of downstream petroleum business and policy and is the Founder of Africa’s biggest downstream petroleum forum, OTL Africa Downstream. A litigator and arbitrator, he uniquely combines his legal skills with an indepth understanding of markets and operations in the shipping and petroleum sectors.

 

Akabogu holds a Masters Degree with specialization in Maritime Laws from the University College London, and a M agister Juris. (M. Phil.) from the International Maritime Law Institute (IMLI), Malta. A British Chevening Scholar, he is the Editor of the Journal of Contemporary Nigerian Admiralty Law, a Fellow of the Chartered Institute of Shipping, and a member of the Nigerian Bar Association, Maritime Arbitrators Association of Nigeria, Nigerian Chartered Institute of Arbitrators and the Energy Institute. He is a member of the Board of Governors of the Centre for Petroleum Information and serves on the Executive Council of the Nigerian Maritime Law Association as Honorary Secretary.

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