The Yearning for Review of the Cabotage Act


Calls for a thorough review of the Coastal and Inland Shipping Act of 2003 have intensified in recent times, writes John Iwori

Since the enactment of the Coastal and Inland Shipping Act Number 0.5 of 2003, it has not really achieved its objectives. Otherwise known as the Cabotage Act, the law was  enacted in order to  place Nigeria  in a vantage position to derive maximum benefits from the huge potential in the maritime industry.

However, this has not happened. Hence, stakeholders have been calling for a review of the act. Many factors are responsible for the calls but the   main issue is that the Act has gone through several administrations in the last 13 years yet its implementation has not yielded expected dividends.

To some stakeholders in the maritime industry, this should not be allowed to continue in the years ahead if the provisions of the Act  are to  achieve the  set goals and objectives.

The Act borrowed substantially from the provisions of the Jones Act in the United States of America (USA). It emanated from the clamour for a law that would give legal backing to the earnest desire of Nigerians, especially indigenous ship owners to take their destiny in their own hands and occupy the rightful place in the scheme of things in Nigeria’s maritime industry. To attain its set goals and objectives, the Act provides that vessels that vessels in cabotage must not only be owned by Nigerians, crew by Nigerians but also built in Nigeria. The framers of the provisions of the Act envisaged that it is the strict implementation would stop foreign vessels from lifting crude oil or other cargoes within Nigeria’s territorial waters thereby freeing such cargoes for Nigerian ship owners. However, in spite of the strict provisions of the Act, Nigerians, particularly indigenous ship owners, are yet to enjoy the benefits.

Provisions of the Act

The Act in Part 1, (2) defined cabotage as: “The carriage of goods by vessel or any other mode of transport, from one place in Nigeria or above Nigeria waters to any other place in Nigeria or above Nigeria waters, either directly or via a place outside Nigeria and includes the carriage of goods in relation to the exploration, exploitation or transportation of the mineral or non-living natural resources of Nigeria whether in or under Nigerian waters.”
Act explains that cabotage is the “carriage of passengers by vessel from any place in Nigeria situated on lake of river to the same place, or to any other place in Nigeria, either directly or a place outside Nigeria to the same place without any call at any port outside Nigeria or to any other place in Nigeria, other than as an in -transit or emergency call, either directly or via a place outside Nigeria.”

In order to ensure that its successful implementation, the Act also established the Cabotage Vessels Financing Fund (CVFF).The management of the CVFF was put in the hands of Nigeria’s apex maritime regulatory authority, the Nigeria Maritime Administration and Safety Agency (NIMASA). The agency said as at January, 2016, not less than N50 billion has accrued into the cabotage fund. However,  since establishment of the fund no Nigerian ship owner has succeeded in accessing it despite repeated promises by successive helmsmen in the Federal Ministry of Transportation and NIMASA. The authorities had raised the hopes of indigenous ship   through a process that was expected to lead to the release of the funds. In this regard, primary lending institutions (PLIs) comprising   commercial banks, meant to disburse the fund were selected. Yet no disbursement has been made.

Clamour for Review/Losses
The waiting game continues. It is this endless wait for the disbursement of CVFF that has fuelled the  clamour for the review of the Act.  Another factor responsible for the strident calls for the review of the provisions of the Act is the huge losses that Nigerians, especially indigenous ship owners, have been incurring since 2003.

Stakeholders in the maritime industry are unanimous on the huge losses of Nigeria  due to the poor  execution of the Act. Stakeholders agree that  that indigenous ship owners have not fared well in the implementation of cabotage in the country while foreign ship owners are still calling the shots. This is contrary to the provisions of the Act. For instance, the Nigeria Indigenous Ship owners Association (NISA) puts the loss  suffered by indigenous operators at N2 trillion annually. The association, which is the oldest forum for indigenous ship owners, said the loss arose from the huge capital flight to foreign countries that own vessels used to lift about 150 million tonnes of cargoes, especially crude oil and petroleum products such as premium motor spirit (PMS) popularly called petrol.

The President of NISA, Captain Niyi Olabinjo said: “Nigeria is losing N2 trillion annually from shipping business. From fisheries, because we are not protecting our water, other nations are taking our fish away and we are instead importing fish. We are losing about $2 billion that is about N300 billion. Then we are also losing the entire insurance of that amount because if these ships are working, they will be insured. So our insurance companies also lose N16.5 billion. In terms of employment, Nigeria is losing five million jobs”.

According to him, “If you look at the number of ships to be engaged, the total number of ships that called at Nigeria ports for one year is over 4,000, so you can imagine where indigenous ships are working. Then we have our oil. We produce 2.5 million barrels per day. In one month, that gives us about 70 million barrels. Over 20 ships are needed to lift the oil. So, we calculated the number of ships that are required in every sector. We also realised that we need about one million direct employments. But you know that shipping also has auxiliary service providers, including the financial sector, banks and insurance.”

 Nigeria remains an import dependent country, importing virtually everything. On the other hand, Nigeria exports  her crude oil and imports its derivatives. Ironically, Nigerian ship owners are not involved in the export and import of these cargoes.
The former Director General of NIMASA, Mr. Ziakede Patrck Akpobolokemi also expressed regret at the losses incurred by Nigeria as a result of the poor execution of the Act. According to him, Nigeria loses an estimated $3 billion (about N465 billion) annually to foreign seafarers.

“If you add the remuneration of other foreigners in the shipping and logistics chain, we would probably be talking of losing about double this amount. The implication of retaining about $6 billion in the country annually cannot be underestimated. Besides, a lot of foreign income can also be earned from seafarers working on foreign-flagged vessels,”  Akpobolokemi said.

Blocking the Loopholes

Stakeholders have said that going forward, all hands must be on deck to block all the loopholes in the implementation of the Act. This, they said, could be attained if the federal government take the lead in ensuring that it put measures in place to successfully implement the  Act.
According to them,  blocking the loopholes in the Act by way of a review is the best way to go. They, however, insisted that the  government should strive to be the forefront in this regard.
The Chairman of Ship Owners Association of Nigeria (SOAN),  Greg Ogbeifun called for  federal government’s urgent intervention in the nation’s shipping industry.

He hinged his call on the present slide in the price of crude oil in the international market which he argued, had impacted negatively on the indigenous shipping. Ogbeifun, who is the Chairman and Chief Executive Officer of Starzs Investment Limited, noted that indigenous ship owners are fully involved in the oil and gas industry.

Ogbeifun argued that the poor condition of Nigerian shipping industry has been compounded by the continuous low price of crude oil in the international market since last year. While highlighting that a good number of Nigerian shipping companies were presently idle because they were unable to secure contract from the international oil companies (IOCs) as a result of the prevailing economic situation, he  stated that it had become imperative for shipping practitioners to join hands with the government  on how to shift attention to non-oil exports in the months ahead.
According to him, thousands of container vessels are calling and moving out of Nigerian ports. No single Nigerian ship is involved in the shipment of these cargoes.

“The federal government must play a pivotal role by creating opportunities for indigenous ship owners, not only to ensure their survival, but to enable them assist and promote government’s employment dreams, with the government offering the indigenous operators the right of first refusal, in the shipment of non-oil exports,” he said.

 Ogbeifun  added the federal government should see the need to encourage smaller vessels to do trans-shipment of cargo from Lagos ports to Warri, Onne, Port Harcourt and Calabar port as well as other ports in the neighbouring countries, to reduce container trucks on the roads, while reinvigorating the economy.

“We should begin this initiative without delay. It will reduce the number of containers on the road, boost the economy, create jobs and help in the training of cadets. Government agencies, especially the Nigerian Shippers Council need to take the bull by the horn. Government has a critical role to play in this regard.  Government must encourage the stakeholders to drive the sector, by supporting them like Britain. While most ship owners prefer to dry dock their vessels within the confines of the routes they operate, it was a pity that up till now, Nigeria has no facility that can be used by a 30,000 tons ships,” he said.

He stated that as at today, shipbuilding is relatively non-existent in Nigeria. “The building of ships involves enormous amounts of money. At the moment, Nigeria has only one ship building yard located in Onne, Rivers State, while there are other small yards that build barges and fibre glass small personnel-carriers. The big shipyards and dockyards capable of meeting the maintenance needs of heavy docking or for serious general ship repairs are not available here. The country was thoroughly losing the much revenue it ought to attract, as clients are forced to seek for such services elsewhere,” Ogbeifun said.

Timely Intervention

The need for timely intervention in the implementation of the Act cannot be over stressed. The timely intervention is key in the propose amendment of the Act. This is due to the prolong delay associated with the passage of bills in the National Assembly. The federal government needs to immediately present the Act for amendment. It should be doing so at the twilight of its tenure. If the request for its amendment  is not done on time, the present 8th session of the National Assembly might not likely complete it before the expiration of its tenure, thereby prolonging the present challenges associated with the implementation of the Act.

There are fears that if the legislative arm of government does not give the proposed amendment of the Act the desired attention, the primary purpose for which the Act was enacted over a decade ago may not be realised.
This is the basis of the strident calls in some quarters for the speedy review of the Act so that Nigerians, particularly indigenous ship owners can begin to reap the huge benefits in the Act as it is the case in many other maritime nations where Cabotage is already yielding huge gains to their citizenry.