The main crux of the Coastal and Inland Shipping (Cabotage) Act 2003 is to reserve the commercial transportation of goods and services within Nigerian coastal and inland waters to vessels flying the Nigerian flag and owned by individuals who have Nigerian citizenship. Part 2, section 3 of the act talks about the restriction of vessels in Domestic Coastal Trade. The implication is that a vessel other than one wholly owned and manned by a Nigerian citizen, built and registered in Nigeria shall not engage in the domestic coastal carriage of cargo and passengers within the coastal territorial inland waters, or any point within the waters of the exclusive economic zone of Nigeria. This provision is particularly exciting when you consider its impact on our territorial integrity and our blue economic competitiveness. Nigeria is a signatory to the African Continental Free Trade Area (AfCFTA) and if charity does not begin at home as regards our blue economy, it leaves much to be desired.
Again, the holy book says money answers all things. So, there is a fund established in the same Coastal and Inland Shipping (Cabotage) Act 2003 for the purpose of developing indigenous ship acquisition capacity. This fund is also to provide financial assistance to indigenous coastal shipping operators. So, the fund will not only afford the indigenous industry players the capacity to acquire ships for their operations, but also serve as a cushion to them in the maintenance and other running costs. Perhaps it’s only a cushion fund because there are ongoing conversations about the insufficiency of the fund and the possibility of increasing this envelope budget.
It is noteworthy, that the fund is administered by the Nigerian Maritime Administration and Safety Agency (NIMASA), subject though, to the approval of the National Assembly from time to time. How exactly, is this fund generated? It is through fees for licence fines, tariffs, and surcharge of 2% of the contract sum performed by vessels involved in coastal trade. As we speak, the cabotage fund has accrued to N160 billion, the dollar component is about $350 million (equivalent to about N160billion at N447/$). Indeed, shipping is a capital intensive business.
It is heartbreaking though, that since contributions into the fund began when the Cabotage Act came into effect in May 2004, we do not know of any actual beneficiaries of the fund yet. Maybe it’s any consolation, that as we speak, we have a new administration in Nigeria and the Tinubu administration may look in this direction. Despite former president Muhammadu Buhari’s approval, the fund was still not disbursed; talk of politicising our economic potential as a nation.
However, if the fund is conscientiously disbursed and efficiently appropriated by the beneficiaries, the maritime sector in Nigeria, and indeed our blue economy will benefit in no small measure. It will empower indigenous ship owners to take control of the nation’s coastal and inland shipping business. Enhancing the Cabotage trade in this manner, will go a long way to reduce the chances of external bombardment on our waterways. This is one primary way to allow our blue economy operators take ownership of our waterways security. We can only continue that the fund gets disbursed as this will give Nigerian shipowners access to cheap funds. Of course, that would enable them to buy new vessels. In turn, our indigenous ship owners can be better enhanced, to fully participate in the coastal and inland shipping business.
Shipping is a business with a long gestation period but Nigerian banks invest in it with the expectation of getting returns in three years. In fact, it takes between 10 and 12 years for shipping investment to mature. This is according to the National Fleet Implementation Committee (NFIC). So, this unrealistic expectation from deposit money banks in Nigeria stifle the growth potential of the cabotage industry, further depleting our nation’s domestic supply of ship owners in the blue economy. This is another challenge the banking regulators can help the industry to mitigate. Place this side by side with the very high interest rate for borrowing in Nigeria today and see What a tall order it is for Nigerians to compete with foreign-owned ships that get loans at a lower percentage. Speak of he equity contribution and the collateral required to get a loan; these come with conditions that can only be likened to a horse passing through the eye of a needle. Again, the banking regulators can come to our aid in this respect.
By sharp contrast, with access to the cabotage fund, not only will existing indigenous shipping business owners thrive and strengthen our blue economy, but new indigenous entrants will also be encouraged to participate and who knows what diversity such inclusion would bring to the industry? Thousands of direct seafaring jobs and hundreds of thousands of indirect jobs in marine insurance, shipyards, and others can be created within a short period, only if Nigerians are encouraged to buy ships. Besides, training and certification of seafarers will be positively impacted as many will get the opportunity for sea-time training onboard seagoing vessels. There is just no telling, the amount of jobs that can be created in the nation’s maritime.
This goes without saying, lack of access to the cabotage fund will lead to capital flight where our potential operators have to go abroad for requisite trainings and certifications. This is a direct link to the perennial challenge of brain drain that we keep battling as a nation in almost all sectors of our economy. $700 million; that’s how much the House of Representatives approved in cabotage vessel finance fund at the twilight of the 9th assembly. Before the approval, the house had urged NIMASA to stop the planned disbursement of the funds to individuals and entities. The house had also directed its committee on local content to make use of an external auditor to audit all the contracts that had entered the cabotage regime. It was to submit a report to the house on its findings. This serves as a reminder of the popular concern in different quarters that it’s important to ensure that only genuine indigenous ship owners are beneficiaries of the fund. Part of the recommendations of the committee is that there is a lack of capacity among indigenous coastal operators in Nigeria. As such, the NNPCL continues to award contracts to foreign shipping companies without recourse to the Cabotage and Nigerian Oil and Gas Industry Content Development (NOGICD) Act. This contravention continues because of inadequate capacity among domestic coastal operators in Nigeria. Indigenous shipping companies must continuously build capacity to execute the terms required of them.
Furthermore, the fund will enable Nigerians to own different kinds of ships including general cargo ships, tanker vessels, roll-on roll-off vessels, barges, offshore supply vessels, passenger/crew boats, and tug boats. This will facilitate bringing in imports and taking out exports. Then Nigeria can develop a fleet that will match her diverse international trade. This is a sure way to reduce foreign domination of the nation’s shipping business.
Also, Nigerian shipowners complain of rarely benefiting from the millions of dollars in annual earnings from freight expenditure on ships undertaking the direct sale-direct purchase (DSDP) contracts of the Nigerian National Petroleum Corporation (NNPC). This is due to a lack of vessels to compete with their foreign counterparts. This is because despite reserving cabotage trade to local shipowners, the Cabotage Act recognises that there may be some capacities of vessels that might be needed for the lifting of crude oil and refined petroleum products in Nigeria that may not be owned by Nigerians. This was why the Act provided for granting waivers at the discretion of the Minister of Transportation. Ideally, the cabotage fund should be taking care of this. If appropriately disbursed, the fund will reduce the millions of dollars in annual loss to foreign ships dominating the Nigerian shipping business. So, a waiver in the act for non indigenous ship owners would not have been necessary for the lifting of crude oil and refined petroleum products if our indigenous ship owners had been adequately reimbursed with the wherewithal for acquiring all kinds of ships. By implication, our petroleum industry is also experiencing a domino effect of the non-disbursement of the cabotage fund. In addition, administrative and political bottlenecks are to hindering the disbursement of this fund. Indigenous ship owners are having difficulty providing their counterpart funding, and this a sacrosanct condition for disbursement. The recently adopted Treasury Single Account (TSA) is where the total amount collected by NIMASSA is domiciled.
Again, it is the duty of the Federal Executive Council (FEC), the National Assembly, lawyers, indigenous ship owners, other Nigerians and the media to keep harping on the judicious disbursement of the cabotage financing fund. This is particularly important, as there is an ongoing undercurrent by the Federal Government that suggests that the fund is not owned by the indigenous shipowners, and so, would not be disbursed solely for vessel acquisition purposes. Indigenous shipowners continue to fear that the fund may be diverted into irrelevant projects since the government holds that it does not belong to the indigenous shipowners. This ownership tussle is another drawback to the effective disbursement of the fund.
In conclusion, many indigenous shipowners in Nigeria have gone under and out of business due to lack of funding. Despite this, there has also been a back and forth with the federal government who is alleged to be planning an amendment to the act. The indigenous shipowners fear that if the federal government is successful in this drive, the odds can only pile up against the health and survival of the cabotage industry and our blue economy as a nation.
.Tolu Ojewunmi is an Author, and Senior News Anchor @ Arise News. He writes from Abuja, FCT.