Challenges in Nigeria’s Shipping Sector

Eromosele Abiodun writes that despite complaints of lack of access to finance and insecurity as the bane of the shipping industry, many Nigerian ship owners lack the experience to go into the business

According to a report by the United Nations Conference on Trade and Development (UNCTAD), developing economies in 2019 accounted for the largest share of global seaborne trade, both in terms of exports and imports.

The UNCTAD noted that they loaded 58 per cent and unloaded 65 per cent of the world total. With a volume of 4.3 billion tons loaded and 6.1 billion tons unloaded, Asian and Oceanian developing economies contributed most to that share.

“While developing economies remain the main maritime trade centres, the structure of their trade has changed. Since 2014, their share of world imports has exceeded their share of world exports,” UNCTAD stated.

UNCTAD added that developing economies’ declining contribution of seaborne trade exports and increasing contribution of seaborne trade imports is reflected in a steady decrease in their trade balance.

“Their balance changed from a surplus of 433 million tons in 2009 into a deficit of 49 million tons in 2014, which deepened to 776 million tons in 2019, “it stated.
However, UNCTAD stated that this development was mainly driven by the widening deficit in Asian developing economies.

Over the last 10 years, transition economies recorded a growth of their surplus from 412 to 614 million tons. For developed economies, a deficit of 820 million tons in 2009 has, over time, turned into a surplus of 155 million tons in 2019.

This is not all. In 2006, for instance, goods loaded at ports worldwide were estimated at 7.42 billion tonnes, up from 5.98 billion tonnes 2000.
The value of total world export increased from $6.454 trillion in 2002 to $40.393 trillion in 2005, representing an increase of 64 per cent.

Despite the huge contribution of shipping to global trade, Nigeria and Nigerians play marginally in the industry. It is on record that no fewer than 90 per cent of shipping companies owned by Nigerians have either completely shut down their operations or barely struggling to survive.

Some of the indigenous shipping companies include: Equitorial Energy; Oceanic Energy; Morlap Shipping; Peacegate; Pokat Nigeria Limited; Al-Dawood Shipping; Potram Nigeria Limited; Joseph Sammy, Genesis Worldwide Shipping and Multi-trade Group all in Lagos; Niger-Delta Shipping in Warri, Delta State; and Starzs Investment Group in Port-Harcourt, Rivers State.
Of all the companies listed above, only two can be said to be operating viable businesses while others are either completely dead or are in comatose.

Ironically, all the shipping companies based in Lagos are either dead or struggling to survive while the ones in Warri and Port-Harcourt are thriving. Thriving in the sense that they do coastal trade with multinational oil companies.

The companies, which the former General Secretary of the Indigenous Shipowners Association of Nigeria (ISAN), Capt. Niyi Labinjo, described as ‘struggling heavily,’ have mostly downsized and are operating with less than 20 per cent of the workers they had about two to four years ago.

THISDAY findings also revealed that all the companies are heavily indebted to banks and are mostly unable to service the loans they took to buy ships.
Recently, a major stakeholder in the industry told THISDAY that most of the ship owners have resorted to selling their landed properties to enable them service their bank loans, while others have lost prime properties to the banks.The companies, sources volunteered, also owe their crew arrears of salaries ranging from six to 14 months, while some have sold off their vessels.

Self-inflicted problem
Meanwhile, despite the fact that Nigerian shipowners have consistently cited lack of financial capacity and insecurity as the bane of the shipping companies, there are evidence to show that many Nigerian ship owners are actually bad managers without any prior experience before going into the vessel-owning business.

This has led to a situation whereby Nigerian owned vessels are mostly old “rust buckets” and are left as wrecks on the waterways meant for scrapping because they can no longer be sustained in business.

In a chat with newsmen in Lagos recently, a master mariner and chief marine surveyor with a shipping firm in Lagos said that the general response and attention to shipping business in Nigeria is so lackadaisical.

During the 70th birthday of the Chairman, Starzs Investment Company and Starzs Marine and Engineering Company, Greg Ogbeifun two months ago, shipowners took turns to lament the various challenges confronting them in Nigerian

For instance, Mrs. Margret Orakwusi, disclosed that no Nigerian vessel was listed among a total of 500 vessels that visited the Nigerian ports in the first quarter of 2015.
”No Nigerian flagged ship plied the international route. That means no value addition to the huge annual tonnage generated by way of earnings in freight, which translates into billions of dollars loss to Nigeria.

“Even the coastal trade reserved for indigenous operators; they are dominated by foreign operators and the common reason for this is due to lack of capacity of the indigenous operators in the provision of seaworthy ships, ”Orakwusi lamented.

On his part, a former President of Nigerian Shipowners Association (NISA), Aminu Umar, identified lack of finance as one of the major challenges facing Nigerian shipowners.
He added that insecurity on the waterways as well as deploying poorly trained seafarers as crew also pose challenges for indigenous operators.
However, the master mariner who does not want his name in print disagreed with the claims by ship-owners.

He said that most Nigerian shipowners have no prior knowledge before investing in buying of ships, adding that they usually take away all the profits, without any more investment in the business.

“The mentality of most Nigerian ship owners from what I noticed, is that, when they get N100 as proceeds from engaging the ship, you would be surprised that they would take N90 for their own personal purpose instead of putting back money into the business. So, when you go to some of these ships, the state of the ship would make you wonder why they don’t re-invest profits into the business, they would start giving you different excuses,” he said.

Vessel maintenance
The master mariner added: “If you look at the state of vessels in Nigeria, there is inability of the vessel owners to properly maintain it, maintenance of a vessel determines the life of it. The owners of the vessels are not really conversant with the business. The person that advised him to buy the vessel is not even a marine person, the people he employs to man the company are not marine people, there is a case we have at hand now, the company has a ship, but the people managing the ship at the office have no knowledge that is maritime related, what do you expect?.

Such a ship, he stressed, would be in a bad shape,“and things would be going wrong because they cannot defend or see the importance of enforcing certain things on the vessel.The point is typical of Nigerian mentality, they have this “take” and “don’t give back” mindset”
“In my personal experience, there was a company I was superintending, I advised the shipowner that, for every profit you get, take away 25 per cent of it and keep it aside for the vessel maintenance, this includes salaries, dry docking, bunkers and other things that may come up, but he never listened.

“Eventually, the ship propeller broke, we had to order propeller from Japan. I took the vessel to Nigerdock, I had actually told him to keep a N100 million to do this job, but he thought I wanted to spend his money. He spent N300 million to play politics and he didn’t win. Eventually, the vessel was sold as a scrap,” he said.

He stated that the mentality of most Nigerian ship owners is that, they are in the business not because they are interested, or they did visibility studies on it. But because they were told that there is a lot of money in the business and that is how they find their way in. Eventually most of them get stuck,”the expert stated.

The master mariner also noted that there is an increase in the number of vessels being scrapped at various scrap yards dotting the Kirikiri axis of Lagos.
“Do you know that, if you go to Kirikiri area of Lagos, they are scrapping more vessels these days, because when the owners can no longer update the business, they would be forced to scrap it, “he said.

He warned that a time would come in Nigeria that, if care is not taken, there may not be any Nigerian owned vessels anymore.
He cited a situation that took place years ago at the Lagos breakwaters when a vessel had issues, but it was abandoned until it broke into two.

Foreigners cheating Nigerians
With Nigerians playing marginal or no role in the industry, foreign shipping companies have fully taken over and using the opportunity to cheat Nigerian shippers. Despite the effort of the Nigerian Shippers Council (NSC), the foreign shipping companies have effused to soft-pedal imposing all manners of charges.

Recently, clearing agents and freight forwarders accused the foreign shipping companies of exploiting and extorting Nigerian importers through introduction of arbitrary charges on a yearly basis.

Customs agent Izuchukwu Obasi, explained that some importers have joined the bandwagon and moved their cargoes to neighbouring countries due to unnecessary shipping charges shipping lines slam on Nigerian bound cargoes.

According to Obasi, “In 2016, the shipping lines first came with a new charges called government and port taxes. They were imposing the charges on importers, and many had no choice other than to pay, even though some of our clients complained to us.
“The government pretended as if it was not aware of the new charges until some Customs brokers raised the alarm through a petition to the Presidency. Everybody now started talking about it and journalists started reporting it.

“That was when government was forced to come out and say it is not in support of such charges. The Nigerian Orts Authority (NPA) and the Nigerian Shippers Council now denounced it, but the shipping line did not stop collecting it. In fact, it is still being collected till date and everybody is just going about as if all is well. My brother, all is not well. Importers are being extorted in Nigeria’s maritime sector.”

He added: “As if that is not enough, in 2019, the shipping lines came again with another charges. This time, they labelled it Ports Additions Destination (PAD) charges. What kind of charges is this? They were collection this charges like almost three months before some agents again raised the alarm by leaking it to the press.

“Before the PAD charges was exposed to journalists, government agencies saddled with the regulation of charges pretended as if they were not aware. Nigerians were being ripped apart right under the nose of our own government by foreign shipping lines.”
He said a 20feet container destined for Nigeria pays additional N38,000 aside all the other charges usually paid before.

“For a 40feet container, importers were forced to pay N76,000 before their cargoes were shipped to Nigeria. All this was going on under the new PAD charges and our government pretended as if they were not in the know.Until some agents addressed some journalists and it became news item in the media, that was when government agencies came rushing to agents, appealing to them to remain calm, that negotiationsare ongoing with the shipping lines to stop the new charges. That was in the middle of 2018.

On his part, Vice President of the Association of Nigerian Licensed Customs Agents (ANLCA), Kayode Farinto said all manner of charges are still being collected.
In his words: “Importers are still paying the levy and nobody seems to be talking about it again. We just hope government does something about this.”