Minister of Transport, Idris Umar

By John Iwori

Not less than 90 per cent of earnings in the shipping sector of the economy go to foreign ship owners, the Executive Vice Chairman and Chief Executive Officer, Sifax Group, Dr. Taiwo Afolabi, has asserted.

He attributed the low involvement of indigenous operators to their lack of capacity to compete with their foreign counterparts.

Afolabi’s disclosure came on the heels of the criticism that has continually trailed the effective implementation of the Coastal and Inland Shipping Act 2003, otherwise known as the Cabotage Act; nine years after its enactment by the Federal Government.

He contended that the problem with the effective implementation of the Act was rooted in the provisions of the four pillars of the act.

The Act was enacted with a specific objective to improve indigenous participation in shipping trade within the country’s waters and ultimately promote coastal shipping in the region. However, it has not attained its set goals as a result of its poor implementation over the years.

The provisions of the Act, which borrow substantially from the Jones Act in the United States of America (USA), have not been implemented to the satisfaction of stakeholders in the maritime sector.

The shipper disclosed this while presenting a paper titled ‘Impact of Cabotage Act On Entrepreneurial Opportunities in a Developing Economy’ at a lecture which took place at Ladoke Akintola University Of Technology (LAUTECH), Ogbomoso, Oyo State.

Afolabi contended that ensuring that not less 50 per cent of inland trade go to indigenous ship owners would go a long way in addressing the ills associated with Cabotage over the years.

His words: “Available statistics indicate that an average annual traffic of about 152 million metric tonnes of both oil and non-oil cargo worth over $5 billion (or N750 billon) in freight earnings is generated in the country.

“Ensuring that the indigenous shipping interests have access to 50 per cent of these earnings may go a long way to solve the problem. Instead, what you have is that over 90 per cent of this income is earned by foreign shipping companies alone.

“Until the issue of cargo rights is addressed, it is my submission that the present controversy raging among the stakeholders concerning the cargo which has become to sound like the proverbial egg and the chicken conundrum may prove diversionary, useless and nauseating.

“The result? Out of about 400 vessels that are owned by indigenous operators over 70 per cent of them are reportedly not engaged allegedly because the vessels are presumed to be unsuitable and  needed to be put up to standard”, Afolabi added.

According to him, “it is clear that the indigenous operators lacked what it takes to compete with their foreign counterparts. Principally, the indigenous ship owners labour under the burdens of lack of the required tonnage capacity (minimum of 500GRT) to immediately take over from their foreign competitors, as many of the indigenous operators are small vessel-owing companies;

“Inadequate manpower as regards the seafarer requirement under the Act; inadequate infrastructural support base reflected in the nation’s low ship building and ship repair capacity; weak financial muscle to solely and easily source the required funds for ship acquisition and other heavy capital-intensive elements associated with shipping; and lack of collaboration among the domestic operators leading to their refusal to come together and put up a unified front during bidding processes for contracts.

“The indigenous shipping companies ignore the practical wisdom that it is better to own 1 per cent of a viable fleet with strong cash flow and balance sheet than to have 100 per cent ownership of a cash-strapped shipping company with obsolete ships”, he added.
The lecture was part of the activities earmarked for LAUTECH Postgraduate School, Department of Transport Management Interactive Discourse Programme 2012.

He argued that the requirements of the law, which stipulate that vessels to be used by indigenous operators must be built and registered in Nigeria and also be wholly owned and manned by Nigerians, are unrealistic.

He noted that the Act, which made provision for waivers, should indigenous operators be unable to meet its requirements, has not been used favourably to better the lots of indigenous operators.

Afolabi however stressed that Cabotage as an idea was good but that its implementation over the years has failed. He contended that if well implemented, the provisions of the Cabotage Act hold immense benefits for Nigeria.

These benefits include establishment of ship building and ship repair yards (dry docking) in Nigeria to build vessels for sale to indigenous shippers; establishment of dredging services for clearing and maintenance of the 3,000 kilometre length of inland waterways under the jurisdiction of the National Inland Waterways Authority (NIWA) as well as maintenance dredging of the channel.