As FG Steps up Plan for New Shipping Line

As the committees set up by the Minister of Transportation, Rotimi Amaechi embark on their mandates to assist in laying the foundation for the establishment of the national shipping line and overhauling the Nigerian Maritime Administration and Safety Agency, Eromosele Abiodunwrites that a new shipping line may be another pipe dream

State-owned companies are often touted as necessary tools for development in emerging economies. This is because they can be directed by governments to achieve development ends. The model has been a success in some countries, but it has been an epic failure in others. Such companies are not generally needed to provide goods. Rather, they are needed to provide the foundation for a well-functioning economy and a healthy, well-informed populace. The companies operate in a wide range of sectors across all countries but are mostly common in emerging markets.

Research shows that electricity infrastructure roll-out increases employment. Related to this, transport infrastructure expansion increases economic growth in the long-run and has relatively high rates of return in industrialising countries, although that effect might not be as strong as initially believed.

Thus, state-owned companies that provide the backbone of an economy can be expected to help spur economic growth and development. While some have argued that the era of state-sponsored enterprises is over, the story is different in Asia. For instance, the share of state-owned companies among the top 10 firms is 96 per cent in China, 88 per cent in the United Arab Emirates, 81 per cent in Russia, and 59 per cent in India.

Given that China and India are among the fastest-growing economies in the world, it is tempting to conclude that state-owned enterprises can spur economic growth. But analysts believe that conclusion is not supported by any empirical research, and ignores the fact that even China believes it is necessary to further reform its state-owned enterprises sector.
Experts told THISDAY that state-owned companies can be found in every country in the world.

“Norway has, arguably, seen greater success than other countries, especially in Europe, while South Africa cannot point to the same levels of success. State ownership itself is not necessarily the problem. Instead, success more often hinges on managerial skill and autonomy. In Norway the government operates through the board and treats all shareholders as equals. Chinese state-owned enterprises have been spurred on by a variety of events, including increased autonomy and the impact of market forces, “said an expert in the sector who do not want his name in print.

Proposed Shipping Line
Historically, governments have set up companies to develop industries where investors seem reluctant. Is that still important in today’s world? The Minister of Transport, Mr. Chibuike Amaechi thinks so.
Recently, the minister unfolded the federal government’s plan to float a new national shipping line.

Amaechi, who spoke at a Maritime Technical Summit in Lagos, explained that the new national carrier of ocean-going vessels would not be funded via the Cabotage Vessel Financing Fund (CVFF).
The maritime technical summit was organised by the Association of Marine Engineers and Surveyors (AMES).
He disclosed that he would be holding a meeting with some experts in maritime industry and ship owners to arrive at decisions on the establishment the national carrier.

At the summit, which attracted stakeholders in the maritime industry, he reiterated that the federal government’s determination to float a new national shipping line was part of efforts to develop the shipping sector.

Against the insinuations in some quarters that the billions of naira which had accrued into the CVFF would be used to acquire the national carrier, Amaechi said the present drive to set up a national shipping carrier would be based on a partnership with private investors.

The minister restated the need for a performance audit of agencies in the sector to ascertain what the challenges are with a view to addressing them with input from experts.

According to him, “I am determined to ensure that we get a new carrier and I will not disburse Cabotage fund for that. By next week, I will be meeting with some experts and ship-owners and make decisions on establishing the national carrier. We will also create a group that will move it forward.

“The performance audit will tell you how to move the industry forward. It makes you know what the problems are and make possible suggestions on how to move forward. Even when the performance audit is over, I will not make those decisions alone, I will try and meet experts in the industry and we will share these views with them.”

Amaechi also spoke on the need to upgrade the Maritime Academy of Nigeria (MAN) Oron to strengthen its capacity to produce skilled manpower for the sector, and pointed out that the academy would have been well equipped and developed by now if the fund invested to establish the Maritime University, Okerenkoko had been put into it.

“Anybody who has invested in Okerenkoko should have invested the money in MAN Oron. That is why the institution has not developed. We cannot continue to build another institution when we have not equipped existing ones,” he said.
President of Association of Marine Engineers and Surveyors (AMES), Charles Uwadia in his remarks called for a holistic review of the maritime sector human capacity development.

Uwadia said the failure of the sector was due to lack of in-depth technical input in maritime policies and their implementation in line with international best practice.

He added that the decline in standard, quality and profitability of the ships of Nigerian flag was as a result of their poor technical standards occasioned by the owner’s reluctance to comply with national and international standards and regulations.

Former Alternate Permanent Representative to the International Maritime Organisation (IMO), Mr. Olu Akinsoji in his presentation said individuals with specialised knowledge especially in human capacity development are required to ensure policy formulation and implementation to move the sector forward.

Akinsoji explained that most of the challenges faced in the sector are due to the deficit of human capacity development, which according to him must be looked into before establishing a new national carrier.

Obasanjo’s fears

Reacting to the proposed new shipping line, former President, Chief Olusegun Obasanjo, advised the federal government against resuscitating the defunct Nigerian National Shipping Line (NNSL).

Obasanjo, who gave the advice in his address at a recent two-day stakeholders’ conference on the maritime industry, which held in Lagos, blamed the demise of NNSL on the lack of professionalism and high level corruption at the time.
He said: “NNSL had been liquidated, they tried Nigeria Unity Line, it collapsed.

Nine brand new ships were specially built for Nigeria and we did not take delivery of some of them until I left office in 1979. When I came back in 1999, NNSL had been liquidated with all 19 ships and the five already in existence gone. Two of the ships were missing for almost two years and it was discovered that one military man was using them all over the world without accountability.”

Obasanjo urged the present administration to ‘think out of the box’ and come up with what should be done to grow the maritime industry.

However, Amaechi, said that the federal government was ready to create an enabling environment for steering the maritime industry to its rightful position.
The minister said government would provide safe environment for both foreign and indigenous investors to reap returns on their investment without compromising the nation’s economic benefits.

The Fall of NNSL

Obasanjo and other stakeholders’ fears may not be out of place given what happened to the NNSL in the past. The company was established by the Nigerian government in 1959. Despite heavy investment and subsidies, the state-owned company was unable to compete with European lines. Much of the investment went to enriching the political elite. Deeply indebted, the NNSL was liquidated in 1995 and all 21 of its vessels were sold.

At inception in 1957, 33 per cent of the capital was held by the Elder Dempster Line and 16 per cent by the Palm Line, both British companies, while the Nigerian government held 51 per cent. In 1961, the Nigerian government acquired all the shares. The NNSL started operations in 1959 with three vessels. Nigerian seamen who had been employed by British shipping companies in the colonial era moved to work for the Nigerian line. By 1964 it had grown to a total of 16 vessels. The public company was assisted by private businessmen. Sir Louis Ojukwu was an early member of the board before he died in 1966. The chairman from 1967 to 1973 was Oloye Adekunle Ojora, formerly of the United Africa Company (UAC), who later became a highly successful businessman in his own right.

During the Nigerian Civil War the army made free use of the NNSL for transport of troops. The ships played a key role in the advances along the coast in 1969. With the end of the Civil War in January 1970, General Yakubu Gowon announced an extensive programme to revive the economy. In place of expensive hired vessels two new ships were bought for the NNSL and the ports at Calabar and Port Harcourt were rehabilitated. In 1977 the government ordered construction of 19 new vessels to replace the aging fleet. By 1979 the company had 24 oceangoing ships. The NNSL was an important source of training for seamen of the Nigerian Merchant Navy (NMN).

While addressing newsmen in January 1980 about his first 100 days in office, former President Shehu Shagari had said that during this period the NNSL increased its percentage of imported goods from about 8 per cent to 11.3 per cent and had started bringing in components for the Peugeot assembly plant in Kaduna, components that had previously been flown in. On a less positive note, heroin smuggling by crew members was a significant issue in the 1970s and 1980s, with Nigeria serving as a major transit point for drugs bound for Europe.

A 1987 study of the NNSL for the World Bank compared results to the benefits that the United Nations Conference on Trade and Development (UNCTAD) had estimated would come from entry of Nigeria into shipping. The findings were that the investment had made no significant contribution to Gross Domestic Product (GDP), employment, the balance of payments, exercising countervailing power, national security or the country’s image. The gains had been less than the opportunity costs of the resources used.

In 1988 the National Maritime Authority (NMA) granted six Nigerian shipping lines “national carrier” status, including the state-owned NNSL. The NMA planned to extend this status to more domestic companies so as to reduce control of trade by foreign-owned lines. The Shipping Policy Decree of 1987, which established the NMA, gave approval for a 50-50 share between foreign and domestic lines for non-conference cargos. However, in 1988 the 24 ships of Nigerian national carriers including the NNSL took only 11 per cent of the cargoes at Nigerian ports. The NNSL and the private companies suffered from financial problems and lacked the facilities needed to attract cargoes. In the 1990s several of the company’s vessels were seized in different parts of the world for alleged breach of contract and unpaid bills.

Finally, the NNSL was liquidated in September 1995 and its assets were assumed by the newly formed National Unity Line (NUL). The NUL, fully owned by the Nigeria Maritime Authority, began commercial operations in July 1996 as Nigeria’s national flag carrier. The NUL had just one ship, MV Abuja. In August 2005 the government put the NUL up for sale. In July 2010 it was reported that the Nigerian Maritime Administration and Safety Agency (NIMASA), the successor to the NMA, had completed arrangements to establish a new national shipping line for Nigeria. A fresh attempt was made to re-launch and sell the NUL in 2011.

Committee on Reform
The Minister of Transport is determined to move the maritime industry forward. To that end, he recently set up two committees with mandates to brainstorm and assist in laying foundations for the establishment of the national carrier as well as the overhauling of the NIMASA.

In addressing the problems of industry non-performance, the minister assembled experienced and very brilliant people within the maritime industry, and enjoined them, to assist the federal government to deliver on its campaign promises.

The experts and stakeholders, included the pioneer Chairman, Indigenous Ship-owners Association of Nigeria (ISAN), Chief Isaac Jolapamo, former Maritime Academy of Nigeria (MAN), Oron Rector, Mr Olu Akinsoji; Arrowhead of Ship-owners Association of Nigeria, Mr Greg Ogbeifun; Lloyds Ambassador, Mr Emmanuel Ilori; the Secretary General, Abuja MoU, and former NIMASA Director General, Mfon Usoro; and Shipping Forum Boss, Margaret Orakwusi- Onyema.

The stakeholders were actually assembled, at Amaechi’s instance, following a summit of the AMES in Lagos, during which the minister emphasised that since he was not a maritime expert.

He had stated that he would ensure he harmonises the strength of the industry operators, to restore the country’s lost glory, following the collapse of the Nigerian National Shipping Line.

The first committee whose duty would be to guide the authorities on how to create the national carrier, it was learnt, also has the job of midwifing vibrant ships that would fly the nation’s flags, in addition to providing oasis of refuge for Nigerian cadets, whether studying at home or abroad.

The second committee was saddled with the onerous task of making the NIMASA as agency, work by providing strong teeth where it lacks it, making sure the agency conscientiously works within the ambit of its enabling Act in addition to ensuring that the Cabotage law is allowed to function in tandem with the nation’s economic interest.

Subsequently, fundamental issues which included those bordering on freights, carriage of goods on cost, insurance and freight, as against the current free on board regime were all discussed also at the forum. The minister’s attention was also drawn to how Saudi Arabia, Iran, Iraq, Malaysia amongst others, that have made their shipping policies fuel the growth of their countries’ economy.