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“Nigeria loses $100m annually on shipping” – Egesi

By on July 15, 2013

When the cabotage regime came on stream, the intention was to stimulate the development of indigenous capacity in the Nigerian maritime industry. Ten years down the line, many Nigerians are wondering whether the law has actually taken off as indigenous vessel owners, who the law was designed to protect, remain sidelined while foreign shipping companies hold sway.

In this interview, Mr. John Patrick Egesi, President of the Nigerian Institute of Shipping (NIS) and former Director General of the National Maritime Authority (NMA) now known as NIMASA, speaks on why an economy like Nigeria’s, with stunted industrial development, can never become a maritime power. Excerpts:

Stakeholders in the maritime sector have described the cabotage regime in Nigeria as a huge failure. As a maritime economist, what is your take on that?

The Cabotage Act was enacted for stakeholders and, of course, for the generality of Nigerians to benefit from through returns on investment, generation of jobs and indirect economic benefit for the common man through what the Keynesian economist would call multiplier effect. It is usually very tempting to side with the position of the stakeholders since everybody should consider them the direct beneficiaries of the Act. However, given my personal experience as a former Director of Operations and Director General of NMA (now NIMASA), my reasoning calls for caution in this regard.

I recall that when the 40-40-20 rule was at its height, the NMA did all it could to ensure that indigenous shipping companies get some share of the maritime cargo in spite of the fact that they had little or no vessels of their own. Many of them collected Form ‘C’ and quickly sold them to foreign lines that had the tonnages to carry the cargoes. Before you say jack, they were in the press telling the world that the shipping policy was a failure and went on to demand their own share of the Ship Acquisition and Ship Building Fund.Despite the techno-legal shortcomings of that Act, any Nigerian knowledgeable in the dynamics of shipping will concede that the Cabotage Act, inspite of its deterministic tone, is more like a wishful road map for Nigeria national industrial development. To put it bluntly, a nation that has stunted industrial development can never become a maritime power. Growth in maritime development will continue to be marginal for as long as our industrial and manufacturing base is hollow. I know that NIMASA has never rested on its oars since the enactment of this law.

But there is a limitation to what NIMASA can do. They cannot start purchasing vessels for all and sundry who wish truly or falsely to participate in the cabotage trade. It will also be irresponsible on their part to allow substandard vessels to participate in the trade. The stakeholders will have to meet NIMASA midway by merging to purchase the right equipment and vessels. NIMASA could then use its federal might to assist. While NIMASA definitely has its own shortcomings, the word failure will be problematic here

How has the poor implementation impacted on the maritime sector and the economy at large?

An under developed cabotage implementation will definitely further stunt our maritime development – particularly in our high seas and intercontinental sea trade aspirations. Do not forget that while the cabotage regime was considered necessary in itself, the midterm aim was to help Nigeria re-develop its participation in the international carriage of cargo. Failure of the cabotage regime will make these aspirations less easy to attain. All the other expectations like growth of ancillary trade, insurance, job creation and skill development and expected multiplier effect on the economy will fail to materialize.

Do you support the view that a harmonized approach would ensure Cabotage regime success?

By harmonize approach, I believe you mean cascaded implementation of the Act. These have always been my position and the position of the Nigerian Institute of Shipping. It involves taking incremental measured steps in implementing the cabotage. For example, 300 grt vessels can be exclusively reserved for Nigerians, while allowing non-Nigerian companies to continue to operate at a higher tonnage level – but of course giving priority to Nigerians at all levels. The limitations could be increased in vessel and equipment after every three years to 1,000 grt – 1,500 and so on until foreigners are completely locked out – may be within 20 years. What is important here in focused consistency on the part of the Ministry of Transport and NIMASA

Out of about 400 vessels, 70% are reportedly not engaged for not meeting standard. Any hope that in the near future more Nigerians would be manning vessels operating in our domestic waters and our domestic vessels built or repaired in Nigeria shipyard?

Like I said, development of shipping including cabotage does not depend on a legal fiat but a function of incremental and positive development of our industrial, manufacturing and trading base. Once these factors of our life take-off like in India, Philippines, Korea, Malaysia (who were members of the Group of 77 with us), the growth of our shipping and cabotage trade will take off consequentially.

Estimates have put the loss recorded so far at about $100m annually showing that the Nigerian water has become a feasting ground for foreign ship owners. What could be done to address the situation?

My own estimates are far above that. But that does not change the reality of our incapacity. No matter what the government through NIMASA wants to do for the promotion of cabotage shipping, the fact still remains that shipping is an expensive field of investment which only those with the necessary resources and interest should get into. It is not a social benefit organization where individuals go to receive money to assuage their needs.

The most important step therefore is to ensure that only companies or group of Nigerian companies capable of meeting the minimum ownership standards should be recognized. Their minimum capacity will give NIMASA the proper base to assist through the Cabotage Fund. This should be supported by periodic (2 -4 years) but incremental exclusive tonnage and equipment zone for only Nigerian companies. It will take a while but we shall get there in the end. I am sure that the enactors of the Cabotage Act probably have this in mind.