Nigeria's Blue Economy: From Thought To Action

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Thursday, October 17, 2019   / 04:01PM  /  By Proshare Economy   / Header Image Credit:  Proshare EcoGraphics

 

Being the transcribed text of a pre-panel overview presentation by Olufemi Awoyemi, Founder of Proshare at the NECCIpr roundtable themed "Awakening the Blue Giant: Catalyzing The Growth of Nigeria's Maritime Economy Through Public Relations", on Thursday, October 17, 2019 at the Four Points Hotel, Victoria Island, Lagos Nigeria.

 

 

What is a 'Marine' or 'Blue' Economy?

 

The blue or marine economy is the ecosystem of economic activities centred on trade and actions around large bodies of water ranging from rivers to oceans, which are managed in a way as to ensure environmental sustainability. The economy extends beyond ports and terminals to fishing, waste management, hospitality (beachside hotels and bars), Power (offshore wind and tidal energy) and transportation (ships, barges, rigs and other floating vessels).

 

According to the World Bank, the Blue Economy is, "sustainable use of ocean resources for economic growth, improved livelihoods, and jobs while preserving the health of ocean ecosystem." While the European Union, on the other hand, defines it as, "All economic activities related to oceans, seas and coasts".

 

Over the last decade, the blue economy has taken on greater importance in the context of an increasingly resource constrained world and a climate-threatened global ecosystem. According  to Michael Jones of The Maritime Alliance, "There is increasing interest globally in the Blue Economy and BlueTech as humans rediscover the importance of the ocean...Problems like ocean warming, plastic gyres and ocean rise have us looking at the ocean again since it is our past and our future as we address human needs for food, water, energy, medicine and coastal real estate."

 

 

The BLUE ECOSYSTEM:

The detailed blue economic ecosystem is depicted in Illustration 1 below:

 

 

Illustration 1: The Blue Economy Ecosystem

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The primary segments of the Blue Economy ecosystem include the following:

1.      Maritime Transportation

2.     Fisheries

3.     Alternative wind and coastal wave power sources (Renewable energy)

4.     Tourism

5.     Climate Change (carbon sink)

6.     Waste Management

 

 

Comparative African Blue Economy

 

The territorial waters and exclusive economic zones (EEZs) within African Coastal States (about 39 out of Africa's 54 countries are either coastal states or islands) are extensive, measuring some 13 million km2, and the continental shelves extend over a total area of 6.5 million km2. With an area of approximately 30 million km2, Africa is the second largest Continent on the planet, equal to two-thirds the size of Asia, and perhaps three times the size of Europe.

 

The continent is surrounded by oceanic expanses (Atlantic Ocean and Indian Ocean), and by two semi-enclosed seas: the Mediterranean Sea and the Red Sea). Africa is also home to the second-largest and longest rivers and aquatic areas in the world (the Nile and the Congo). There are 63 international river basins covering approximately 64 per cent of the continent's land area. The African Great Lakes constitute 27 per cent of surface freshwater, the largest proportion in the world.

 

The Blue Economy has the potential to create both economic growth and development.  The added African wealth that can be generated from the ocean is conservatively valued at US$ 4 trillion, which is equivalent to the GDP of countries in East Asia and the Pacific in 2017 with estimated goods and services of $2.5 trillion annually. If, collectively, the African oceans were a country, they would constitute the eighth largest economy in the world just after India and perhaps just ahead of Italy.

 

Nevertheless Africa has a long way to go in properly harnessing the economic power of its marine and maritime economy as this shows up in the relative inefficiency in its port activities which tend to show slow throughput processing times leading to long cargo turnover periods and lower potential incomes that would result from faster port processing (see table1 below).

 

Table 1: Performance Indicators of Ports In Eastern and Southern Africa

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Source: African Development Bank (AfDB) Report 2017

 

 

The PESTEL

 

Nigeria's Blue Economy has been pounded by what analysts describe as PESTEL. The problem facing a sustainable Blue Economy in Nigeria centres on six key strategic difficulties that relate to the following:

 

  • Political: The lack of control by coastal states of their natural water resources and coast lines has resulted in an inefficient management of country's waterways mainly located in the South West, South South and South East of the country. Nigeria's South hosts the country's Oil and Gas resources, international waterways and littoral ports. The natural geography and geology of the country which places these resources in one part of the nation creates a major point of political conflict with the North. An indication of this conflict is the ongoing litigations between the Lagos State Inland Waterways and the Federal Inland Waterways Services over control of waterway revenues in Lagos State. The problem over who controls inland waterways revenue has been a long-drawn battle since the early 2000's and shows the innate conflict between federal and state governments over resource control. The lack of broad political consensus on the nature of Nigeria's fiscal federalism has deep economic implications, including making the blue economy a fragile concept


Action:

o   The fiscal arrangement in Nigeria needs to be revisited in such a way as to allow states to have greater autonomy over their local marine resources, this would enable littoral states generate the private capital investments needed to improve the quality of maritime ecosystems and expand blue local economies in sustainable manners.

o   Greater fiscal autonomy for littoral states may appear radical, but if the country is to achieve greater growth in the blue economy, centralization of policy and investment at the federal level cannot bring about a fast-paced improvement in the maritime sector. The sector must witness greater privatization of infrastructure and deeper localization of economic activities. Littoral states marine fronts should be treated as the equivalent of crude oil and maritime states should be entitled to derivation proceeds from revenues at the ports. This would bolster littoral state revenue and serve as an incentive for such states to improve infrastructure leading to the ports/terminals since there would have been higher vested economic interest by way of increased recurrent revenues.  

o   The principles applied to the blue economy would also be equitably applied to the green economy, where agricultural output would also be given similar treatment. The approach proposed towards developing the blue economy would mean that their may be need for a constitutional review and this would require political buy in from all parts of the country.  

 


  • Economic: A blue economy would require competitive and efficient use of coastline resources. Nigerian ports and maritime facilities are currently costlier than neighbouring countries such as Port Novo in Benin Republic or Tema Port in Ghana. The relative high cost of Nigerian ports has reduced port activities; this, in turn, has reduced potential employment and decreased tax revenues that could be achieved in a less expensive and more efficient administrative environment. The high explicit and implicit cost of using Nigerian ports has stifled growth of maritime activities and held down the expansion of Nigerian coastal economies. The shrinking of port patronage is evident from the reduction in ships that have berthed in Nigeria between 2012 and 2017. Service boat numbers have fallen from 21,726 vessels in 2012 to 12,243 in 2017, a reduction of 271%. Ocean going ships fell from 6,369 in 2013 to 4,175 in 2017, a drop of 52.6% (see chart 1 and 2 below).

 


Chart 1: Number of Ocean-Going Vessels Berthed in Nigeria 2012-2017

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Source: National Bureau of Statistics (NBS)

 

 

Chart 2: Number of Service Boats Moored in Nigeria 2012-2017

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Source: National Bureau of Statistics (NBS)


 

Total transport revenue from maritime activities in the last 3 years has been roughly equivalent to the average size of the Nigerian annual budget. Import and Export values of maritime shipping transactions have been around N8trn in 2018 and 2019, which were increases from around N6trn in Q4 2017 and 7trn in Q1 2018. In Q1 and Q2 2019 the value of shipping transportation for both import and export was N8.5trn, while export alone was N4.5trn (see chart 3 and table 2 below).

 


Chart 3: Maritime Transportation Import/Export 2012-2017

 

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Source: National Bureau of Statistics (NBS)

 

 

Table 2: Total Quarterly Marine Transportation Value 2017-2019 (N'bn)

Imports

Exports

Total

Q4 2017

2,112,311.51

3,896,925.37

6,009,236.88

Q1 2018

2,518,261.14

4,672,358.86

7,190,620.00

Q2 2018

2,106,689.90

4,426,677.43

6,533,367.33

Q3 2018

4,172,348.71

4,824,078.80

8,996,427.51

Q4 2018

3,582,296.2

4,989,624.09

8,571,920.33

Q1 2019

3,703,711.7

4,494,656.18

8,198,367.90

Q2 2019

4,007,394.2

4,551,837.49

8,559,231.69

Source: National Bureau of Statistics (NBS)


  • Social: High incidence of piracy, smuggling, human trafficking and drug peddling makes Nigeria's maritime business a precarious entrepreneurial activity. For fear of their lives, several port security officials simply allow illegal activities fester as they take a pre-arranged cut of the proceeds. Many officers that have been known to resist port smuggling or trafficking bandits have ended at the bottom of the Atlantic Ocean. They high presence or influence of wharf gangs has created a marine 'inverse' ecosystem that is socially precarious involving illegal guns, drugs, prostitution, and gambling. The rough social life at the marines has infiltered surrounding villages or communities with young girls precociously introduced to rough social conditions and young boys recruited into a lifestyle outside the law. The consequences of the anti-social subculture have been dire in places like Ajegunle, Apapa and Ijora in Lagos State, Abalama, Tombia, Degema and Buguma in Rivers State, Creek Town and Calabar in Cross River State. Similar challenges exist in riverine communities of Ondo, Ogun, Bayelsa, and Ebonyi States.

 

The poor social conditions of maritime communities reduce communal productivity and worsens the problems of education, social aspiration and entrepreneurship reward.


Actions:

    • Improve the physical condition of communities around the Ports
    • Compel port operators to contribute to a community trust fund by way of a community charge on port activities. Part of the fund would go into technical training schools targeted at port-related activities
    • Maintain port/terminal community relations offices
    • Locate maritime training schools in close proximity to port locations
    • Commence port sustainability programmes which would include supporting clean port communities and "clear waters" programmes. Port ecology should be just as important as port profitability.


  • Technology: Technology adoption is a critical aspect of the evolving blue economy, from stevedoring to cargo handling and inspection, the use of machines has become a compelling necessity to remove the obvious corruption that occurs with multi-point human interface in shipping operations. The digitization of standard operating procedures (SOPs) and use of electronic monitoring and inspection technology has gone a long way in improving port turnaround time and scaled down the levels of corruption that result from high levels of human discretion. Nigerian ports are still majorly inefficient and corruption prone as a result of low level of technology application in ship processing. A recent survey by the Maritime Anti-Corruption Network (MACN) in collaboration with the Convention on Business Integrity (CBi) discovered that although most port users knew the SOPs that applied to port activities; they simply circumvented them to provide opportunities for negotiated expedition of port processing. The result has been a tendency to prefer human engagement that allows for operational opaqueness as a tradeoff for transparency that could be relatively cheaper in terms of time spent on activities, and better in terms of service quality in respect of diligence.


Actions:

    • Adopt increased technology to reduce human intervention
    • SOPs can be circulated to mail addresses of captains and crew of berthing ships.
    • Surveillance of Personnel and cargo by way of multiple point CCTV Cameras
    • Use of cargo scanners as first line inspection method while human intervention should take place only when digital red flags are raised or sniffer dogs initiate further investigation
    • Digital register of all port officials updated daily


  • Environment: The port environment in Nigeria is poor and nurtures a culture of weak morals and perverse hygiene. Port infrastructures are old and badly maintained while marine shorelines are highly polluted from industrial effluence and waste products habitually thrown into the dock waters by port users and refuse disposal vendors. The pollution of the ports marine water creates challenges for environmental sustainability.  

Actions:      

Water quality at the ports/terminals must be routinely tested to measure pollution levels

o   Environmental agency should regularly monitor compliance with health codes at the wharfs

o   Port ecosystem review needs to be conducted and a metrics developed for assessing the quality of port environments. The environmental status reports would be used to shape action on remediation in every port and terminal.

 

  • Legal: The laws and procedures guiding maritime services in Nigeria are comprehensive and fairly robust, the problem is not with written regulation but enforcement. The punitive sanctions and positive incentives that would encourage better port behavior have been found to be ineffective, mainly because port officials find the economic rewards of violating SOPs more compelling than the likelihood of sanctions for infractions. The results of slim risks of punishment for bad conduct leads to higher port charges (with a large unofficial component), slower throughput time, and deadweight loss resulting from both service time delay and service quality reduction (see economic supply and demand illustration 1 below showing the deadweight consequences of slower service delivery and higher port cost charges). 

 


Illustration 2: The Economic Burden of Port Inefficiency and Corruption

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Action:

  • SOPs must be rigorously enforced
  • SOP enforcement should be digitized and codified in such a manner that enforcement will involve minimal human intervention. The intervention would involve CCTV Capture technology, scanners, check-in, check-out movement monitors and digital activity log books similar to those that operate in factories.
  • At a broader national level constitutional provisions regarding maritime activity need to be revised to allow greater state involvement in maritime management and investment.
  • Private sector engagement in port management needs to be expanded and public private partnerships (PPPs) need to be adopted as standard default models for port administration. The laws should be configured in a manner that maritime assets can be securitized to improve fiscal liquidity on the part of the government while efficiency would be attained through private management of port/terminal infrastructure, this sort of framework would support social, economic and environmental sustainability (see illustration 3 below).

 


Illustration 3: Desirable Blue Economy Framework

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Source: Africa's Blue Economy: A Policy Handbook, United Nations Economic Commission for Africa

 

 

The Blueish Colour of Littoral State Economies

 

Littoral states (that provide buffer to 8,000kilometers of navigable inland and coastal channels) do not appear to benefit directly from their supposedly 'privileged' maritime status apart from derivation revenues received from oil exports by oil producing states along Nigeria's Gulf of Guinea.

 

The revenues that they receive come mainly from onshore oil wells as offshore wells are considered to belong exclusively to the federal government. Nevertheless, as a proportion of national GDP, littoral states have seen a major increase since the decline from 21.87% in 2013 to 18.75% in 2014. The contributions of these states (minus Lagos State) further declined in 2015 to 17.92% before rising to 18.75% in 2016 and 56.08% in 2017 (see chart 4 below).


 

Chart 4: Littoral States Collective GDP/ National GDP (%)

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Source: National Bureau of Statistics (NBS)

 

The contribution to GDP between Oil and Non-oil activities is clear in a breakdown of each state's contribution to GDP by percentage economic activity (see chart 5 below).

 

Chart 5: Share of Nigerian Littoral States In GDP (%), Excluding Lagos State

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Source: National Bureau of Statistics (NBS), *the figures for littoral states do not include Lagos State as Lagos State data is currently unavailable from the statistics bureau

 

Littoral states have been prominent in their industrial contribution to GDP from 56.92% in 2013 to 61.34% in 2014, but this dropped to 43.02% in 2015 at the beginning of the country's first recession in 20 years, by 2016 the industrial output contribution of littoral states dropped to 39.41% and rose steeply to 76.5% in 2017 at the height of the recovery. The service sector has also improved as a proportion of GDP since the 2015 recession rising from 7.02% in 2015 to 9.94% in 2016 and 47.63% in 2017. In the last 5 years littoral states have seen the proportion of maritime activities such as fishing, water transportation and waste management rise as a proportion of their state GDP (see table 3 below).

 

 

Table 3:  Maritime Sector as % of Littoral State GDP

 

 

 

 

 

 

2013

2014

2015

2016

2017

Akwa Ibom

16.59%

15.12%

                                                  

                 24.65%

     26.23%

35.03%

Bayelsa

6.98%

7.67%

                 11.38%

12.15%

19.59%

Cross River

29.81%

55.98%

                  51.48%

55.66%

43.75%

Delta

11.06%

14.58%

                  17.58%

19.12%

13.02%

Ogun

32.75%

32.04%

                  32.72%

31.86%

75.23%

Rivers

10.65%

12.75%

                  16.27%

15.67%

22.77%

Ondo

 38.49%

37.93%

                  39.91%

43.71%

80.17%

Source: National Bureau of Statistics (NBS)

 


Nigeria's maritime architecture is weak, leading to the sector performing far below its revenue-generating potential aside oil export and import. A few numbers underscore the problem:

  • A 2017/2018 study by the Nigerian Ports Authority showed that Nigeria loses $7bn annually in revenue due to poor ports infrastructure.
  • To counterbalance this, Nigeria generated $840m in revenue in 2017. It also created 10,000 direct new jobs. The ports also recorded increasing volume of 1.3m shipment of non-oil products. These developments led to a 2.1% increase in GDP.
  • Recent studies by other international maritime agencies seem to suggest that a 10% increase in port activities could lead to a 6% to 20% increase in national GDP.

 

In other words, the "Blue Economy" has an enormous potential of dragging the Nigerian economy out of its slow-moving GDP growth rate (GDP growth for Q2 2019 was 1.94% down from 2.38% in Q4 2018). But a lot will depend on understanding the Blue ecosystem; the synergies, the strategic imperatives and the overarching vision to unleashing maritime sector growth.

 

Unfortunately, most of Nigeria's maritime activities, especially ports and terminals, have been lumped under an amorphous ministry called transportation making it difficult to isolate the contribution and cost requirements of the sector; this has resulted in poor planning, suboptimal decision making and underperforming sectoral growth.

 

If Nigeria's maritime economy is to take off, the maritime sector needs to be under a separate ministry from transportation (or a dedicated unit in that ministry) and should be shaped by a clearly crafted fiscal plan to grow the sector by at least 10% in annual revenues and maritime activities over a period of 10 years. The plan will involve several public private partnerships (PPPs) and financial arrangements that improve the liquidity of the sector by selling off non-strategic maritime assets of the government to private enterprises or by 'securitizing' these assets for the benefit of the populace while still improving sector liquidity.

 

 

Conclusion

 

Nigeria's Blue Economy could help the country diversify and generate far larger revenues than currently exists, but this will require a clear delineation of maritime economic activities across littoral states. It would also need the following:



  • Creation of littoral maritime activity budget lines at both Federal and State levels;
  • Creation of a purpose-led office for Maritime Affairs in/under the Ministry of Transportation, or specifically, make it a direct KPI for the Minister of State;
  • All activities under the Blue Economy must be recorded and brought in a single central data base; and
  • Marine activities such a transportation, fishing, hydro-energy generation, littoral state beachside revenue generation and activities related to waste management and waterway management must be brought into a broad national plan that details the needed set of activities to achieve clear goals, amounts of finance and timelines based on cash flow expectations/needs, and offices/officers responsible for deliverables.

 

The grand potential[s] for Nigeria's maritime or blue economy will not succeed based on hope and grand thoughts, but rather, around a coherent and well thought out plan that compels action, is measured and delivered around specific timelines.

 

The action plan for blue economy growth must be attached to individuals and agencies or offices who will then be held accountable for the failure or success of the various initiatives.

 

Nigeria's blue economy would, if above is adopted, help prepare the country for growth without oil, meaning that a lot of the maritime traffic that currently dominates transport data at the wharfs will be gradually scaled down to include more non-oil export and import numbers for proper decision-making. It is trite knowledge that, for Nigeria to achieve lower oil-sector related shipping as a proportion of total maritime ship movement by tonnage and value, the government must be deliberate and focused.

 

Thank you.

 

 

Download - PowerPoint Presentation Here 

 

Credits

The esteemed research group that worked on and contributed to this paper, was led by Teslim Shitta-Bey (Managing Editor), included Saheed Kiaribe (Director of Research), Norbert Idowu (Research Analyst) Adeolu Green (ecoGraphics) and Habib Bello (Graphics).

 


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References / Acknowledgments

1.      Nigerian Federal Government Budget 2020, October 2019

2.     Breakdown of the 2020 Executive Budget Proposal

3.     Nigeria Federal Government Budget 2019, December 2018

4.     Africa's Blue Economy-Opportunities and Challenges to Bolster Sustainable Development and Socioeconomic Transformation, Issues Paper, United Nations Economic Commission for Africa, November 2018

5.     Opportunity and Growth Diagnostic of Maritime Transportation in The Eastern and Southern Africa, Professor Godius Kahyarara and Deborah Simon, September 2018

6.     Blue Economy: Initiatives in East Asian Seas, Maria Corazon Ebarvia, Project Manager, PEMSEA, August 2018

7.     Nigeria Economic Recovery & Growth Plan 2017-2020 (ERGP), February 2017

8.     Africa's Blue Economy: A Policy Handbook, UNECA, March 2016

9.     Green Economics, An Introduction to Theory, Policy, and Practice, Molly Scott Cato, June 2008

10.  The Maritime Alliance - BlueTech Cluster Alliance (BTCA)

11.   Blue Economy: a sustainable ocean economic paradigm

 


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