President, Nigerian Licensed Ship Chandlers Association, Dr. Martins Enebeli, says the operating environment, poor access to capital and the activities of government agencies make it difficult for Nigerian ship chandlers to compete with the foreign counterparts. He speaks with SHIPS & PORTS’ Abolanle Oluwatola.
Excerpts:
What are the logistical challenges faced by ship chandlers in Nigeria?
The practice of ship chandling connotes international operations and time is of essence when you are carrying out ship chandling activities vis a- vis supplies to ships which includes victuals, oils, services, lubricant and supplies. In Nigeria, things are not done properly so we cannot compete effectively. We control about 65% of ship operations within the sub-region, the Gulf of Guinea and most of these ships that come into our harbours are fully laden with cargo while they go out mostly imballast. This enables us to have a balance of trade in all the bi-lateral and multi-lateral trade agreement we have entered but they are not implementable because of the turnaround time because the constraints are enormous. Accessibility to the port, particularly Lagos port is almost impossible through roads, accessibility to the ship through the waterways is almost impossible because of the proliferation of security agencies and their illegal approvals. The Nigeria Customs Service regulates ship chandling practice in Nigeria and after giving you approval, other agencies like Navy, Police, Civil Defense, Immigration, etc will still proliferate the approvals. Sometimes, you stay as much as two hours with vegetables that is meant for consumption on an international vessel with an international benchmark for which health is of essence. By the time of arrival after all these bureaucracies, the receivers of the consignments will reject them on health grounds because they have overstayed, not fresh and bacterial infected. All facets of ship chandling activities are affected in the Nigerian system. We have in the past written a lot of memorandums to this effect but as usual, we have only had talk shows, nothing comes out of it. All the vessels go out imballast ranging from the cabotage-coastal, coast-wise and the Gulf of Guinea. In international operations, Nigerians cannot fit in because of the logistical problems so revenues are lost. Ideally, you would be having about fifteen crews on the smallest vessel and to set sail for thirty days, it needs an average of about a hundred thousand dollars’ worth of victuals, oil, water etc. One hundred thousand dollars by twenty thousand vessels on average was the order of the day before now but today, it is not like that. It has gone so down and we are supposed to be one of the hub centers of ship chandling practice in this country. That is where we are.
Can you mention specifically how government agencies and bureaucratic processes affect the operations of ship chandlers?
Ship Chandling Practice is regulated via the Customs and Excise Management Act (CEMA) Section74. Also, in the Nigerian content law, we have 95% local participation. As regards the NIMASA Act, ship chandling is not directly mentioned but implied on the purpose for which ancillary and auxiliary services will be performed on vessels. Ship chandling forms the critical part of that either ancillary or auxiliary services. Those are where we are mentioned. Other than these regulatory bodies, the bureaucracies of the security agencies are deeply unwarranted, unproductive and anti-blue economy concept. The blue economy has 200 exclusive economic zone and 1,000 nautical miles of littoral strength but the bureaucracies are enormous. Why will a chandler get an approval from the Customs, Navy, Immigration and the Police which has twenty units on the same product? By the time you go round all these people, it is a pity, the ship must have gone. Some of these vessels are on time charter. Their turnaround time is in hours so Nigeria is never suitable for them. That is why they are all in Ghana, Togo, Republic of Benin and Côte d’Ivoire. I can tell you that a vessel that is heading towards Nigeria, to take full ship stores of about US150,000 laden with Nigerian cargo supposedly going out imballast will go to Durban, South Africa with an extra fuel to take full ship chandling operations en-route Nigeria. Is that economically viable? Do you know how many billions of dollars Nigerian government will lose through that? So, if we annex these areas, like what the Americans did in the Jones Act, where in the American Harbour, localized chandlers are allowed to operate. When you are within the Black Sea countries like Ukraine, Pakistan, Belarus, you shut down your ship stores and take ship chandling activities whilst you are there. This is massive revenue earning. You can imagine the oil services needed for a ship, victuals, vegetables, technical parts all on one voyage; you see that Nigeria is losing hugely from these logistic deficiencies. Nigeria will reap huge benefits when the chandling activities are properly coordinated and annexed. Our farms and local factories will improve tremendously because the entire earnings on ship chandling is in hard currency. So, we are talking about billions of naira earnings every year. In only bunker operation, if well annexed, we will make USD15 billion yearly.
How can these challenges be mitigated?
The solution is for President Bola Tinubu with the passion he is showing presently to put Nigeria on the right economic pedestal to do fiscal changes in this country. He is to look deep into ship chandling and other allied services so as to generate revenue earnings to make Nigeria a hub. This implies that all the multiplicity of regulatory bodies and security agencies should be compounded and streamlined into a one-stop-shop mechanism. The only way to achieve this is the enactment of a presidential Executive Order to entrench ship chandling and allied services into law for its earnings. A committee should be set up to be driven by the private sector but can have government staff as members to enforce ship chandling and allied services law. This should be put in place as fast as possible to generate earnings to the country, if not, there will be no revenue. Nigeria can earn as much as USD15 billion on ship chandling and allied services.
How does the fluctuation in foreign exchange affect the pricing of ship chandling services?
Everything about chandling has to do with foreign exchange earnings ranging from different currencies like the yen, dollars, euro etc. There are international benchmarks, standards of pricing for which a ship is supposed to buy any item for the consumption of a vessel. In petroleum, there is a flat rate, in victuals and vegetables, there is the ISA handbook on pricing, the same with International Management Practitioners Association and the International Ship Services and Supply Association of Nigeria. These benchmarks and standards are done in foreign currencies. So, we would look at the foreign currency and our local cost. Most times, our cost is higher because this harmonisation is not there.
How about infrastructural challenges such as storage facilities, transportation etc?
As regards infrastructures, we are not there. These are the issues the body we are proposing for the President will look into because there is no desk in any bank that is talking about ship chandling and allied services. During Obasanjo’s government, total estimate of off stream activities was about USD10 billion. That was what brought rice to the formulation and the eventual passing of the National Content Bill where they have the headquarters in Yenagoa. The issue there is that each time these laws are passed, they try to want to make it look like it is a civil service arrangement other than a proper essence of trade in that industry so with a proper harmonisation and coordination of the laws, these issues will be dealt with. Let’s look at the financial aspect of it. The Bank of Industries and the local banks are not properly lettered on ship chandling and allied services. The Central Bank also does not have an account for inflow of chandling activities. It is fundamentally wrong not to have all these. As regards infrastructure, we are at the lowest ebb. We need finance to solve this issue. In Britain, the banks are there. There is a deliberate fiscal policy to enhance ship chandling and its allied services but in Nigeria, it is not available. Other foreigners that have single digit interest rate come into Nigeria and do all the big jobs ranging from Floating Production Storage and Offloading (FPSO), Floating Storage and Offloading units, rigs, platforms, floating barges, LNG vessels and super oil tankers but Nigeria does not participate because there is no economic challenge. These people bring offshore finance to carry out these jobs.
We are going to talk to NIMASA on the issue of the Cabotage fund of two percent. All we are saying is that NIMASA should come out and become guarantors for us to banks when we want to borrow funds for ship chandling operations because this is an operation that within thirty days, gets a turnaround time payment for it. The Central Bank will also look at the policy and make certain regulations to favour localised ship chandlers so that they can go and compete.
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