Iheanacho: Appointments to NIMASA Must be De-politicised

10 Apr 2012

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Capt Emmanuel Ihenacho is a Master Mariner, foremost advocate for indigenous shipping, chairman, Genesis Worldwide Shipping and Integrated Oil and Gas Ltd, and was the immediate past Minister of Interior. In this interview with Francis Ugwoke, he opens up on the local shipping industry

In recent times, the international shipping community has expressed serious concern over piracy attacks in the country, to the extent that there are reported plans by European ship owners to impose higher freight charges on imports coming to Nigeria. What is your take on this development?

It is natural for ship owners to be worried if there are piracy attacks in our waters. It is a major challenge for the administration, because as you know the economy is dependent on international trade, and if we then have a situation where pirates are making life unsafe for those who carry export and import goods, then that is a major cause for worry. But on the other hand, I want to say that we have a well founded navy. If the pirates are operating in our waters, it is the responsibility of the navy to put them out of business. So why is it then that this has not happened? It could be very well that materials and resources required are not available. I think priority   should be given to providing the navy with the necessary wherewithal to take on the pirates in order to put them out of business.

I am sure you are also aware that the federal government through NIMASA has engaged a private security organisation to work side by side with the navy to provide security on our waters. How would you react to that?

Well, the first question I would like to ask is: why is it necessary to bring a private security organisation that is not really trained in the business of providing security on a national basis to come and partner with the navy? Is it that there is a deficit in terms of the numbers in the navy or in terms of the equipment they need. Why are we going to bring people that are not specifically qualified to do this job, to partner with the navy? It is a question that needs to be answered. I think that the thing to do is to equip the navy to discharge its constitutional responsibilities. By bringing in a private contractor, I don't see how that will enhance their effectiveness or how that will indeed stop piracy on our waters.

Your company has been in the shipping business for over 20 years, and you have been in the fore front supporting policies that will promote the industry. What is your current assessment of the sector?

You can say that progress has been made in certain areas. Yes, a few years ago, I was in the fore front in my capacity then as the executive secretary of the Nigerian Shipping Companies Association. And there were so many things we fought to realise. We fought to get better participation of Nigerian shipping companies in the international trade that serve Nigeria and trading partners. We specifically fought to have Nigerians supplying shipping services for carrying crude exports. We specifically fought to have the Cabotage Law. There are so many things we fought for that time. In some areas, we have made progress, because you can see that a lot of Nigerians are involved in the provision of shipping services, particularly in the petroleum products industry. But there are also other areas where you expect that progress would have been made, where you don't see that progress. Today, for instance, I was reading a paper where it was said that NIMASA would be organising a cabotage sensitisation forum. We have been sensitising  people for nearly 20 years. We defined what cabotage is. We defined what needs to be done. If 20 years down the line, we are still sensitising people as to what cabotage is, does it project a sign of seriousness? There are so many areas, particularly with respect to cabotage. I wish that we had achieved greater momentum, greater penetration in terms of Nigerians, particularly with regard to movement of coastal tanker vessels and all of those things. We have not really done that, because when you go to some of those jetties here, you still see vessels belonging to foreign owners that have been driven out of business   because of the double hull requirement in Europe, and they come, and they are resident in our waters. But if you ask, how is it then that these people are able to operate here. Then again, it is no longer a secret that you can get waivers if you do what you have to do. So waivers are available and nobody is being refused and nobody is being thrown out. But as a consequence of this, there are a lot of Nigerian ship owners who are not getting the market exposure and market share in shipping service delivery that they are entitled to. So those are some of the problems. NIMASA is central to the realisation of development in the shipping industry, but I will like to say that the organisation has in some way veered away from what it is supposed to be doing, and it is continuing to redefine what it needs to do, and sometimes that does not really meet with informed industry expectations as to what needs to be done for indigenous capacity development.

I want you to be specific in terms of speaking on what NIMASA has to do to be able to achieve indigenous shipping development.

We cannot continue to stand on the sidelines continuously guiding people in NIMASA all the time. You know that I have said these things several times in the past. It is like having champion footballers and instead of appointing those people into your national team, you decide they should sit in the sidelines and you bring in boys scout and ask them to play ball. We must de-politicise the issue of appointments into NIMASA. We really need to have people who are professionals in the business who understand the history of the fight that we have waged to ensure that we develop indigenous shipping capacity optimally. You must bring these people into the scheme of things. No one is criticising the people who are already in NIMASA, there are lots and lots of people who have by virtue of their employment within NIMASA have over the years acquired the necessary experience. But one of the things we need to do is to de-politicise this issue. You must put professionals in the right positions so that the right results can be achieved.

I have noticed that most of the vessels being operated by indigenous shippers are tanker related, specialising only in petroleum product transportation. How do we move forward to container and bulk cargo shipping?

That again is another problem, because if you really listen to any discussion about indigenous capacity in shipping, you think all we do is ship petroleum back and forth. But we do ship dry cargo goods. So there is no reason why we cannot develop a national policy which looks at the size of the trade, looks at the structure of the trade, and therefore sets out specifically to develop a quantum in capacity in relation to the composition of our trade. A few years ago, the national shipping line was there, providing international shipping services for the carriage of dry cargo goods. But unfortunately, that company has now gone under. I see no reason why we cannot have a programme that really will make it possible for indigenous shipping companies which have the capacity to trade internationally to acquire ships  and specifically to trade in that segment other than in petroleum trade. So really, we need to take a holistic view of the structure of our trade, the size of our trade, who and who can provide this cover and then we put a programme in place for developing our capacity. 

How do we achieve this?

That is what NIMASA was set up to do in the beginning. So as I said to you what they were supposed to do and what they are doing today are two very different things. Because NIMASA now seems to be an organisation really that can define where it will go and that is what we are seeing. So it will be very nice for us to have inputs from elsewhere in terms of the direction that they should be taking in the policies they are pursuing.

What is your take on collaboration between the public and private sectors establishing a national carrier?

Well, I really have to think about it when you talk about collaboration between the private and public sectors. The public sector can only make inputs in terms of policies. In terms of actual running of the fleet, it will be best for the vessels to be run under private auspices. If you had a collaboration between the private and public sectors, there will be the likelihood for the public sector to be dominant and hold the controlling shares, and once that is the case, any superior management benefits that could have come as a result of private sector participation, will be lost. All you would have are situations where decisions are reached by fiat, instructions are given by fiat, and if you don't like it, you go. So I really think that the collaboration could come by way of policy inputs. If you recognise how important shipping is to the development of the Nigerian economy, if you recognise that shipping is really highly capital intensive business, you can then make a plea to the government so that the correct policies will be put in place which will select people based on their capacity, and say, let us assist these people so that they can acquire vessels they can trade under the Nigerian flag. That is the right way we can achieve synergy.

It is on record that over the decades, crude oil affreightment has been dominated by foreigners, can you come up with suggestions on how Nigerians can benefit from the trade, looking at the huge economic benefits to the country?

It is funny that we should be talking about this particular issue because this formed the crux of the discussion that I had with someone in London just two days ago. We talked about the issue of Nigeria's participation in lifting our crude oil. But let us broaden the discussion and talk about the issue of how Nigerians can actually add value to the oil that it exports, because if you bring oil and we sell it on an FOB basis, it is absolutely the least profitable way that we can sell our oil - somebody else carries it to the international market, gets to the market, somebody else refines it and once it is refined into petroleum products, somebody else actually brings it back. So all the processes of value addition before it becomes refined that can be used in our cars are done by somebody else. Effectively, what we are doing is actually exporting jobs that could have been done by Nigerians. We export the jobs to those who lift with their ships, we export the refining jobs to those who refine them, and we export the jobs again to those who run the ships that bring the products. So I think we should really develop a policy which allows Nigerian flag vessels that can lift our crude oil. That means selling at cost and freight basis. However, the issue of if Nigerians able to do handle this could come in, because people say Nigerians lack the capacity. Yet for a 50,000 ton ship, a 500,000 ton ship and a 10,000 ton ship, it takes about the same management requirements. So if you can manage a 10,000 ton ship and you have been in the business of managing it for such a long time, you can manage the 500,000 ton ship. The laws that guide the management of shipping are really the same. So there are lots and lots of Nigerians who have garnered experience over the years, and with all due respect, I will say that my company, Genesis, when we first started, did not start as a coastal shipping company. We launched ourselves into international trading. We traded vessels to India, Brazil, all over the world. This means that we have the requisite experience. But if there is the need for indigenous companies to partner with someone who owns a large fleet of tankers, of course, that will be okay too. But the important thing is that it is very easy for a Nigerian company to have a relationship with a foreign tanker owner where these vessels will be flagged Nigerian, where Nigerian actors will be involved both in the management ashore and operation of the vessels in a technical sense. So we are really losing a lot in terms of the jobs that we are not generating for our people and from the transfer of technology, because shipping technology is continuously changing. 

Looking at your experience in government, can one expect that you will champion this move for Nigerians to be involved in crude oil carriage, considering the multiplier effect on the economy?

Well, there is absolutely no way if I had the opportunity to speak out in any forum, that we will not do so. The only thing to recognise is that whatever opinion that will be expressed will be expressed in the informal context because I am no longer in public service. Yes, if we do have the opportunity to really bring the benefits of our experience to bear in terms of defining what we are losing or what we should be doing to develop shipping connections and thereby develop our economy, please be rest assured that we will do it.

Is it not possible for indigenous companies to come together and think of acquiring bigger vessels that can be involved in crude oil transportation?

It has nothing to do with the number of people who come together to buy a vessel, because a lot of people seem to subscribe to that idea, and I think it is very simplistic. The game is not a game of numbers. It is a game of knowledge. So if you have 100 Nigerians who come together to buy a ship who did not know anything about ships, what you would have is a crowd of Nigerians who know absolutely next to nothing about ships. On the other hand, if you have one person whose knowledge of shipping business with the contacts he has developed over time, he can put together human capacity and finance together to get a workable solution to the problems that we face. So it has nothing to do with numbers. It has to do with our attitude. For instance, if you look at the crude oil lifting business, the cooperation of the NNPC is absolutely crucial. If they agree, and they insist on using a Nigerian shipping company flying the Nigerian flag, that is very competent and meets all the technical requirements, it will be a challenge for local companies to meet its criteria. It can be done, it is very simple. 

So in effect, you are saying that bureaucracy is the major problem why indigenous companies have not been lifting crude oil?

Yes, bureaucracy absolutely. We need to get round the issue of bureaucracy

I am aware that both present and past chief executives of NIMASA had made moves to NNPC to get them to cooperate so that Nigerian companies can participate in crude oil lifting, but this has not been possible. Why is NNPC holding out against indigenous shipping companies?

Frankly speaking, I am not aware where the stage of discussion has progressed to. But in times past, my experience was that they were always skeptical, and there was absolutely no reason why they should have been that skeptical, because the business of operating a ship is not rocket science. And there are those of us who have always posited that we have the capacity and the knowledge to bring this thing to bear, and all we needed them to do was to agree by invoking that provision in the sales contract - I am not entirely sure if it is still there - which is that they sell on CIF rather than on a FOB basis. If they agreed, and there was also support from the presidency, we would have made progress.

When you were nominated minister, many industry operators were happy, and they had expected that you were going to be posted to the Ministry of Transport, but this was not to be. We would like to know if you had any regrets that you were not posted to a sector where you have a lot of wealth of experience?

First and foremost, I want to say that I really cherished the opportunity that was created for me to sit in the council as a Minister of the Federal Republic of Nigeria. It is true that I actually expected, and logically so, that may be I would be given a portfolio in transport, that is my professional area. But when it did not happen, I simply took it as one of those things. I did not know much about the Ministry of Interior at the time, but eventually I got to know what it was all about, and I did the best I could. But having said that, it is only natural to say that being in the Ministry of Transport would have created an opportunity for me to hit the ground running, because I was familiar with the problems in the industry, I was familiar with the development challenges that were there, and one was then placed in a better position really to absolutely make progress rapidly. But it did not happen. However, that was not the end of the world. There must have been a reason why that appointment did not take place. But really, I am grateful to God that I had the opportunity to work in the capacity that I did.

Your company few years ago went into the oil and gas business, can you talk about this?

As you know I did say when this interview began that I became a ship owner by virtue of buying a ship that traded internationally, very different from the ships I operate these days. I operated dry cargo vessels, but I bought a number of them, like the Type SD 14 ship which was the general work horse vessel for lifting agricultural products internationally. I traded the vessels to India and Brazil. I traded them all over the place. But eventually, we decided then to change our business focus and went into tanker operations, and we operated a number of tanker ships. Then from lifting petroleum products for people, because we imported and lifted them to their terminals, it did not take too long for us to decide that we could actually integrate forward and build our own terminal, and that is what we did. Since then, we have been there, going forward all the time. But we have not forgotten that we came from a shipping background.

I noticed that many indigenous shipping companies don't like going into dry cargo business, why is it so?

Dry cargo operations, for one, is not the same kettle of fish as wet cargo operations. It requires advanced knowledge of shipping. It requires a higher number of people to manage the administrative requirements of carrying so many small parcels on board the ship. And then the operating pattern for dry cargo vessels is really not the same as wet cargo shipping. For instance, if I went into dry cargo operations, I will likely be operating a container vessel. And the very first thing you will find is that container vessels do not operate as a single fleet. They will have to operate as part of a fleet, and depending on the distance factor, and the round trip, you will then have to look at what the optimal size of the fleet and the configuration is. If I was operating  to Europe for instance, where it takes about 8 weeks to run round, I will now be faced with the challenge of feeding a ship in all the ports that I go once a week. If that is the case, I will have nothing less than eight ships just to start and be successful. So if I had four ships, for instance, then I will have a gap of two weeks before I call at any port and if I had that gap, people who operated tramp shipping will come in and take the cargo. And if I had only two ships, it would even be worse, because then I will be creating a gap in all the ports that I will call at, every month where I will call once. So if I had only one ship, I will call once every month, if I had four ships, I will call once every two weeks, if I had eight ships, I will then call once a week. That is a huge challenge to manage that level of investment, to manage the number of people who will be responsible for doing the paper work in all the ports. So these are the issues. It is much simpler to have a service where you carry once a parcel of cargo and you then have one Bill of Lading and that is all you do. That is why you have so many people involved in the petroleum products business, rather than the dry cargo business.

Can you talk about the double hull policy of the IMO (International Maritime Organisation) and the level of compliance in Nigeria?

I don't know whether Nigerians are complying, but the IMO requires that vessels of a certain size, lifting certain cargoes must have a double hull. And I think the threshold is 5,000 tons and the cargoes are oil related. So some Nigerians I know have acquired double hull vessels, but quite a lot cannot acquire such vessels. But I believe that NIMASA has given a grace period of up till 2015, after which it will no longer be accommodation of single hull vessels. This means that there is enough time for Nigerians to plan, so that they can invest in second hand double hull vessels or try to get new ones that are fully compliant by 2015.

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