Government Charges and Fleet Development

Eromosele Abiodun writes on the need for the Nigerian Maritime Administration and Safety Agency to urgently design a well-thought out indigenous fleet development programme, which will not involve government ownership and funding of vessel acquisition, to enhance economic growth

In the last three years, importers and exporters in Nigeria have paid over $25.3 billion to foreign ship owners as freight charges on goods imported and exported out of the country.

According to statistics from the Nigerian Maritime Administration and Safety Agency (NIMASA), Nigerian shippers paid a total sum of $9,087,585,117.5 as freight for dry and wet cargo to foreign ship owners in 2015.

In 2016, Nigerians also paid a total of $7,551,304,167.12 to foreign owned ships while a total of $8,601,881,176.08 fright charges were lost to foreign vessels in 2017. The NIMASA data also showed that 2,047 vessels brought in dry cargo import; 987 vessels lifted dry cargo export while a total of 2,468 vessels lifted wet cargo import and export cargoes in 2016. In 2017, a total of 1,967 vessels of dry cargo import were received at the port; 1,145 vessels of dry cargo export while a total of 2,294 vessels of wet cargo import and export were handled in Nigerian ports.

That is not all, between 2004 and 2017, Nigeria recorded total vessel traffic of 25,256 vessels with the total gross freight of $39 billion but the country earned a paltry sum of $1 billion as levies for NIMASA. This massive loss, can be blamed on the failure of Nigerian ship owners to acquire standard oceangoing vessels in order to have the needed capacity to compete with their foreign counterparts. Equally important is the failure of government over the years to implement laws put in place to protect Nigerians and ensure fleet development.

The NIMASA is primarily responsible for fleet expansion and development in Nigeria. Part III (a) of NIMASA Act states: “that three per cent of gross freight earnings on all international inbound and outbound cargo from ships or shipping companies operating in Nigeria to be collected and paid over to the agency to meet its operational costs;(b) 0.5 per cent of stevedoring charges collected by employers of dock labour etc.”

Part III, S. 17(4) states: “The agency may apply monies in the Fund to promote the development of indigenous Shipping and shipping infrastructure in Nigeria. (5) The beneficiaries of the Fund under subsection (4) of this section shall be Nigerian Citizens and Companies.” The agency by its act is mandated to create the enabling environment for fleet acquisition, but the agency has deviated from its core functions over the years.

Failure to Implement Laws
Also, the Cabotage Act, the NIMASA Act and the Local Content Act, which are consolidated, are not being implemented. By the Local Content Act, indigenous operators are supposed to be considered for any job before foreigners. However, over the years, government agencies have not been implementing the laws hence the decay in the industry. Experts believe the lack of fleet development in Nigeria is not just a policy issue but implementation of policy.

According to the experts, another major obstacle to fleet development in Nigeria is the lack of national carrier run by indigenous operators.
“The national carrier is supposed to carry 70 per cent of all the cargoes coming in and out of Nigeria. Also, cargo preference laws are embodied in NIMASA, the law gives indigenous players right to technically generated cargoes and oil and gas cargos. However, no country without a national carrier benefits from cargo preference.

“Sadly, indigenous operators are not looking at the law but rather run to Abuja and move around government circles, bringing politics into matters that are technical with global standards. The operators are supposed to demand implementation of the laws or seek redress in the courts because they contributed to the funds meant for fleet development,” said a leading player in the sector who do not want his name in print.

“Often times, they focus only on the Cabotage Vessel Financing Fund (CVFF), which is set aside for cabotage vessels or coastal vessels and not for sea going vessels. Sea going vessel are domiciled in the NIMASA Act s.16, which states, “that 25 per cent of all the monies collected from vessels calling in Nigeria shall be used to develop indigenous fleet, “he added.

He stressed that the consolidated laws if implemented is capable of generating over 5.3 million jobs for Nigerians, “because under s. 105 of the local content act, these three agencies are supposed to be linked to generate wealth and create employment. Unfortunately, these three acts have been subsumed by politics, which is not supposed to be so.”

He therefore urged the federal government to draw a line between the political space and the professional space and urgently takes steps to implement existing laws for the benefit of its peoples.

Customs Prohibitive Import Tariff
It is also important to point out that the Nigerian Customs Service (NCS) whose prohibitive import duty/tariff on vessel, which currently stands at 14 per cent of the ship value, discourages vessel owners, including Nigerians who prefer foreign registry, is not well represented in the Cabotage Act.
For instance, Nigeria has two coastwise laws, the customs coastwise law and the cabotage coastwise law. Experts believe the two laws are conflicting and efforts are not being made to correct the mistakes.

“Nigeria operates a system that is not legally operate able, the system is politicised and often times no real effort has been made to correct the anomalies in the laws. As a way out, government must allow experts to run the system efficiently for the benefit of the people of Nigeria. NIMASA must urgently design a well-thought out indigenous fleet development programme, which will not involve government ownership and funding of vessel acquisition.
“If the agency wants to make any difference, it must create the necessary atmosphere that would encourage local and private investors to invest in vessel acquisition with the assistance and cooperation of the Nigerian National Petroleum Corporation (NNPC).
“Also, there is need for the government to audit the three per cent benchmark rate of the value of goods for import and export every day, which NIMASA collects from vessels calling in Nigeria to ensure accountability,” said President of the National Council of Managing Directors of Licensed Customs Agents (NCMDLCA), Lucky Amiwero.

Tax on Ship Acquisition
In an effort to grow the industry, stakeholders in the nation’s maritime sector recently called on the federal government to abolish the tax on full duty paid equipment stressing that the policy is undermining local operators and favours foreign shipping companies.
The stakeholders made the call at a group meeting themed: “Shipping Policy: A Catalyst for Maritime Growth,” put together by the Nigerian Chambers of Shipping (NCS) in Lagos.

Speaking on the challenges faced by local operators on behalf of other players, the Chief Executive Officer of Marine Platforms Limited, Mr Taofik Adegbite, said the law was made to stop colonial entities from taking their equipment out of Nigeria arguing that the law is no longer relevant to modern trend.
According to him, “Sect. 8 schedule 6 of the customs and excise act states that full duty paid equipment cannot be re-exported unless it is meant to go and do repairs. Not sounding to be too ethical, some of us have worked in Ghana, Equatorial Guinea, Togo and the Congo. You have vessels that are of course are multinational in nature, we did the right thing, the equipment are man properly so they can work anywhere, those are foreign exchange earners but you have the customs asking for tariff, which means we have to now go and do service to avoid been taxed.

“And I recon the drafters of the law at the time wanted to stop the colonial masters from taking their equipment out of Nigeria. However, we can see now that it is no longer relevant with modern trend. So you can see that operators and challenged, constrained and locked down by the law unless you lie or have maintenance to do to avoid been taxed. AS it is today, if anyone called us from outside Nigeria for work we cannot go because we are constrained by the law.

“How do you make it easy for the operators here, you do a win-win with them, there are instances where they have low utilization, wherein the tonnage you have for them is so big for what they want to do at the time. What you do is tell them your low periods or go seek assignment elsewhere mindful that an international oil company (IOC) like Eni has a very great opportunity in Ghana. It means Eni Milan will be looking at it is cheaper to move equipment from Nigeria than bring it from Europe.”

He stressed the need for more private sector investment in the shipping industry adding that what is happening now in most maritime countries is that national interest encapsulates the private sector essence, which is profitability.

“If we do not have that nationalist mind-set there will be absolute opportunism and in the Nigerian situation, the country will be raped blind, the rich will be so rich and the poor will be so poor. So we need to start looking at what the private sector can do. We need to start going into the various policies and looking at execution. There are enough of the strategies and policies and emphasis are not laid on execution,” he added.

He stated that the talk around a national shipping line will not work because we are not sufficiently nuanced in some of the things we talk about as a country.
“There was an issue around sufficient cargo for the national shipping line if the cabotage fund were used to develop the shipping line. If you understand the way the container cargo of the Maersk of this world works, you cannot have enough cargo to put on a ship to go out of Nigeria and break even as a business. As long that it cannot happen, the shipping line will die a natural death from start, “he said.

On his part, human rights activist and maritime lawyer, Olisa Agbakoba SAN insisted that the Nigerian maritime industry could generate N7 trillion annually because of its huge potential.

“From the discussion here you can see that the potential is so huge. Ghana is now taking over from Nigeria as the shipping hub, even in the aviation sector, because I work in both sectors, Togo is now the hub for airlines like Emirates. How is it that a country of 180 million people can’t see the potential and yet we talk about poverty? The maritime sector can turn the Nigerian economy around but is the government showing enough interest? The government has to create the enabling environment, “he said.