NNPC Counsels FG on National Fleet

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By John Iwori

The Nigerian National Petroleum Corporation (NNPC) has counseled the Federal Government on the proposed national fleet for the shipping sector of the economy.

The corporation said it should avoid the pitfalls of the past in the establishment of the national fleet even as it listed the benefits of the proposed shipping carrier.

It warned that the establishment of a national fleet should not be considered solely as the responsibility of government but should be private sector driven as it is obtainable in other parts of the developed world.

According to the corporation, there was need to be very careful in the choice of the business model. This is very important for the success of the business being proposed by the Federal Government under the auspices of the Federal Ministry of Transportation.

Speaking in Lagos at the at this year annual dinner organised by Ship owners Association of Nigeria (SOAN), the Group Managing Director (GMD) of NNPC, Dr. Maikanti Kacalla Baru said the proposed national fleet for crude oil affreightment would be of huge economic benefits to the country with multiplier effect on the nation’s economy.

Besides earning billions of dollars which will address the nation’s foreign exchange nightmare, the NNPC Chief Executive Officer (CEO) stated that a national fleet programme would also increase capacity building as it will provide a training ground for the nation’s cadets from which Nigeria can earn foreign exchange like other countries.

He argued that that since Nigeria exports her crude oil on FOB basis, a national fleet programme for the country will make the nation to change to CIF basis to buyers.

Under FOB trade terms, the buyers determine who carries the products as against CIF under in which the seller will determine who carries the wet crude.

The transportation of the nation’s crude products has been in the hands of foreigners because those who buy the products nominate their own carriers for the products, most times their own liners.

Baru stated that the establishment of a national fleet for crude oil affreightment helps the country save some of the foreign exchange paid to foreign ship-owners.

His words: “Today, Nigeria exports her crude oil on FOB basis through traders that provide vessels for transportation of the crude oil to buyers. The vessels used are foreign owned. However, with establishment of national fleet for transportation of crude oil, it provides the nation with an opportunity to deliver her crude oil on CIF basis to buyers. This will ensure some value retention within the economy as additional revenue will accrue to the insurance sector. The establishment of a National Fleet for crude oil affreightment helps the country save some of the foreign exchange paid to foreign ship-owners. A total of 771,689,625bbl (197,179, 115mt) of crude oil was lifted from Nigeria in 2015. The current freight rate for 130,000tonnes vessel from West Africa-UKC/med is $7.99/tons. Assuming that the total tonnage of the nation’s crude oil was freighted to UKC/Med using a 130,000 vessel (which could take 950,000bbl), it means that a total of about $6,165,800,104 0 was paid to foreign ship-owners. Some of these monies could have been saved if the nation had a national fleet for crude affreightment.

“The national fleet shall be a training ground for maritime graduates to enable them gain sea-time. According to the Master Mariners Association, since the demise of the Nigerian National Shipping Line, there has been no meaningful manpower development programme in the maritime sector. It is a challenge today for cadets in Nigeria to get sea-time which is one of the parameters for the assessment of Cadets for issuance of certificate of competence (COC). A certificate required by cadet for career growth as seafarer. The establishment of a national fleet shall reduce reliance on foreign ships for transportation of our crude oil. In case of an epidemic or war risk in a country, foreign vessels tend to avoid the country. However, the establishment of a national shipping fleet will help mitigate such challenge”.

Continuing, he said: “The establishment of a national fleet will go a long way to increase activities in the maritime sector. There will be an increase in shipping related support services in the country leading to more employment opportunities. It shall also impact the downstream sector, because there shall be increase in local demand for fuel. The country loses related businesses worth approximately $13.5Bn as a result of non-patronage of local chandlers by shipping lines in the upstream sector. Cumulatively, these and others in dry cargoes, lead to a significant loss of business annually. 

“The establishment of a national fleet should not be considered solely as the responsibility of government. Having a national fleet is about ensuring global presence of a nation’s flagged vessels. The shipping industry in Greece which is the largest in the world is mainly driven by private sector. The Ship Owners Association of Nigeria (SOAN) should thrive to grow the business of its members such that Nigerian flagged vessels are visible globally. The association therefore, should identify what government needs to put in place to make the shipping business of its members extremely successful. There is no gainsaying that establishment of a National Fleet for crude oil affreightment shall be of significant benefit to the nation but success of such an establishment shall depend on the business model employed. A model based on profit and loss rather than an obligatory venture by government to provide to its populace”, he said.

He commended SOAN for the efforts to have a national fleet just as he enjoined everyone involved in the plans to learn from the mistakes of the liquidated NNSL.

Baru also cautioned against establishing a national fleet that will be operated by foreigners, pointing out that this was against the provisions of the Cabotage Act 2003.

“Owning a ship is no mean feat, considering the amount of money involved in maintaining a ship, her crew, insurance, regulatory dues etc. The Association should be applauded for its worthy objectives which are largely aimed at growing the shipping industry in Nigeria. I am sure that you all are aware that our country once had a national fleet under a company called Nigerian Shipping Line (NNSL). One cannot speak therefore on the benefit of establishing a national shipping fleet for crude oil affreightment without referring to NNSL.

“The history of the establishment of a National fleet dates back to 1957 when Nigerian National Shipping Line (NNSL) was established. The company started operation with 3 vessels in 1959 and by 1979 had 24 ocean going vessels in its fleet. Unfortunately, as we all know the company was later sold by government due to dwindling fortunes. There have been recent talks in national dailies that government is planning to establish another national shipping line. Perhaps lessons have been learned on what led to the collapse of the country’s first national shipping line. It is not out of place for a nation to want to own a national fleet country like China and India have state-owned shipping companies that are being run profitably. China COSCO Shipping Corporation Limited which is state owned is among the largest shipping companies in the world today. Also, India’s state owned shipping company (Shipping Corporation of India) has grown from a modest beginning of 19 vessels to a conglomerate with about 80 ships.

“The establishment of a national fleet for crude oil affreightment could be considered a noble idea, considering the possible benefits to the nation. An enabling environment however has to be in place for the operation of a thriving national fleet.

“Only recently, we read in the dailies of the complaint by the Rector of the Maritime Academy of Nigeria at Oron that lack of infrastructure for training is hindering the growth of the institution. The President of Master Mariners Association of Nigeria in a dinner held in 2011complained about the quality of graduates from the school. In his opinion the school has lost focus adding that certificates issued by the institution are not recognized by employers of seafarers.

“This was a school established by government, primarily to produce suitably qualified workforce for the maritime industry in Nigeria. Today, ship owners prefer to employ graduates from Ghana Maritime institute rather than from Oron. I do not think it is our desire to establish a national fleet that shall be operated and managed solely by foreigners which shall be contrary to our cabotage act so it is important therefore as prerequisite to establishment of a national fleet that government revive the ailing institution”