In International Shipping News 05/05/2015
There is a consensus among shipping experts that the removal of waiver clause in the Coastal and Inland Shipping Act 2003, otherwise known as the Cabotage law, will go a long way in addressing the pathetic plight of Nigerian ship owners. It is on record that 11 years after the law was enacted, the sector has witnessed the depletion of indigenous fleet, cumulatively by about 90 percent.
The Nigerian Ship Owners Association (NISA) had disclosed that indigenous shipping operators were indebted to banks to the tune of over N500 billion, that cannot be paid due to the unfriendly operating environment that has led to business collapse. NISA is the umbrella body of Nigerian ship owners.
Meanwhile, the Cabotage Act was passed into law to among others; restrict trade along Nigeria’s coastal waters to indigenous operators. This ordinarily should have boosted indigenous ownership of ships, but the reverse is the case. The Act made provision for a waiver clause that allows foreigners to participate in coastal shipping when there is no Nigerian who has capacity for such jobs.
But over the years, foreigners still dominate over 80 percent of the trade, due to misapplication and abuse of the waiver clause by the transport ministry.
Cabotage law was patterned after the United States of America ‘Jones Act’ of 1938, which has helped develop that country’s indigenous capacity in shipping. No foreign ship is allowed to transit between ports in America.
It is quite unfortunate that Nigeria has not paid the required attention to this important sector. Sadly, 100 years after, the country is still struggling with getting it right, especially in the indigenous ownership of key operations in the sector.
Delay in disbursing Cabotage Vessel Financing Fund
Meanwhile, the whereabouts of more than $500 million that should have accrued to the Cabotage Vessel Financing Fund (CVFF) is generating concern in the maritime sector. The funds which should have been disbursed to indigenous shipping companies, from which six have been prequalified since 2013 have not been accounted for.
This speculation was heightened by the inability of Federal Ministry of Transport and the four banks – Diamond, Fidelity, Skye and Sterling Banks, designated as Primary Lending Institutions, to provide evidence regarding custody of the funds, which grew from about $7 million in 2009 to about $120 million in 2010, indicating an average increase of $110 million annually, according to sources close to the Nigerian Maritime Administration and Safety Agency (NIMASA), the agency responsible for collecting the funds.
The Nigerian Senate started investigation into the long delay in disbursing the CVFF because the exact amount that has accrued into it with the accompanying interests has been shrouded in secrecy. Transport Minister had said the fund has grown to N40 billion as at April 2013.
CVFF, established under the Coastal and Inland Shipping Act 2003, is derived from the two percent deductions from all contracts awarded under the Cabotage regime designed to enable indigenous shipping companies acquire adequate tonnage to be able to participate in coastal and inland trade currently dominated by foreigners, who also dominate deep sea shipping.
As pointed out earlier, NIMASA, the statutory secretariat mandated to disburse the fund, has since 2008 appointed four banks as Primary Lending Institutions (PLIs) for the CVFF. They are Skye Bank, Diamond Bank, Fidelity Bank and Sterling Bank. A PLI is a financial institution that meets the requirement of NIMASA to participate in on-lending, monitoring and management of loans under the CVFF scheme.
Each beneficiaries need to tie their loan application to a maritime project for which each must provide 15 percent of the project cost, having been pre-qualified by NIMASA that would be made to guarantee repayment.
But NIMASA has completed appraisal of some pre-qualified companies penciled down to be the first set of beneficiaries of the CVFF, before 2013 and submitted report to the federal ministry of transport, which is to give approval.
The Minister of Transport, Senator Idris Umar confirmed that, “Out of the several applications received for the CVFF facility, six applications have been processed and endorsed by Primary Lending Institutions (PLIs) and accordingly recommended by the management of NIMASA to the ministry and are being evaluated for approval”. This has been the position since early 2013.
Recommendations of the Presidential Committee
To make matter worse, the much-expected implementation of the report of the Presidential Committee on Development of the Maritime Industry has been abandoned.
President Goodluck Jonathan had set up a 15-man committee headed by the minister of transport, Idris Umar, assisted by Mr. Olisa Agbakoba, following a presidential retreat he hosted at the Aso Rock Villa in which top management of shipping companies both indigenous and foreign, government agencies, freight forwarders and banks, among others, were in attendance.
The committee was inaugurated in July 2012 to draw up a roadmap for effective maritime operations in the country. It submitted its report and recommendations to the president in October 2012.
Part of the committee’s recommendations is the removal of waiver clause and the change of the terms of trade for Nigeria’s crude oil carriage from Free On Board (FOB) to Cost, Insurance and Freight (CIF), among others.
“One quick way of resolving the situation we have found ourselves in the shipping sector today is by implementing the report of that Committee. Removal of the waiver clause from the Cabotage Act will also go a long way in addressing the plight of Nigerian ship owners whose businesses have been so badly damaged and who now owe banks close to half a trillion naira,” said Isaac Jolapamo, former chairman of Nigeria Ship Owners Association.
Crises and reforms by ship owners
Fortunes of indigenous ship owners have been dwindling over the years because of unfavourable operating environment. As part of efforts to boost capacity and be properly positioned to do the job, ship owners embarked on reforms. This resulted in change of its name from indigenous ship owners association (ISAN) to NISA.
This was followed with the first elections since the association was formed 13 years ago. Captain Niyi Labinjo emerged as President, but his emergence was trailed by huge disenchantment among members.
