Deficit budget and why Nigeria should take the maritime sector serious

Buhari presents 2021 budget to National Assembly

 

President Mohammadu Buhari last week Thursday unveiled to the nation N13.08 trillion budget proposal for the 2021 fiscal year. The President told a joint session of the national assembly that the 2021 budget has a projected deficit of N5.20trillion, including government-owned enterprises and project-tied loans.

According to the President, total revenue available to fund the 2021 Federal Budget is estimated at N7.886 trillion, and that this includes grants and aids of N354.85 billion as well as the revenues of 60 government-owned enterprises.

With a budget of N13.08trillion, and only N7.886trillion available to fund it, the President said the deficit would be financed by new borrowings of N4.28trillion. He noted that oil revenue is projected at N2.01 trillion, while non-oil revenue is estimated at N1.49 trillion.

From all indications, the oil party is gradually coming to an end. No thanks to Covd-19 and the consequent slump in oil price. For many decades, Nigeria had clung to oil with childish tenacity to the detriment of other veritable revenue sources like the maritime and shipping sector which is supposed to drive the oil sector for maximum prosperity.

It is indeed very sad that Nigeria, despite her enormous natural and material resources, has to borrow to finance her annual budget or execute capital projects. Worse still, Nigeria continues to borrow from a country that is blessed with maritime resources as it is blessed, but knows how to harness the resources to create wealth.

Over time, out willful ignorance or levity, Nigeria has neglected its maritime sector which is supposed to be a huge revenue earner. A goldmine, the maritime sector has suffered terrible neglect by the past governments in the country, including the present. Yet, the industry has the potential of single-handedly financing the national budget.

Instead of massive borrowing to fund the budget in the face of dwindling revenue from oil, the government would have done well to take a critical look at the maritime sector in order to identify new revenue sources, block revenue leakages and stop the massive capital flight in the sector.

Even though, the government under its “Strategic Revenue Growth Initiative” has sent monitoring teams to the revenue collecting agencies including those in maritime to checkmate stealing and corruption, what is needed in the maritime sector are policy decisions and actions that will unlock the huge potentials of the sector –policies that will be fundamental and far-reaching.

Nigeria’s neglect of the maritime sector comes in different forms. These include total lack of appreciation of the role shipping can play in the nation’s economic prosperity, infrastructure decay, unfavourable policies and festering maritime insecurity.

Because of lack of appreciation of shipping in revenue generation, government has over time clung to FOB trade term instead of the CIF which would have enabled her citizens to participate in international shipping, especially in the carriage of the nation’s crude. Nigeria has been comfortable with throwing away the freight component of the oil trade, and shamelessly, bearing the odium of being the only OPEC member that cannot transport her crude to the world market.

Instead of empowering indigenous operators, government and its oil corporation have been showing preference for foreign ship owners who are increasingly being empowered to dominate the sector. According to shipping and economic experts Nigeria loses billions of dollars every year to these foreign ship owners due to inability to lift her crude to foreign buyers. The Federal Ministry of Transport last year estimated a total of about $8 billion freight cost yearly for the oil industry. This, of course, is lost to foreigners.

Trade facilitation is another area that government has been failing in the maritime sector. Nigeria is a trading nation, with trade being the country’s second-largest contributor to GDP. Maritime transport is the facilitator of this trade since over 90% of the world’s trade is carried by sea. Unfortunately, Nigeria lacks the critical and essential tools of trade facilitation, thus allowing trading partners to dictate the terms.

A very important trade facilitation tool Nigeria sorely lacks is vessels. Efforts by the present government to refloat the Nigerian National Shipping Line (NNSL) or establish a national carrier was abandoned halfway without adequate reason. And there has been no concerted effort to encourage Nigerian ownership of vessels.

Ownership of ships is very critical to the implementation of the local content policy, especially in maritime and oil industry. If the local content policy laws and the Cabotage law are implemented in terms of trade facilitation, experts project that “Nigeria can generate over N20 trillion and 10 million jobs in 5 years.”

Nigeria’s neglect of the maritime and shipping sector is very glaring in the way port infrastructure has been allowed to decay over the years. The bad shape of the port access roads in Lagos, Port Harcourt and Onne which has been allowed to linger all these years, shows the nation’s lack of seriousness in maximizing the revenue from the ports.

The notorious Apapa traffic gridlock which is induced by bad roads, uncontrolled truck movements and corruption is costing the nation a lot in terms of revenue. Yet it has been allowed to linger. The poor access roads had been left unattended to for years until recently when corporate bodies decided to come together to tackle the problem. A recent report by a Dutch consultancy firm, Dynanmar says that Nigeria loses N20 billion daily at the ports, which is N7.2 trillion yearly. This is no news because industry operators and notable businessmen in Nigeria have always wept over the huge losses.

In the shipping sub-sector, Nigeria has all it takes to be a shipping nation. Unfortunately, most government officials regard shipping as a mere service sector. This largely accounts for how shipping has been treated in Nigeria.

Perhaps it might be necessary for such government functionaries to take a look at what shipping is doing in the economy of Greece, China, Hong Kong, Singapore and Japan. In Greece shipping is the major revenue earner. According to the Bank of Greece (BoG), “revenues from shipping in 2015-2018 exceeded – on average – over $13.5bn annually, about 6.8% of GDP, representing 37% of total balance of service receipts.

The governor of BoG, Yannis Stournaras, said shipping receipts, were and are, necessary to cover a large part of the country’s external financing needs.” Stournaras stressed that Greek shipping with its related activities is a highly extroverted sector which has traditionally been a dominant force in the Greek economy, effectively addressing challenges both internationally and nationally.

This is what shipping does for a country that is blessed with the potentials and knows how to harness them. Shipping is accorded a pride of place in Greece, with the government always supporting it with constant packages of incentives. Last February, the country made legislative reforms to the Greek shipping tax law in recognition of the contribution of shipping to the economic well-being of the country, and to further boost the attractiveness of shipping.

According to Wikipedia, “Greece remains the world’s largest shipowning nation. Though the country accounts for only 0.16% of the world’s population, Greek ship owners own 20.67% of global tonnage and 54.28% of the European Union (EU)-controlled tonnage. Between 2007 and 2019, Greek shipowners have more than doubled the carrying capacity of their fleet, while they control 32.64% of the world tanker fleet, 15.14% of the world’s chemical and products tankers and 16.33% of the global LNG / LPG fleet. The country also controls 21.7% of the world bulk carriers, and 8.92% of the world container vessels.

Imagine if Greece has oil like Nigeria, the economic prosperity of the country would have been limitless. Yet, some Nigerian government officials describe shipping as just a service sector. This is why the Nigerian government, instead of encouraging its citizens to participate in international shipping, has not shown even enough seriousness in implementing the Cabotage and the Local Content Laws.

The Cabotage Vessel Financing Fund (CVFF) attached to the Cabotage Law which is meant to help indigenous ship owners to acquire vessels in order to take control of the country’s cabotage trade has been hijacked by government and its functionaries. For over 14 years money started accumulating in the Fund, no one can say exactly how much is there, while disbursement of the fund has become a matter of endless promises.

Nigerian maritime operators and some heads of maritime agencies have never ceased to emphasize the role the sector can play in the economy. Sometime last year, the Executive Secretary of the Nigerian Shippers Council, Hassan Bello, said the Council was working with other stakeholders to ensure that the maritime industry grows its annual contribution to Nigeria’s Gross Domestic Product (GDP) from the current N1.9 trillion to N7 trillion. This is a realizable target.

Bello described the maritime sector as the engine room of Nigeria’s economic growth if only concerted efforts could be made to leverage on its many deliverables. Unquestionably, this is the long and short of the matter.



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