Nigerian shipping fleet as viable economic diversification option

By Samson Echenim

As the federal government mulls possible options to reposition the economy, analysts have suggested that the government should direct its gaze strongly at areas that has the capacity to transform the life of an average citizen.
They also proposed that the authorities should work on strengthening the country’s economic fundamentals with viable options.
It is in this vein that the plan to re-establish a Nigerian shipping fleet by the current President Muhammadu Buhari-led administration has been greeted with enthusiasm among maritime and shipping industry stakeholders.

Some notable stakeholders said that establishment of a national fleet remains Nigeria’s best option in her economic diversification plans, especially now that the country has already produced a handful of professional seafarers through the Nigerian Maritime Administration and Safety Agency (NIMASA) driven National Seafarers Development Programme (NSDP).

Over 100 Nigerian young cadets have returned from Egypt where they trained in various maritime fields and are currently awaiting their sea time training, which NIMASA is currently working on and determined to provide via a willing shipping line even as the nation hatches the national carrier plan.

Executive Secretary and Chief Executive Officer of the Nigerian Shippers’ Council (NSC), Mr Hassan Bello says for Nigeria to be effectively referred to, or maintain her status as a maritime nation, it must the have vessels—merchant shipping vessels for carriage of her petroleum products and other cargoes generated in the country.

According to him, the advantages of having a national carrier are beyond the earnings from freight, but would include profound impact on the economy of Nigeria.

He said, “The disadvantage Nigeria has in international trade is due to lack of vessels to carry her cargoes. If we have Nigerians to carry these cargoes, Nigeria will able to influence positively terms of trade, its terms of carriage—contracts of afreightment, and this will always effects on the economy. Besides, the seat of economic diversification is the maritime industry.

“If Nigerians own vessels, they carry products, compete internationally, it therefore means that there are a lot of industries that will benefit or that will spring up, such as stevedoring companies, Nigerian insurance companies will automatically be involved in insuring or in the risk taking of the freight and this means financial growth for the insurance, the banks and other financial institutions.”

The Minister of Transportation, Mr Rotimi Amaechi had charged the Shippers’ Council with the responsibility of implementing the report of a committee set up to establish modalities for establishing the planned national carrier, which has become a priority for the President Muhammadu Buhari administration as part of the government’s efforts to develop and harness the country’s maritime potential.

Creation of genuine shipping industry

At the moment, Nigeria cannot claim to have a viable and an active shipping industry. This situation is no doubt, a huge disappointment, as the country has a vast coastal stretch of about 870 kilometres. Indigenous ship owners have consistently maintained that if properly harnessed, the shipping sub sector in Nigeria can employ over 5million people while saving the country trillions of naira in capital flight.

Stakeholders, including experts, indigenous ship owners and relevant agencies of government have a common opinion about how Nigeria is losing billions of naira annually for not putting its maritime sector at the reach of her citizens. While the various interests give different figures as to what the country loses annually to foreign-flagged vessels, the fact remains that what the country losses for not having a national shipping carrier in monetary and employment terms is unquantifiable.

Globally, about 80 per cent of the world trade by weight is done by sea. In the case of Nigeria, 90 per cent is done by sea. Despite this huge potential, local capacity in the maritime industry remains despiteful. Nigeria imports over 100 million tonnes of cargo and general goods annually, according to 2010 estimates. In 2009 the country imported 93 million tonnes; 87 million in 2008 and 80 million in 2007.

President of the Ship Owners Association of Nigeria (SOAN), Engr Greg Ogbeifun, who described the establishment of a Nigerian fleet as a laudable idea says the project should be encouraged, as it will accord Nigerian shipping companies the opportunity to participate in international trade, create jobs and earn huge foreign exchange.

“It will enable the country to participate in the afreightment of both import and export sectors of the economy and that will create jobs and provide platform for training Nigerian seafarers to international standards,” says Ogbeifun who is the CEO of Starz Marine Services.

He dismissed fears that this might be another project that can become a drainpipe to the government fund, insisting that the establishment of the fleet must be private sector driven.

The Shippers Council boss, Bello says the maritime industry is so vast that it could create millions jobs directly and indirectly. He cites such industries as ship repair, shipbuilding and cadets being trained in the ships and working in the vessels.

“We have sailors who are doing nothing; we have master mariners. What is even very important is that we will have precedents. We had Nigerians who trained internationally and went everywhere until certain things happened because the defunct Nigeria National Shipping Line was government-owned,” Bello says.

Indeed, the impact of having a national carrier and growing the indigenous shipping industry can be positively enormous, considering that this can give birth to hundreds of firms providing shipping and auxiliary shipping services, including ship repair and even ship building, as well as indirect employments.

Dissenting voices

As good as the idea of the establishing a national carrier sounds, the Ministry of Transport, which is driving the project does not appear to have a clear hold of the investment equation for the national shipping line.

While, Amaechi plans to invest the Cabotage Vessels Financing Fund (CVFF) now said to be around N50 billion into the proposed shipping line, the Shippers Council boss, who heads the implementation committee has maintained that no public fund would be needed for the project.

So, the big question remains, what is the federal government plan for financing the establishment of the shipping line? This is the more reason government must listen to divergent views. One of the industry players, who opposed the idea of a National Shipping Line driven by the government, is the chairman, Shipping Association of Nigeria (SAN), Val Usifoh. Usifoh says having a national shipping line is no longer popular all over the world unless the government is a despotic one.

“If a government wants to own a shipping line, this means the government is willing to support it and will be proud that it goes everywhere,” he declared. He insists that for the project to succeed, it must be driven and run by the private sector.

“The shipping industry is not in many aspects like the airline industry. The similarity you have among them is that it is an industry where competition is very stiff. So we have go through a regime where there were so many shipping companies all over the world, now they are consolidating, the ships are getting bigger and specialized.
“If you are setting up a national shipping line, it is better that it is run by the private sector. Government should not be the one to set it up, government, should encourage the private sector that are already in it and say ok, We think the problem that you ladies and gentlemen had in the past is two much fragmentation; come together, set it up; we will take a golden share in it, support you, once we have a golden share, the government will know that you are there and we don’t want you to die.

“We support you with cargo; we support you with facilitating bank credit because we have indigenous operators who are well experienced in all the fields of shipping; they are there suffering and languishing, so if government want to set up a shipping company in this 21st century it is a big mistake,” Usifoh affirmed.

He also revealed he fought the current exercise because they had already decided what to do before they set up a committee to do it, adding  “For me if government is investing in a national shipping line, it is bad investment in this day and age when very big multinationals are finding it difficult to survive.”

Following the precedents of the defunct Nigerian National Shipping Line (NNSL), maritime experts and analysts insist that the government should play cautiously by not putting public funds into the project.

Former president Olusegun Obasanjo strong advises that the Ministry of Transport puts not government fund in the shipping line. According to him, past experiences have shown that the government badly got its fingers burnt why trying to indulge in businesses that could have been done by the private sector.

“And if the government wants to establish the national shipping line let it not puts its monies there. That is why I said we have to think out of box. As head of state, in 1979 before leaving office, I signed funds for acquisition of 19 new vessels for the defunct Nigerian National Shipping Line (NNSL). As president from 1999, but in less than 10 years nothing was left of the shipping line. Instances have shown that these government parastatals do far better if they are privatized,” the former president said at a Lagos maritime stakeholders forum in May this year

Bello seems to be more definite with working with private sector funds as he maintains that the planned national carrier will be driven by private sector.

“Now if you observe the trend in the maritime sector, you will notice that it is the private sector that is driving the maritime sector. The concession of the ports, the shipping lines are private and so the shipping lines to be established is to be private, but government has the responsibility of providing enabling conducive environment for this shipping line to operate,” he observes.

He says the national carrier implementation committee is currently looking at data on the types of ships owned by existing ship owners, the configuration of those ships, the cargo type, and patterns of trade for the ships.

“We have known our competitive edge, what are those things that the government can do now and immediately set the course of growth. It is very important that we don’t go in darkness, so data is our illumination and our guide,” he noted.

Enacting enabling legislations

The realization of the national carrier may not be so soon.  According the Shippers’ Council boss, relevant agencies will need new laws to perform better in the plan to have a national shipping line. This is where the national assembly is needed to ensure the national shipping line comes on stream.

Bello stresses that there are a lot of work to do; saying that his committee has segmented the works to subcommittees to ascertain what can be done in the immediate—short term, in medium term and in long term. He said there are some places where legislations will have to change.

He explains, “We are urging that certain legislations be put in place. Where policies of the government should change and we saying government should change the policy. We are talking about strengthening NIMASA whose responsibility is to ensure that we have indigenous fleets.

“These are all part of what the committee is looking at, but that doesn’t meant that if we see things coming up, we should not seize the opportunity but there’s a lot of work to be done. We want whatever we are doing to be supported strongly by policies, by laws and some economic policies of the government.”

Aiding the fleet with policies

It is not enough to work so hard to establish the Nigerian fleet and leave it to its fate in the face of harsh competition that the new shipping line will experience.

As part of efforts to make the planned Nigerian fleet (national carrier) successful, with generous availability of Nigerian cargoes, the president of SOAN, Engr Greg Ogbeifun, calls on the Federal Government to begin consideration of the existing free on board (FOB) oil freight policy with the intention of changing it to cost, insurance and freight (CIF).

According to him, this will ensure that the national fleet when established will have oil cargoes to lift to buyers from the Nigerian government.

“I think what government can do to help the emergence of the Nigerian fleet is one, to look at the critical incentives, to look at tax policies that we have; to look at all it takes to make the operation of a fleet easier than how it has been. For example, at the moment, if you look at the policy for the freighting of Nigerian crude, it is on the free on board (FOB) policy.

“Now we are all suggesting and rightly so that the government should look at reviewing that policy to make it cost insurance and freight (CIF) because that is the only way, a Nigerian fleet can be engaged to participate in the carriage of Nigerian crude to the buyers. That is one major area the government can look at to help the emergence of a Nigerian tanker fleet for example,” he posits.

Copyright Ships & Ports Ltd. Permission to use quotations from this article is granted subject to appropriate credit given to as the source.