What is your view about shipping in Nigeria today?
I would like to elaborate a little bit on the word shipping because it’s a very broad term. If you are in associated industry like the clearing, chandelling, and support aspects of it, you are in shipping. Incidentally, the core aspect of shipping is as it relate to movement of goods in and out by sea. You will agree with me that the type of shipping activities in international movement of goods by sea is different from shipping as it relates to oil and gas industry. So, I thought should emphasis this because my area of interest is shipping as it relates to oil and gas industry. I can comment elaborately on that and maybe marginally on International shipping. As a country, the evaluation of shipping activity as it relates to import and export of general goods which was the business that the Nigerian National Shipping Line, unfortunately now liquidated, was into. Because there is no national line the question is, who is now carrying out the function?
So you will find out majorly, the business of import and export of Nigeria product is now been handled principally by foreign players. It’s up to government to decide if that’s good for the economy or to consider a strategy to replace national line in such a way that the mistakes of the past are not made but to help the Nigerian economy. In the Oil and Gas sector you have the upstream and the downstream. Downstream, principally, are activities that relates to the movement of petroleum products. We have importation and exportation which, of course, requires the use of coastal tankers which can trade in the Cabotage regime and, additionally, in international trading. As you know, this country imports certain brands of products which act as blends for the final products that are done here.
Such importations are majorly carried out by foreign companies but coastal form of product or the light range of imported product are supposed to be carried or should be carried out by indigenous players and I think this is where the challenge is because the regulatory agencies that determines who carries this things have not been able to come into sync with indigenous players to arrive at a solution that makes it possible for the indigenous players to participate in that business to the standard required by the client.
I believe it is this gap that has led to a situation where it will appear that the indigenous players are not being given a chance to participate in the industry whereas the clients are saying ‘you will participate in the industry if you meet up to the standards’. So I think there is a platform for discussion, to come to a common understanding, that enable both parties play their role such that this issue can be put to rest permanently. It is good for the economy, it is good for the country, it is good for employment opportunities, it is good for empowerment of Nigerians, it’s good for the scale growth, and it’s good for every aspect of Cabotage! And the absence of effective participation of indigenous tonnage in the coastal trade has a massive negative effect in our national economy and I still say that it is the responsibility of the government to take a more positive look at these issues and create an atmosphere for resolving the differences in other to move our economy forward.
At the moment, regrettably, that does not appear to be the case. With respect to the upstream with the appropriate acts and legislation that the government have been able to put in place thankfully, like the NOGIC Act – the Nigerian Oil and Gas Act, which is midwife by the Nigerian Content Monitoring and Development Board whose Executive Secretary, Mr. Ernest Nwapa, has done a wonderful job to sensitize everybody about the needs to grow the Nigerian content in the upstream industry. Also, we have the NIMASA Act which, conversely, the implementation has being an abysmal failure. Nevertheless my comment is that upstream there is a gradual growth on increase of indigenous participation in the business there. However I am quick to say also that the indigenous players could do more to improve on their best practices in other to maximize the opportunities that are available in that industry. Upstream, I would say that presently, a good eighty to eighty-five percent of the business is still been handled by foreign players. You wouldn’t call that a success story but if you consider that a couple of years down the line or before that percentage was something like ninety to ninety-five percentage. Then you can see a gradual though slow growth in that industry. I think that my comment at the moment on that as far as shipping is concerned in Nigeria.
There have been complaints from indigenous players in the shipping industry, especially those operating here in Lagos, about the rapidly declining state of their shipping businesses. The same, I am sure, cannot be said about Starzs Investment Limited so tell us what exactly does Starzs do differently to keep its business thriving?
When you say especially those in Lagos, I do not agree because in Lagos you have indigenous players in the upstream that are doing well. I would not like to mention names. But I’ll agree with you to the extent that in the Lagos environment, most of the indigenous players who are not doing well are in the downstream sector of the shipping industry. So it is important to separate that. I’ll imagine your question is probably channeled one, towards the downstream and also maybe looking at what those playing in the upstream can do to improve on their abilities to tap into the opportunities. Downstream, the problem is very evident.
The problem is not limited to the relevant bodies not making available cargo which is what we hear every day. ‘We don’t have cargo to carry, foreigners are carrying our cargo” I don’t think that is principally the problem. What I see as the problem downstream is, over time, the players in that industry who started with reasonable assets, acceptable operating assets… A few years down the line those assets were relatively new enough to meet the standards requirements by the clients to be able to carry cargo. Two, the international regulations those years back are not as stringent as they are now so we find ourselves in a situation where indigenous operators who had assets a few years back that were okay have not taken time to ensure that their establishments were responding to the changing times as far as the requirement of the quality and standard of assets are concerned.
I’ll give you a typical example, you have a ship ten thousand deadweight single hull, at the time maybe ten or fifteen years old…we all know that the IMO constantly reviews the standard of participation with respect to safety in our shipping industry. Therefore, we all should also know at what point certain legislation would come that could make our current assets no longer adequate for the trade and business we are in. That should give us some feeling of forward looking and proactive actions which could result to getting rid of these assets that would no longer be useful in the next couple of years and acquiring more suitable assets to be able to effectively participate in the trade. We have not done this with the result that today most of those assets, and when I’m talking about assets I’m talking about vessels, which were adequate a few years back are no longer adequate. We now find ourselves in the situation were the cargo owners are saying ‘sorry we cannot use your assets’. Now that is a challenge and also a challenge for government. Government cannot force a cargo owner to use vessels that are no longer adequate.
Allocating cargo to the owners, in my own opinion, is not the solution; It is part of the solution but what I think the indigenous players should do is to come together and purposely agree to dispose of these unserviceable assets and through a co-operative, of some sort, acquire a couple of very modern new assets that can now meet the standard required. But regrettably here we like to play it alone and we are not very good at coming together to do things with the same purpose. That’s our nature, that’s our culture. On an individual basis you will find out that in recent times, one or two companies have taken bold steps to go out there to acquire modern assets and these people are already benefitting from the allocation of cargo. So we now find a situation where the same indigenous players while some are saying ‘we don’t have any problem with cargo’, others are saying ‘cargo is our problem’. So, the solution is clear. The other problem is that indigenous because indigenous players who a few years ago were well structured, well put together, the organizational structure was in place, the management structure was in place, the operational structure was in place, the maintenance structure was in place, because there was trade to support those structures, as time went on and the assets began to get more and more inadequate and therefore the trade began to decline for them most of those structure began to crumble. To the extent that right now most of those companies that you see as a name of a company only have one or two people floating around as a company.
Therefore if such companies are subjected to a thorough due diligence as to the ability to make minimum requirement in the industry, they can’t! So, it becomes impossible to expect a cargo owner to engage such companies seriously for the purpose of allocating cargo. Having said that, the solution is come together. I don’t have what it takes, you don’t have what it takes but you have little so let’s come together and pull it together and get a legal body to structure a legal partnership whereby everybody is an equitable player in that partnership but then we would be able to present a strong enough structure front company with the appropriate assets and then go to government and say now we are restructured, this is what we look like and we believe we meet all the minimum requirement to participate in this industry. That’s my recommendation. Starz, what do we do differently? Well, Starzs is playing in the upstream. I want to say that the Starz you see today is not a product of one year, five years nor even ten years! Today, Stars Investment Company Limited is twenty-seven years old. We started from a humble beginning, with nothing. But I, as the pioneer of the company, have remained focused over time. That’s one of what have we done differently, focus! Two, what have we done differently? Integrity! Over time we’ve gone through different financial regimes that have derailed- a lot of companies, because of lack of integrity in business practices.
We have, very painfully, ensured that in every business venture we get involve with we must play straight and right. That, with time, has given us a reputation that clients are now tapping into; it’s important to mention that.
We have are also ensured that we are very professional in the way we do our business. Our standards for our business are International standards. Clients, particularly the international clients, tend to raise the ante when it comes to indigenous players as against their foreign counterparts. We know that for an indigenous player- upstream, to be considered equal to a foreign player you’ve got to be twice as good as that foreign player. So, instead of fighting that discriminatory issue we, Starzs, choose to raise our standards to be twice as good as the foreign players.
It is good for us because we are meeting standards and we are being strategically positioned for higher opportunities.
This is not cheap because to maintain such standards goes beyond just operating a ship or executing a contract. It goes to the organizational structure which should be seen to be sustainable in the next five to twenty years, beyond the contract, beyond the ship! That gives confidence to your clients that if the key player suddenly is not there the whole agreement, the operation; the business is not adversely affected. To put such structures in place first of all is expensive. You’ve got to bring in professionals in safety, professionals in H.R., professionals in operation, professionals in technical considerations, professionals in finance. You’ve got to put it together and have a structure that has the capability of supporting whatever contract opportunity you are been given. So, if you come to Starzs you will find that we operate a standard that is equal to any in the world, in the maritime sector. Often, the clients come around for their usual audit and they are amazed at what they see in terms of best practices and they take that away and they begin to advocate for jobs for you because they are convince that we are safe with this people. At this point they are no longer looking at you as an indigenous player or a non-indigenous player. They are looking at you as an industry player of standard. So, there is need for us indigenous player to take time to look at what we are doing and work and invest on what we are doing and bring in to a standard comparable to any in our industry.
The energy, the time, the resources we spend chasing contract, we should spend such energy and resources in improving on our work and then show casing it. Starzs does not have problem with contract. Starzs goes to the normal portals were tenders are advertised and Starzs goes through the prequalification exercise like everybody and Starzs goes through the technical bid like everybody and Starzs take their time to do their commercial competition and put in a bid like everybody and quite often we have found that we are always able to get involve primarily because there are a lot of job out there and the system is now looking for capable indigenous player who can be brought on board. Therefore, first, we meet the standard and jobs come and when the jobs come we don’t celebrate because we know that it is the beginning of work and then we now come back and put our acts together to ensure that we execute the job to the extent that the clients will be happy and would always want to come back.
We have the popular known MV Osayeme. MV Osayeme has been working now for three years and seven months with zero downtime and zero lost time injury. This is a record anywhere in the world. Now, the contract is for five years and by the grace of God our goal is to run that ship for five years with zero downtime and zero lost time injury. Now, in recent time, a few months ago we brought in a bigger vessel Verada Queen which we own now much bigger than Osayeme to work for the clients, deep water. Now, the client in our discussions came out to say “please we would like you to replicate the standard of service of MV Osayeme of zero downtime on this contract”. So you’ve set a standard for yourself that the client is now asking for.
Are there any plans for Starzs to add to its fleet of vessels?
Absolutely! Our growth plan right now is that in the next two to three years Starzs should increase to about ten vessels. Now, the challenge we have is financing, like every other player. Regrettably our financial system here isn’t really effectively supporting the industry as it could do, talk less government whose Cabotage vessel fund has remain a mirage over time. We are looking out in the international community and our activities now and the level of our operations are beginning to attract international interest in giving us support. I wouldn’t want to elaborate on that but our growth profile is that in the next two to three years we should have a fleet of minimum… ten, operating upstream. As we speak, the first vessel is on route to Nigeria for a four years contract with another international… so it is coming up. My goal has been… yes, I started with Osayeme offshore I was standing on one leg. Now Verada Queen comes in, I am standing on two legs. With two legs there is still a chance of tipping over but now we have a third vessel coming in and when she comes in we are now standing on a tripod and we are now ready to take any growth size because we can remain standing. We are coming on, gradually.
In your response to my first question, you said the NIMASA Act is an abysmal failure….
(Cuts in) The Cabotage! Yes, Cabotage is a total failure. It is recognized nationwide in the industry by everybody. The four cardinal points of cabotage is that, it must be owned by Nigeria, it must be built in Nigeria, it must be registered in Nigeria, it must be manned by Nigerians. Tell me which of these ones have been effectively accomplished. You cannot build in Nigeria because we don’t have the infrastructure. You have the cabotage register which is being implemented with an array of waivers. Then manning… the demise of national line which was the platform for training Nigerians Seafarers have since gone and our waters are principally infested right now by foreign crew. The training structures of mariners in Nigeria are dislocated, so how can you implement manning when you don’t have the people. Most of our crews are running around with fake certificates which they cannot get unless there is connivance by appropriate agencies and then in talking about registrations…I’ve said it all! So, where are the indices of any level of success as far as Cabotage is concerned, it’s a total failure! But we are glad that government and industry players in recognition of this are now beginning to ask for a review of the Cabotage Act with a view to possibly carrying out amendment to that Act that will make it a more implementable document. People have talked about implementation. It’s beyond implementation, you cannot implement if you don’t have the implements to implement. You cannot ensure that a ship is manned by Nigerians if you don’t have the Nigerians who are qualified and professionally competent and skilled to mannish it. So, you cannot implement that. You cannot build, you cannot force a contract owner to build a ship in Nigeria if we have no sea industry, if we have no power that is reliable and we don’t even have the skill, we don’t have the infrastructure. How many yards in Nigeria can build ships and then we say that ships must be built in Nigeria. It needs to be looked into.
Do you think the Nigerian Maritime Administration and Safety Agency (NIMASA) is living up to its responsibility of securing the water ways?
That’s a difficult one. Difficult in the sense that when we talk about securing the waterways really, what do we mean? Now, we have a situation where in some parts of our waterways piracy is prevalent. You have high-jacking at a time. Trawler owners can no longer to go out there and trawl and all that sort of thing. Have we effectively secured? On the other hand, we look at the eastern coast where there are a lot of oil activities and those operations are going on. So, would you say that they are not secure? Now, it is a difficult question. My take on this is simple, industry players in the upstream that is the IOCs that are drilling and exporting oil and operating the platforms and things are spending huge resources to put in place their own security arrangements to protect their operating assets out in the field. No ship, no offshore service boat leaves Onne to go offshore on its own. They must go in a convoy and that convoy is protected by an array of security vessels carrying armed security people.
Now, conversely, we are aware so from that perspective their operation is reasonably secure. When we look at the generality of our coast line, where other players downstream players, for example, you find a lot of issues going on there. Piracy going on and the sad thing again is when we begin to hear that some of these piracy issues are not really piracy! They are issues between competitors undoing themselves out in the field. This is even known in I.M.O as been the case because I was in London, in the I.M.O, when this was been discussed by a few people there. That a Nigerian vessel owner organized to pirate another Nigerian vessel owner! So, if you have situations like that what can NIMASA do to stem things like that?
So, the solution to piracy in that area goes beyond NIMASA. It’s everybody’s responsibility to check our activities and see to what extent we are contributing to the problem and to what extent we can contribute to the solution. But because this is part of NIMASA role; ISPS, NIMASA now went in to put an arrangement in place, which was generally criticized, that is the Global West Contract that began to do certain things. But from where I stand the fact that through Global West NIMASA could get Nigeria Liquefied Natural Gas to comply with a government regulation that they have flouted for years, that alone gives credence to the establishment or the arrangement with Global West policing our waters. On a final note, I am convinced that the effort the NIMASA has put in place to combat piracy to a large extent is having the desired effect but the Nigerian players have to be honest to themselves and try to do things right.
Has any of your vessels been subjected to pirate attacks?
Never! Never, and this is primarily because all our vessels are manned by Nigerians. We go out of our way to source for people from the catchment area that we can train and give opportunities on our vessels, in our establishment and this is part of the issue we are talking about. I cannot be operating in Onne and not impact the local labor market in one form or the other. I need people to run my business and I believe that every community must have one or two people that have the potential to participate in your business. So we actually, consciously…if we are looking for a captain, for example, we start by looking for captain in the catchment area. We spread words around. They may not meet our standards we send to institutions to brush them up to get them to meet the standard. If I have a captain who comes from the Bonny or Warri axis, for example, on my ship, taking my ship from Onne to offshore, do you think anybody from the Niger Delta will pirate or attack my ship?
The solution is clear! But when we limit our search to the finished product of foreign crew from wherever they come…they are strangers in the land and they become easy target. No I am not saying that you don’t have the odd occasions where the bad boys out there are irrational but they may be irrational on going after the vessel but when the captain speaks the language back to them…you see the solution? So, if more people can adopt this strategy, we will now find a situation where many ships in the area are operating with the people. The word is going round that you are creating employment and they begin to protect your assets. This is not government, this is private initiative! Now, if you come to our ship yard in Onne, our compound is probably the only compound in the whole of Onne that it is not fenced. Even in the heat of the militancy when they were attacking companies what was happening is, once there was a plan to attack, they would send their people to come and protect our compound. Do you know why? Most of our workers are from there! They don’t want their job affected. They don’t want their means of their livelihood in anyway affected. So, most of them will say “Greg, you are not afraid. You are operating no fence” and I’ll say, “What do I want to fence myself from my brother for?” So, we are enjoying an incredibly good relationship. There are challenges, there are issues but we manage them.
Copyright Ships & Ports Ltd. Permission to use quotations from this article is granted subject to appropriate credit given to www.shipsandports.com.ng as the source.