Cabotage Act: NIMASA’s Bold New Steps to Protect Indigenous Operators

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Business/PERSPECTIVE PAGE

BY Vincent Obia

When recently the Nigerian Maritime Administration and Safety Agency (NIMASA) set its face against violators of the coastal and inland shipping law, after a series of engagements with stakeholders, MT Navigator Capricorn, a Liberian-registered Liquefied Petroleum Gas (LPG) vessel, was in plain sight. Caught in the Agency’s crosshairs, MT Navigator Capricorn, which is on lease to the Nigerian Liquefied Natural Gas (NLNG) Limited, and supplies cooking gas to Nigeria’s domestic market, was detained. It was later released. But the decisive statement on the enforcement of the revised guidelines on the implementation of the Cabotage Act was not lost on stakeholders.

The Coastal and Inland Shipping (Cabotage) Act 2003, which came into force in 2004, aims “primarily to reserve the commercial transportation of goods and services within Nigerian coastal and inland waters to vessels flying the Nigerian flag, owned and crewed by Nigerian citizens, and built in Nigeria.”

To facilitate compliance with the provisions of the Act, the Federal Ministry of Transportation, in 2004, issued a set of guidelines to relevant stakeholders. The guidelines proved to be a useful tool for the operation and implementation of the Cabotage Act. But it was not without some hiccups, as NIMASA, the prime maritime regulator, had understandable challenges in the application of the Act. Following interfaces with stakeholders, the revised Guidelines on Implementation of Coastal and Inland Shipping (Cabotage) Act, 2003, was produced to provide further clarification and streamline the Act’s enforcement and monitoring processes.

NIMASA followed up the revised guidelines with the introduction of the Cabotage Compliance Strategy in August last year to facilitate full implementation of the Cabotage Act. But the Agency continued to talk with the vessel operators in the new spirit of camaraderie that has prevailed between the regulator and the operators since the administration of the NIMASA Director-General, Dr. Dakuku Peterside.

However, after several warnings, NIMASA last month commenced a clampdown on vessels that did not conform to the Cabotage Compliance Strategy.

Announcing the commencement of the crackdown, Dakuku made it clear that the Agency would no longer encourage the application of any form of waivers under the Cabotage Act, particularly for oil firm operations. He said such waivers hurt the growth of the maritime sector and the economy, generally.

According to him, “Our laws forbid foreign vessels operating in our territorial waters, save for compliance with the Cabotage Act. There shall be no sacred cow when we commence clampdown on erring vessels. We want to increase the number of Nigerians who participate in the marine aspect of your business and we are working closely with the Nigerian Content Development and Monitoring Board (NCDMB) to have a joint categorisation of vessels operating under the Cabotage Act in order to ensure the full implementation of the Act.”

When NIMASA got down to brass tacks in the resolve to curb erring vessels, MT Navigator Capricorn, a foreign vessel, which began operation in Nigeria last year, became a major culprit. The vessel brings LPG to Lagos for the licensed off takers appointed by NLNG to distribute to the domestic market.

There is no doubt that MT Navigator Capricorn is critical in the supply of cooking gas to the strategic Apapa axis from where more than 80 per cent of LPG supply to Nigeria is distributed to depots. However, in line with the current focus on building local capacity to drive national development, many believe such pivotal position in the domestic gas supply matrix should not be left to foreigners. But beyond the question of patriotic logic, MT Navigator Capricorn’s operation flouts the provisions of theCabotage Act, which NIMASA has a duty to enforce.

The Act requires all foreign vessels operating charter services within the country’s coastal and inland waterways to be crewed by a sizable number of Nigerians. MT Navigator Capricorn was in clear breach of this requirement. And the view in some quarters that the safety standards set by the owners of MTNavigator Capricorn and NLNG are so high that it would be hard to get Nigerians with the requisite expertise to man the vessel does not reduce the weight of that contravention. It flies in the face of NIMASA’s intense effort to build the capacities of Nigerian seafarers through training and placement on ships.

The Agency has trained many graduates under the Nigeria Seafarers Development Programme, with about 1, 600 cadets at various stages of completion of the programme, and 887 of them ready for sea-time training. NIMASA is aggressively dealing with the issue of sea-time training through full sponsorship, in partnership with some international institutions that have access to ocean going training vessels.

About 150 cadets have done their on-board sea time training under the first phase of the NIMASA fully-sponsored sea time training programme, facilitated alongside the Arab Academy of Science, Technology and Marine Transportation in Alexandria, Egypt. Onboard training for another 89 cadets was facilitated by the South Tyneside College, UK, making a total of 239 cadets in the first phase of the programme. The Agency has allocated a number of cadets to local and foreign partners for sea-time training on their ocean going vessels.

The number of Nigerian seafarers placed onboard vessels by half year 2018 was 2,337, representing a 58.9 per cent increase in the number of seafarers employed. This means significant job opportunities and economic empowerment for Nigerians.

Under NIMASA’s Survey, Inspection and Certification Transformation Programme, Certificate of Competency (CoC) examinations have been conducted at the Maritime Academy of Nigeria (MAN), Oron, leading to the issuance of different categories of CoCs to successful candidates. In 2017 alone, NIMASA issued 3,752 certificates to successful seafarers. This represented a 149 per cent increase from the 2016 figures.

NIMASA has made significant progress on the manning aspect of the Cabotage law implementation, with MAN producing the needed middle level manpower for the sector and the Nigeria Seafarers Development Programme (NSDP) supplying the high-end manpower requirements.

Currently, most of the vessels that trade within the country’s coastal waters have at least 70 per cent Nigerian content in terms of manning. In addition, the Agency is collaborating with the Nigerian Content Development and Monitoring Board to do a five-year skills demand programme, which would give the Agency an idea of the skills needed in the industry.

“The bigger picture is that when we identify the gaps, we would begin to train people to take advantage of the gaps, leading to the employment of more Nigerians in the sector,” Dakuku stated recently.

On the other legs of the Cabotage law, ship ownership, registration, and flagging, there has been an increase in the number of wholly Nigerian owned vessels on the Nigerian Cabotage register. The 2018 half year result showed that 125 vessels were registered, representing a 33 per cent increase when compared with the 94 registered in the corresponding period in 2017. Currently, there are more than 200 vessels captured in the Cabotage register.

About 68 per cent of vessels trading within the country’s maritime space are Nigerian flagged.

NIMASA’s policy of encouraging Nigerians to go into joint ventures and joint ownership of vessels on a 60-40 basis has started yielding fruits, as more than 20 new vessels are flying the Nigerian flag under this arrangement, as against one last year. Bareboat charter of vessels has witnessed an increase, while foreign owned vessels on Nigeria’s Cabotage register has witnessed a decline, from about 68 to 55.

In the area of ship building, many of the vessels have not been built in the country because of the challenge of steel and aluminum.

But NIMASA is conducting an audit of shipyards in the country, in conjunction with Nigerian Content Development and Monitoring Board, to see how they can be assisted to build capacity. The ultimate aim is to ensure that most of the vessels in the country are built in Nigeria.

Other attempts by NIMASA to develop local capacity under the cabotage regime include the downward review of freight rates, which has fostered a harmonious relationship between the Agency and the operators and led to increased patronage.

The current administration at NIMASA has also championed a change of Terms of Trade for the affreightment of Nigerian crude oil, from Free on Board (FOB) to Cost Insurance and Freight (CIF). Under FOB trade terms, Nigeria practically has no control over the distribution of its crude oil with respect to carriage, insurance and other ancillary services. But under the CIF arrangement, the tide would change in favour of indigenous operators.

NIMASA is engaging the Nigerian National Petroleum Corporation (NNPC) and other relevant government agencies, and the engagements are yielding good fruit.

The Agency is also engaged in efforts to provide funding for indigenous operators under the cabotage regime. Besides the Cabotage Vessel Financing Fund (CVFF), which is provided for in the Cabotage Act 2003, NIMASA has engaged the Central Bank of Nigeria (CBN) to negotiate a special single digit interest facility for indigenous ship owners to enable them acquire needed assets. The special foreign exchange intervention package would help operators acquire vessels and vessel parts.

NIMASA is also negotiating with the Nigeria Customs Service and the Federal Ministry of Finance to create a special tariff regime for the importation of maritime assets.

“They have agreed with us in principle that is something worth considering,” Dakuku said.

The Dakuku-led regime at NIMASA is in the forefront of advocacy for the creation of a basket of incentives, including tax holidays, to encourage Nigerians to go into the shipping sector.

“An average Nigerian investor needs to be given some incentives for him to compete favourably with his counterparts elsewhere in the world, who access funds at single digit interest rate, some at one per cent rate, and have incentives and some form of support from their home countries,” he said. “If we want our people to compete favourably, we need to also give them equivalent support and that is receiving attention at the highest level of government.”

The incentives – both subsisting and sought – would come to naught if the country’s maritime space is thrown open to foreign competitors, whose capacities far outweigh those of the Nigerian operators. Hence NIMASA’s resolve to fully enforce the cabotage law to protect the local shippers.

But the Agency is mindful of the spirit of the law, which is ultimately to protect and grow the economy as well as enhance the quality of life of the citizens.

“While we will continue to do everything within our powers to enhance the economic wellbeing of Nigerians and avoid disruptions to their economic lives, in line with the spirit of the cabotage law, NIMASA will remain committed to acting against deliberate disobedience to the letters of the law,” Dakuku stated.

– Obia writes from Lagos.