NIMASA’s $1bn Floating Dockyard Project

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Eromosele Abiodun posits that the acquisition of a modular floating dock yard by Nigerian Maritime Administration and Safety is a huge opportunity for ship dry docking, repairs and others which will save the federal government $1 billion in 10 years

To ensure seaworthiness of the ships, most ships are required to be dry docked twice every five years. Some ships may have dry docking postponed or the intermediate dry docking waived by performing an underwater Inspection in Lieu of Dry docking (UWILD).

Dry docking a ship is a complex task. The ship weighs a lot and the weight must be spread evenly to the dock. While a ship is floating the pressure holding the ship afloat is spread throughout the entire underwater hull. While in dry dock the load is spread among wood blocks. There are also interferences such as transducers and irregularities such as flare at the bow. In order to dry dock the ship the dock master must be aware of the characteristics of the ship’s bottom and its weight distribution.

Therefore ships carry a docking plan which specifies where the blocks are to be placed, the angle of the side blocks, and the height of the side blocks. It also lists where transducers, sea chests, tail shafts, and other items are located.

With an average of 5,000 ships calling at the Nigerian ports annually, 400 active coastal vessels and several fishing trawlers, the demand for ship repair and maintenance facilities can only be on the rise.

Before now, the dry docking of vessels operating in Nigeria was done outside the country with huge implications in terms of foreign exchange costs running into several millions of dollars yearly.

As a matter of fact, Nigeria was losing about N16.5 billion ($100 million) annually to neihgbouring countries through the movement of its vessels dry docking to meet the International Maritime Organisations (IMO) requirement.
Experts believe there is a huge investment opportunity for ship repair and ship building in the country presently that is not being exploited. THISDAY findings revealed that it cost between N45 million and N75 million ($300,000 and $500,000) to dry dock a vessel and that approximately 200 to 300 vessels go to Ghana, Duala and Robins Bay for dry dock annually.

“Each dry dock cost the ship owner between $300 to half a million dollars each trip. If you can dry docks a vessel at $300,000 for dry docking for 25 days and if you have two docks a month that is $600,000 every month. You can imagine having over 3,000 vessels (in Nigeria); they have to go for dry dock. It is a requirement by the IMO standard that a vessel goes for dry dock once every three years, and if you dock 200 to 300 vessels once every year at $300,000 per dock, you can then imagine how much it will come to,” maritime expert Lucky Amiwero said.

Saving Cost
In a bid to put an end to the huge cost of dry docking outside the country, NIMASA recently acquired a modular floating dockyard. With this facility in place, the agency will save the federal government in excess of $100 million annually and about $1 billion in 10 years.

The plan to embark on the project predates the current Director General of NIMASA, Dr Dakuku Peterside. Before his appointment as NIMASA boss, the previous management had already established a business case for a floating dry dock where owners of ship can dry dock their vessels from time to time.

In a chat with THISDAY in Lagos last week, Peterside stated that the multimillion dollar floating dockyard owned by NIMASA, will save the country millions of dollars in capital flight once operational noting that efforts are being made to create enabling environment for the growth of indigenous participation in shipping.

He said that the facility which would be operated on a Public Private Partnership model will be located at a facility of the Nigerian Navy.

The NIMASA boss said that the Floating Dockyard would commence operations immediately after its inauguration by President Muhammadu Buhari.

He added that when fully operational, Nigerian Ship owners and their foreign counterparts would no longer need to take their vessels outside the country for dry docking.

According to him, “Nigeria loses up to $100 million annually simply because when our ship owners need to dry dock their vessels, they mostly take them to neighbouring countries like Ghana and Cameroun thus spending avoidable foreign exchange. When this facility is fully operational it has the capacity to dry dock any vessel in country and save the much-needed foreign exchange.”

Speaking further Peterside noted that the facility would be operated in conjunction with the builders as technical partners. He also assured that it will create thousands of jobs for teeming Nigerian youths as well as provide training opportunities for seafarers, adding that the NIMASA floating dockyard would also be available as a training facility for the students of the Nigerian Maritime University, Okerenkoko and other maritime institutions in the Country.

“We are planning to ensure that the permanent location of this facility would benefit our students for training and we have also engaged the builders to manage the facility for a one-year period at a Naval facility” while further arrangements are being worked out”, he said.

The $1 billion, he said, would be a direct saving from the dry docking of vessels operating in Nigeria, which he stated are mostly done outside the country at the moment.

The decision to embark on the project, he further explained, was based on the realisation at that time that “85 per cent or 90 per cent of those who own vessels dry-dock their vessels outside the country, “and we felt it encourages capital flight and that it doesn’t support the industry. So, it was at that point that we got into a relationship with a firm in Netherland to build a floating dry dock in the Netherland and in Romania. That project is on; when we joined the NIMASA team, we resolved to continue and follow it to its logical completion.”

Decision on Location
The DG said that another issue around the floating dry dock was location, adding that the agency had resolved to make the decision on location business related.
As expected, the location of the facility is beginning to generate political interest. But Peterside stressed that, “When operational, the dry dock location will be a business decision and many factors will be considered before we decide where it will be located. Studies are going on right now on where best it will be located.”

This was just as he emphasised that, “it is absolutely not true that we have cancelled that project; that project is on. It is progressing at a satisfactory pace and we believe that it will be completed this year.”
Stakeholders in the marine transport sector are optimistic that the floating dockyard would open new windows of opportunity in the maritime industry in West Africa.

Cost Insurance and Freight
In addition to the dry dock project, Peterside has introduced other innovative policies that are intended to enhance the viability of the agency. One of these is the Cost Insurance and Freight (CIF) to enable Nigerians lift the country’s crude oil

According to him, “One major factor that edges Nigerians out in the ‘affreightment’ of Nigerian cargo, especially crude oil lifting, is the prevalent Free On Board (FOB) trade term especially in a situation where Nigeria as a nation and Nigerian businessmen have very minimal control in the distribution of its crude oil with respect to carriage, insurance and other ancillary services.

Under a CIF arrangement, NIMASA is planning to effect a far-reaching change in favour of indigenous operators. To this extent, therefore, NIMASA is joining forces with well-meaning Nigerians to move for the change of trade term from Free on Board (FOB) to CIF to reasonably involve our indigenous operators in Nigerian cargo affreightment.
“The advantages of this policy, when implemented, is that it will not only give distribution control of the country’s hydrocarbon resources to Nigerians, but also enable the agency to empower Nigerians through cargo lifting and meaningful participation in the entire value chain of export goods. CIF as a policy thrust will enable Nigerians participate in cargo lifting, cargo insurance, create job for our teeming cadets and other ancillary economic and security derivatives,” he said.

Peterside added: “The plans are on top gear to reach out to relevant agencies of government and very soon, we shall do an executive memorandum to the Federal Executive Council (FEC) for consideration and approval.”
Already the agency has designed and embarked on a programme that will empower indigenous ship owners.

Elaborating on this policy, Peterside said: “Conscious of our mandate to promote the development of indigenous commercial shipping in international and coastal shipping trade, we are poised, more than ever, to achieving this obligation. We understand it requires a great deal of capacity building, especially human, infrastructural and tonnage capacities of our indigenous shipping operators.

“We have reviewed the participation of Nigerians in the industry and are not satisfied with the outcome. The summary of our findings reveals a very low indigenous participation in international commercial shipping trade in Nigeria. As far-fetched as it sounds, there are no Nigerian Flagged Ocean-going vessels known to us.

“In the course of our review also, we observed the salience of cargo availability to the commercial fortunes of a ship owner/operator and to our national tonnage growth. We noted also that commercial shipping will less likely develop without conscious, proactive, well -structured and monitored government intervention as is done in other sectors,” he stated.

Cargo Availability
The NIMASA chief executive added that one area of such intervention is cargo availability.
Developed maritime nations, he said, have at one time or the other consciously supported, and are still supporting their indigenous operators in building their commercial shipping capacities.

“Recently, a bipartisan bill was brought before the United States Congress aimed at strengthening indigenous participation in shipping. The bill seeks to allow US flagged vessels carry up to 30 per cent of the U.S LNG as a matter of both economic importance and security concerns. On our part, plans are in top gear to use our existing enabling laws to make public cargo available for indigenous shipping operators in order to improve their commercial fortunes and competitive advantage over their well-capitalised and established foreign counterparts. We are out to enforce Sections 36 and 37 of the NIMASA Act 2007 towards building indigenous capacities in shipping.

“This is already at executive management level and we are determined to take it to the highest level of bureaucratic, legislative and executive engagements necessary. We shall also involve our esteemed stakeholders at the right time because we understand they have roles to play in the entire process,” Peterside said.