Why government must be more purposeful with maritime sector

Buhari
President Muhammadu Buhari

 

The year 2021 opened with a lot of uncertainties for the economy and government of Nigeria. The economy had entered into another round of recession in the last quarter of 2020. Prices of oil, the mainstay of the economy, had fallen to an all time low as part of the fallouts of the COVID-19 pandemic that is still raging across the globe. To recover from the doldrums, it has become pertinent that government take a major revenue spinner like maritime serious this year.

Even before the coming of COVID-19 the national economy had been floundering, prompting the calls for government to explore other sources of revenue that are replete in the country. One of such sources of revenue that has been neglected over the years is the maritime sector. This year, government should be more purposeful and take maritime, a major source of revenue for other countries, more serious.

Economic and maritime experts have never ceased to draw attention to maritime, and to emphasize the role the sector can play in the economy of the nation. Sometime ago, the Executive Secretary of the Nigerian Shippers Council, Hassan Bello, disclosed that 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 which can even be exceeded.

The description of the maritime sector as the engine room of Nigeria’s economic growth is not an overstatement, but a statement of fact if only concerted efforts could be made to leverage on its many deliverables.

To maritime experts, considering the huge potentials, revenue from maritime can single-handedly finance the national budget. Unfortunately, instead of the government giving serious and deserved attention to this huge goldmine, it prefers to borrow to finance its budget.

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 China – a country that is blessed with maritime resources as Nigeria, but knows how to harness the resources to create wealth.

Instead of massive borrowing to fund the budget in the face of dwindling revenue from oil, the government should simply 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.

Simplistically, what the government has done to boost its revenue from the sector is sending monitoring teams like other revenue collecting agencies, to checkmate stealing and corruption which truly are big sources of revenue losses. However, what is actually needed in the maritime sector is a couple of far-reaching policy decisions and actions that will unlock the huge potentials of the sector.

Government needs the political will and sincerity of purpose to put together policies that will redress the many years of neglect and sabotage of the sector. The 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 Free On Board (FOB) terms of trade with regards to the nation’s crude oil export instead of Cost, Insurance and Freight (CIF) which would have enabled her citizens to participate 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 member of the Organisation of Petroleum Exporting Countries (OPEC) 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 Transportation 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 new 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.

To do this, a lot of political will and determination are needed from the Federal Government. It must come out with a policy which makes the existence of a national shipping fleet inevitable. If Ethiopia, a landlocked country has vessels that carry its imports and exports, it is difficult to fathom why Nigeria cannot. Ethiopia is known to have achieved this because of a strong political will that every Ethiopian cargo must be carried on an Ethiopian vessel.

Government should also take bold steps to address the well-known man-made challenges facing indigenous ship owners such as unfavourable policies of the Nigerian National Petroleum Corporation (NNPC). Nigerian ship owners have often complained about NNPC breaching the provisions of Nigerian coastal and local content laws in the shipping of petroleum products in the downstream sector of the oil and gas industry in favour of foreign vessels – a situation that encourages massive capital flight.

According to the indigenous ship owners, foreign-operated vessels engaged in NNPC’s marine service contracts account for over 90% of the Cabotage trade, thus creating an uneven operating environment detrimental to the growth of indigenous tonnage.

Nigeria’s neglect of the maritime and shipping sector is very glaring in the way access roads to the ports have been allowed to decay over the years. The deplorable state of seaports access roads in Lagos, which has been allowed to linger all these years, shows the nation’s lack of seriousness in maximizing revenue from the ports. The notorious Apapa gridlock, which is induced by bad roads, uncoordinated truck movements and unbridled corruption is costing the nation a lot in terms of revenue.

A report by a Dutch consultancy firm, Dynanmar said due to the poor access roads, Nigeria loses N20 billion daily at the ports, which is equivalent to N7.2 trillion yearly. This is really no news because industry operators and notable businessmen in Nigeria have always lamented the colossal losses but the government appears unwilling to take appropriate actions to repair the roads.

We expect that this year, 2021, Nigeria will give the maritime sector more serious attention. The attitude of government officials to the sector must change. The notion among some of them that shipping is a mere service sector is very wrong as this largely accounts for how shipping has been treated in Nigeria.

Government functionaries should take a look at the contribution of shipping to the economy of countries like Greece, China, Hong Kong, Singapore and Japan. In Greece, shipping is the major revenue earner, and this is because of the pride of place given to the sector. 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”.

This year, government should endeavour to be true to its words by disbursing the Cabotage Vessel Financing Fund (CVFF), a provision attached to the Cabotage Law created to assist indigenous ship owners to acquire vessels in order to take control of the country’s Cabotage trade. The Fund appears to have been hijacked by government and its functionaries, and all the owners of the Fund have been getting are endless promises of disbursement.

We strongly believe that the maritime sector can finance the national budget if the right things are done. According to President Buhari, the 2021 budget is N13.6trillion with only N7.886 trillion available to fund it, leaving a deficit of N5.2 trillion which, he said, would be financed by new borrowings.

It is very unfortunate that Nigeria with enormous maritime potentials should go cap in hand to finance her budget. We, therefore, call on the government to harness the potentials of the sector. If that is done, there will be no need to borrow to fund national budget.



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.

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