Shipping as Catalyst for Economic Growth

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Eromosele Abiodun writes on the need for the implementation of a comprehensive shipping policy in Nigeria

For several years shipping has been recognised as one of the catalysts for socio-economic development. This is because it has since the ancient times been at the forefront of opening up of the world and thus a major driver in of the process of globalisation.
Specifically, container shipping has been both a cause and effect of globalisation. Container shipping is believed to be the world’s first truly global industry.

Container shipping could claim to be the industry which, more than any other, makes it possible for truly global economy to work, it connects countries, markets, business and people, allowing them to buy and sell on a scale not previously possible.
As a matter of fact, it is impossible to imagine world’s trade, and ultimately our lives as consumers, without container shipping. Shipping has led to a phenomenal growth in world merchandise trade, which has consistently grown faster than output.

In 2006, goods loaded at ports worldwide were estimated at 7.42 billion tonnes, up from 5.98 billion tonnes 2000. The value of total world export increased from $6.454 trillion in 2002 to $40.393 trillion in 2005 representing an increase of 64 per cent. However, the reverse seems to be the case in Nigeria. It is on record that no fewer than 90 per cent of shipping companies owned by Nigerians have either completely shut down their operations or struggling to survive.

Contribution to GDP
Despite its importance, the record of contribution of shipping to Nigeria’s gross domestic product (GDP) has always been a matter of conjecture rather than fact. In the recent publications of the National Bureau of Statistics (NBS) shipping is categorised under “other services” and not as a standalone item. Whilst one may be tempted to frown at this practice by the NBS, it is most obvious that the ships that trade the goods into and out of Nigeria, and the freight the ships earn, do not add to the GDP because their revenues all go to the foreigners who own them.

Nigerians at best earn commissions on shipping support services like marine insurance and law, cargo survey, freight forwarding, transportation and warehousing, some of which have their individual headings in the NBS’ GDP computation. Given the volume of oil and gas cargo that Nigeria exports daily, coupled with the regular importation of refined petroleum products chief of which are premium motor spirit (petrol) and automated gas oil (diesel); add to this the volume of non-oil import and export that pass through our seaports, the loss of capital contribution to the economy from the ships that move these cargoes is better imagined than calculated.
With regards to domestic shipping, ownership of tankers and offshore supply vessels (OSVs) is still tilted in favour of foreigners despite implementations of the Coastal and Inland Shipping (Cabotage) Act 2003 and the Local Content Act of 2010 both of which confer on Nigerian citizens the right to building, ownership, management and crewing of vessels that operate within Nigerian territorial waters.

Stakeholders Take Action
In a bid to reverse this trend and make shipping the main stay of the Nigerian economy, the Nigerian Chamber of Shipping (NCS) put together a focus group to work with government and other relevant stakeholders to map out plan and policies to achieve the goal.
Stakeholders in the nation’s maritime sector at the meeting called on the federal government to abolish the tax on full duty paid equipment stressing that the policy is undermining local operators and favours foreign shipping companies.

Speaking on the challenges faced by local operators on behalf of other players, the Chief Executive Officer of Marine Platforms Limited, Mr. Taofik Adegbite said the law was made to stop colonial entities from taking their equipment out of Nigeria arguing that the law is no longer relevant to modern trend.

He said: “Section 8 Schedule 6 of the Customs and Excise Act states that full duty paid equipment cannot be re-exported unless it is meant to go and do repairs. Not sounding to be too ethical, some of us have worked in Ghana, Equatorial Guinea, Togo and the Congo. You have vessels that are of course are multinational in nature, we did the right thing, the equipment are man properly so they can work anywhere, those are foreign exchange earners but you have the customs asking for tariff, which means we have to now go and do service to avoid been taxed.

“And I recon the drafters of the law at the time wanted to stop the colonial masters from taking their equipment out of Nigeria. However, we can see now that it is no longer relevant with modern trend. So you can see that operators and challenged, constrained and locked down by the law unless you lie or have maintenance to do to avoid been taxed. As it is today, if anyone called us from outside Nigeria for work we cannot go because we are constrained by the law?

“How do you make it easy for the operators here, you do a win-win with them, there are instances where they have low utilisation, wherein the tonnage you have for them is so big for what they want to do at the time. What you do is tell them your low periods or go seek assignment elsewhere mindful that an international oil company (IOC) like Eni has a very great opportunity in Ghana. It means Eni Milan will be looking at it is cheaper to move equipment from Nigeria than bring it from Europe.”

He stressed the need for more private sector investment in the shipping industry adding that what is happening now in most maritime countries is that national interest encapsulates the private sector essence, which is profitability.

“If we do not have that nationalist mind-set there will be absolute opportunism and in the Nigerian situation, the country will be raped blind, the rich will be so rich and the poor will be so poor. So we need to start looking at what the private sector can do. We need to start going into the various policies and looking at execution. There are enough of the strategies and policies and emphasis are not laid on execution, “he added.
He stated that the talk around a national shipping line will not work because we are not sufficiently nuanced in some of the things we talk about as a country.

“There was an issue around sufficient cargo for the national shipping line if the cabotage fund were used to develop the shipping line. If you understand the way the container cargo of the Maersk of this world works, you cannot have enough cargo to put on a ship to go out of Nigeria and break even as a business. As long that it cannot happen, the shipping line will die a natural death from start, “he said.

Major revenue earner
On his part, Human rights activist and maritime lawyer, Olisa Agbakoba insisted that the Nigerian maritime industry can generate N7 trillion annually because of its huge potential.
“From the discussion here you can see that the potential is so huge. Ghana is now taking over from Nigeria as the shipping hub, even in the aviation sector, because I work in both sectors, Togo is now the hub for airlines like Emirates. How is it that a country of 180 million people led by a so called government can’t see the potential and yet we talk about poverty? The maritime sector can turn the Nigerian economy around but is the government showing enough interest? The government has to create the enabling environment, “he said.
Agbakoba slammed the federal government for falling to tap into the huge potential of the maritime sector, stressing that if the cabotage law alone is well applied, it will give the Nigerian government over N4trillion annually in revenue.

Agbakoba also stressed for the government to ensure that all government procurements are bound to be carried on Nigerian vessels.
“When I was reading all the various laws relating to cargo movement, let us just take Bonga, when a Nigerian government signs a PSC with an IOC, all they see is a barrel of oil. They don’t see the 34 by-products. I can name four; shipping, insurance, banking and law. That is why we are fighting for Free on Board (FOB) to be scrapped for PIF. IOCs like Shell are so happy with what is currently obtainable. For them the government only sees the price of crude oil. Who carries our crude? No Nigerian company currently carries Nigeria’s crude, which is the problem. We have a procurement policy that does not favour Nigerians. If you just talk about procurement and cargo movement you are looking at about 100 vessels and work. We need to have a trade policy that takes into account economic nationalism. A technically insolvent can only survive like this,” he said.

On what the government can do to harness the sector’s potential, he said the government must first have a high policy of level player.
“The policy level player in government that oversees shipping today is the director of maritime services. It is way too low and he is in a small department, which is why I call for a minister for shipping because you have a minister for aviation. But I also see the point that it might also be too disparate, in that case, we need an integrated Ministry of Transportation, which will include roads, rail, shipping and aviation. It should be just like the United Kingdom where the Secretary of Transportation has four Under Secretaries with each of them running a sector. If maritime is not even mentioned in the government’s Economic Recovery and Growth Plan (ERGP) then you can imagine. The problem with shipping is that it is invincible. It is not like a bank that you will see its building, which is the problem I have discovered in the last 40 years I have been in the maritime sector. People don’t remember it but it is a huge industry.

Resolution
In a communiqué released at the end of the meeting, stakeholders agreed that the target of the colonial administration for the shipping industry in Nigeria was to promote British shipping interest, “and so the Nigerian indigenous shipping industry was ill developed and ill prepared at the time of independence. Even the subsequent attempts at shipping law and policy have not been able to adequately develop the Nigerian indigenous shipping industry.

“Nigerian Costal trade is currently dominated by foreigners and unfortunately this is not being adequately addressed because of the politicisation of government, which has inhibited political will particularly with regards to the development of the shipping industry. The Multiplicity of agencies in maritime industry is creating more problems rather than develop the industry. The first step in the development of the industry is to first dominate domestic trade before venturing into international trade.”