NIMASA and efforts to end foreign dominance in shipping business, grow indigenous participation

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Determined to put an end to the foreign domination of the nation’s shipping business, the Dakuku Peterside-led management of the Nigerian Maritime Administration and Safety Agency (NIMASA), recently launched new plans targeted at empowering Nigerians to acquire new vessels and to put an end to granting of waivers to foreign owned vessels, writes AMAKA ANAGOR-EWUZIE.

Nigeria’s shipping business

With a coastline of 852 kilometres bordering the Atlantic Ocean in the Gulf of Guinea and a maritime area of over 46,000 km2, Nigeria is no doubt a maritime destination.

Statistics show that a total freight cost of between $5 billion and $6 billion is estimated to be generated on export and import businesses annually, while the maritime component of Nigeria’s oil and gas industry is worth an estimated $8 billion alongside seaborne transportation, oceanic extractive resource exploitation and export processing zones.

Alarmingly, the big business has for several years, been dominated by foreign-owned shipping firms. As a result, the Federal Government in 2003 came up with the Coastal and Inland Shipping (Cabotage) Act, aimed at growing shipping through effective participation of indigenous-owned vessels in the nation’s lucrative shipping business.

The act restricted the use of foreign vessels in domestic coastal trade to grow indigenous tonnage. It also made provisions for securing jobs for qualified and upcoming Nigerian cadets presently being trained in different maritime institutions of the world.

Fourteen year down the line, the act is yet to achieve its aim as many Nigerians still lack the capacity to acquire quality vessels to participate in coastal trade and foreign vessels still depend heavily on foreign seafarers for manning.

This is traceable to lack of affordable funding for vessel acquisition, owing to the inability of the Nigerian banking industry to develop a framework for financing ship acquisition, which has a long gestation period.

As a result, credit facilities received from Nigerian banks by indigenous ship owners to fund vessel acquisition, usually come with interest rates that are in double digit, sometimes over 20 percent. This makes it near-difficult for Nigerian indigenous shipping firms to compete with their counterparts that operate with offshore loans of single-digit interest rates.

To bridge the gap created by insufficient vessel supply for shipping- related business, the Act further created certain clauses to accommodate granting of waivers of different categories to foreign-owned vessels in the event that Nigerians fail to produce the needed vessels or qualified manpower to man Cabotage vessels, own ship yards to build Cabotage vessels and acquire the specific vessels required for a particular Cabotage trade.

Ironically, granting of waivers created huge capital flight on the nation’s economy as Nigeria continues to lose in excess of N2trillion annually for not developing local shipping capacity.

It is estimated that maritime industry can generate close to N7 trillion annually because developing shipping comes with spinoff effects on other industries such as insurance, steel for the use of ship building and ship repair yards.

Unfortunately, over 80 percent of Nigerian seaborne cargoes are carried by foreign-flagged and registered vessels today.

NIMASA’s effort

Following these concerns, NIMASA, the agency saddled with shipping development, recently rolled out plans targeted at putting an end to granting of waivers to foreign-owned, manned, built and flagged vessels.

The new strategies are aimed at addressing issues around growing capacity in ship building by encouraging establishment of shipyards; creating affordable credit facilities to enable Nigerians acquire vessels; creating tax incentives for importing built vessels by Nigerians and building of qualified seafarers.

Dakuku Peterside, director general of NIMASA, said the agency is engaging with the Federal Ministry of Finance and the Nigeria Customs Service (NCS) to create a special tax incentive for Nigerians bringing vessels in the country.

The plan, according to him, will involve creating special incentives that can enable shipbuilding yards to bring in components for building vessels in-country, adding that the government is also determined to ensure that Ajaokuta Steel Mill and Aluminum Steel Company in Akwa Ibom State, come on stream to provide the needed raw materials for ship building yards.

“The current tax regime makes it impossible for Nigerian ship owners to compete with their foreign counterparts. For instance, foreigners bring in vessels for a short period and they have a special tax regime that enables them pay little to nothing for their vessels and crew to work and live in Nigeria, whereas a Nigerian is charged a full range of all tax applicable (14 percent), making it near impossible for their vessels to compete,” Peterside explained.

He said NIMASA is determined to ensure that in the next five years, certain categories of vessels (yet to be listed) are built in-country. This, he said, would put an end to issues around bringing in all kinds of vessels from outside the country and its attendant capital flight and job losses on the economy.

“NIMASA is engaging with the office of the Vice President on the possibility of creating incentives for shipyards. We believe it will encourage a lot of entrepreneurs to invest in shipbuilding. We are also working in partnership with the Nigerian Content Development Monitoring Board (NCMB) and have commissioned an audit of all shipyards in order to identify a level support that will help revive them,” he said.

Ships cannot exist without cargo to lift. Therefore, NIMASA is also working towards ensuring that ship owners have cargo support.

“We have to guarantee them cargo to lift by giving them right to lift government cargo and other heavy cargo, especially project cargo. We are looking for different windows to get favourable foreign exchange rate for the ship owners in terms of handling, purchasing, repairing their own ships,” disclosed Bashir Jamoh, executive director, Finance and Administration, NIMASA.

On changing Nigerian crude oil trading policy to Cost Insurance and Freight (CIS) from Free on Board (FOB), Jamoh said NIMASA has gone far.

The agency is talking with the Nigerian National Petroleum Corporation (NNPC) to ensure that Nigerian ship owners get the right to lift Nigerian crude oil.

“Interestingly, from our conversations, we have evidence that Nigerians are already lifting oil without any problem,” he added.

Stakeholders’ view

Industry stakeholders have commended the efforts of the NIMASA in addressing the shortcoming facing the nation’s shipping business especially as regards to creating jobs to Nigerian ship owners and seafarers.

Greg Ogbeifun, former president, Ship Owners Association of Nigeria (SOAN), expressed concern that Nigeria’s ability to develop capacity through waiver bracket in the next five years especially in the area of using ships built in Nigeria for Cabotage trade.

In placing cadets on institutions abroad, Greg said, it was important NIMASA put a system in place to monitor what the cadets are doing and keep record in order to certify that they cover the areas required by the regulations.

Ogbeifun said other countries like United Kingdom, have institutions like Merchant Navy Training Board that supervises the training of cadets up to their certification. “We need to have such a unit domiciled in NIMASA to monitor the training of cadets from beginning till their graduation.”

“We are happy that NIMASA is helping ship owners to find a single- digit interest rate to help raise money for the industry. We need to keep talking because the commercial banks, the CBN and politicians do not understand our industry but this is one industry that if we get it right, the international prices of crude oil and other macroeconomic factors will not have any effect on government revenue,” said Margret Orakwusi, a ship operator.

Stating that we must grow this industry, Orakwusi said the NIMASA needed to look into the course content of Maritime Academy of Nigeria (MAN) Oron and other universities that the agency is financing to ensure the institutions graduate cadets needed in the industry in terms of quality and exposure.

She added that the stakeholders were happy that NIMASA was getting them involved in its effort to make the Cabotage work.

Derek Izedonmwen, Sales and Marketing director of NigerStar 7, who said Nigerians are beginning to see an uptake of activities in offshore oil and gas industry, cited his company as example, saying it recently invested hugely on vessels such that in the last 12 months, it has invested over $100 million in acquiring vessels.

“We have put a plan in place to train Nigerians to be able to operate these vessels in line with Nigerian Content Development Act and NIMASA’s push,” he said.

On the five year plan by NIMASA to end issuing of waivers to foreigners, he said five years was not sufficient, describing the plan as too aggressive and broad.

He advised NIMASA to make the plan more specific and limit it to specific vessels for it to succeed.

Conclusion

The general thought in the industry is that NIMASA is presently on the right track to save jobs and create wealth for Nigerians and the economy at large. Therefore, efforts should be doubled on consolidating on already existing laudable plans by ensuring that milestones are achieved within timelines.

 

AMAKA ANAGOR-EWUZIE

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