Thursday, January 17, 2019 02:45 PM/Brickstone/ Image Credit: businessday
Nigeria, located on the coastline corridors of the Gulf of Guinea and the Bight of Benin, is blessed with a natural maritime endowment base comprising a coastline of over 850kms, an exclusive economic zone of over 200 nautical miles, a vast inland waterways resource estimated at nearly 4,000kms, capable of supporting a vibrant intra-regional trade. With Nigeria‘s total annual freight cost, estimated at between $5 billion and $6 billion annually, there is no doubt that shipping is of great importance to the Nigerian economy (NIMASA 2018).
The maritime industry includes all enterprises engaged in the business of designing, constructing, manufacturing, acquiring, operating, supplying, repairing and/or maintaining vessels, or component parts thereof: of managing and/or operating shipping lines, stevedoring and customs brokerage services, shipyards, dry docks, marine railways, marine repair shops, shipping and freight forwarding services and similar enterprises. Put succinctly, the industry embraces all the maritime related business activities which take place within the country’s maritime environment. These include offshore economic activities such as fishing, salvage, towage, underwater resources and on-shore economic activities such as port activities, maritime transport (shipping), ship construction, repairs and maintenance activities.
Maritime Industry Participants
The maritime industry in Nigeria is mostly dominated by the following players; the Nigerian Maritime Administration and Safety Agency (NIMASA), Nigerian Ports Authority (NPA), Nigerian Shipowners Association (NSA), the Nigerian Shippers Council (NSC), Ministry of Trade and Transportation, operators, finance institution and private investors.
The Legal and Regulatory Framework for the Maritime Sector in Nigeria
In this section, a brief overview of the extant legal and regulatory framework (limited only to principal legislation and potential changes in law) for the maritime industry in Nigeria is provided.
Nigerian Maritime Administration and Safety Agency (NIMASA) Act 2007: NIMASA Act establishes NIMASA and saddles NIMASA with the responsibility of pursuing the development of shipping and regulating matters relating to merchant shipping and seafarers in Nigeria. Other statutory functions of NIMASA include but not limited to: regulation of safety of shipping as regards the construction of ships and navigation; administering the registration and licensing of ships.
The Coastal and Inland Shipping (Cabotage) Act 2003: The Cabotage Act was enacted in response of the increased demand of Nigerian stakeholders within the maritime industry for legislative intervention to stimulate the participation of Nigerians in its domestic coastal trade. The Cabotage Act restricts the use of foreign vessels in domestic coastal trade (including carriage of good and passengers in Nigerian waters), promotes the development of indigenous tonnage and establishes a cabotage vessel financing fund. Specifically, the Cabotage Act precludes a vessel other than a vessel wholly owned and manned by a Nigerian citizens, built and registered in Nigeria from engaging in the domestic coastal carriage of cargo and passengers within the coastal territorial inland waters, or any point within the waters of the exclusive economic zone of Nigeria. The Cabotage Act provides for Cabotage Vessel Financing Fund (‘the Fund’) and the Fund is to be used for promoting the development of indigenous ship acquisition capacity by providing financial assistance to Nigerian operators in the domestic coastal shipping.
Nigerian Ports Authority (NPA) Act: The NPA Act empowers the NPA to maintain, improve and regulate the use of the ports; ensure the efficient management of port operations; provide and operate ports facilities; form, establish or incorporate subsidiaries or affiliate companies with other persons or organisations for the purpose of carrying out any of its functions.
Merchant Shipping Act, 2007: This Act provides for merchant shipping in Nigeria and allows only registered Nigerian ships to operate commercially in the Nigerian to the exclusion of others except for statutory exempted cases.
Potential Change in Law: There are currently some bills pending before the National Assembly capable of affecting the maritime industry when passed. They include: the Anti-piracy Bill; the Establishment of the Nigerian Marine Development Bank Bill; Inland Fisheries Act (Amendment) Bill 2017; the Deep Offshore and Inland Basin Production Sharing Contract (Amendment) Bill 2016; and the Cabotage Act (Amendment Bill) 2017.
Key Challenges Facing The Maritime Sector
Some of the key factors that influence the development of shipping industry in Nigeria include: inadequate financing, inefficient ports infrastructure, deficit in maritime infrastructure, inefficiencies, lack of transparency and sharp practices.
Inefficient and Inadequate Port and Shipping Infrastructure
Decaying port infrastructure is another challenge facing the maritime sector in Nigeria.
Port infrastructure, as used in this context includes:
Ports, terminals, cargo handling equipment, channels and harbours, warehouses, ports access roads, intermodal transport involving rail and roads interfacing with ships and badges, utilities, information communication technology (ICT), deep seaport and scanners.
The current bad state of port access roads, especially to the Lagos Port Complex, Apapa and Tin Can Island Port, is rather unsettling. One question begging for answer is: Should the one mode of transport not give way to the wisdom in intermodalism (multiple modes of transportation)?
Maritime Infrastructure Deficit
Inadequate development of seaports as well as the inefficient supportive logistics infrastructure is another challenge facing the maritime industry in Nigeria. The need to increase vessel size present challenges, both for ports and shipping companies. The need to accommodate greater numbers of larger vessels does create challenges for ports where the capacity to accept such ships is conspicuously non-existent.
Loss of Revenue
Our research reveals that Nigeria is currently losing N15b or $101m annually and even more disturbing is that Nigerian ownership accounts for less than 8 percent, which is far less percentage contemplated in extant legislative enactments.
Inefficiencies and sharp practices
The Chinese And The Philippines Examples
A lot can be learnt from the Philippines by the Nigerian maritime industry which has achieved the reputation of a global supplier of sea farers, creating millions of jobs for her citizen and boosting foreign exchange earnings. The time is now to not grow indigenous ship ownership, but also increase funding crucial to boosting the sector.
Increased Investment in Port Infrastructure
There is need for increased and sustained investments in port infrastructure. Port facilities should be upgraded and modernized for quick discharge of consignments. Port infrastructure, as used here, entails all facilities that support and enhance the maritime transport sector, making it efficient, productive, safe and environmentally friendly, with a view to making the sector achieve its fundamental objectives.
Given how capitally intensive the maritime sector is, there is need for increased financing by the private sector. Intervention funds, through the Central Bank of Nigeria and disbursement of the Cabotage Vessels Financing Fund can be made accessible to concerned industry players.
Increased Maritime Infrastructure
Efficiency, Transparency and Global Best Practices
Maritime training institutions in the country will largely benefit from improved and modern simulators and equipment of professionals and employees engaged in the maritime industry. This will go a long in not only providing the human capital needed for the efficient running of the maritime industry but also provide opportunity. PPP will come in readily in this instance in providing the means for building the capacity of maritime professionals needed to take the country’s maritime industry to the desired height.
Increased Agitation for Disbursement of the Cabotage Vessel Finance Fund
There is need for private sector participants in the maritime industry to put pressure on the government to disburse the Cabotage Vessel Finance Fund (CVFF) provided for in the Cabotage Act. The disbursement of the CVFF is long overdue. Disbursement of the CVFF will definitely go a long way in providing succor to ship owners who have acquired huge debt over the years and at the brink of insolvency (occasioned by poor ship finance).
Marine Tourism: Tourism demand is increasing worldwide, and there are opportunities for investors to exploit Nigeria‘s coastal and maritime resorts for revenue generation and job creation. These opportunities include the creation of a marine mall, cruise ships and the fostering of marine sports. Driving the growth of marine tourism through increased investment can be a huge area of opportunity for private investors.
Role Of Project Finance
We recommend the use of project finance through private sector involvement in financing infrastructure development for the maritime industry.
In a Project Finance context, three steps are involved in opening an infrastructure sector to private participation:
a) creating the framework for private participation;
b) defining the project(s) to be tendered; and
c) conducting bidding process(es).
The process occurs in three distinct phases:
(a) identifying projects that may he commercially attractive based on own studies;
(b) preparing an unsolicited bid, as and if permitted by the framework; and/or
(c) participating in a formal competitive bidding.
Throughout the three-step process defined above, the sponsor(s) has the following key issues to resolve:
Alternatively, an unsolicited proposal can be submitted by an interested private entity.
Technical Feasibility Studies
There is need for technical feasibility studies often conducted by in-house staff of the sponsor(s), hiring technical consultants and/or conducting informal discussions with a handful of short-listed turnkey engineering, procurement and construction (EPC) contractors. The objective of a technical feasibility study is to consider the appropriateness of the facility's design relative to the needs to be served; capacity and phasing; cost under current or projected market conditions at one or more sites; construction schedule; and price, availability and transportation requirements of major inputs.