08 Apr 2021

ENHANCING OWNERSHIP OF NIGERIAN-FLAG VESSELS

The question has often been asked about why Nigeria, the largest economy in Africa, does not have a national shipping line. The validity of this question must be viewed against the background of what having a flag carrier could mean to the country’s economy, and what the country is missing from not having one and, is therefore not actively participating in maritime business that accounts for about 65 per cent of world trade. However, such a question does not take cognizance of the very wide issues that are involved in maritime business – issues that may not apply in other industries.

Firstly, it needs be understood that shipping business is not only one of the most capital intensive in the world, but also unlike other businesses, it has a gestation period of between 25 and 30 years. It is not a business you invest in and expect return in a question of months or a few years. It is not buying and selling, neither is it a manufacturing concern that could start to generate income after one year. It is not a business that suits our investment culture of quick return.

When it is considered that we do not operate the kind of economy that encourages long term funding of huge investments, and the fact that our financial institutions are structured to handle only short term funding, it becomes clear why vessel ownership is not an attractive option.

One of the reasons many Nigerian businessmen prefer the option of importation to local manufacture of the products they deal in is the fact that our banks are interested in funding only businesses that guarantee quick recovery of loans, which a project with long gestation period like building a factory, starting production and allowing a certain period to gain acceptability in the market before generating income does not offer. It is common knowledge that this is one of the reasons the country’s economy is heavily tilted towards importation, rather than production.

Secondly, over the years, the government has not done enough to encourage local ownership of vessels by way of interventionist policies that are meant to cushion the side-effects of certain investments if things go wrong along the line.

There was a case of a ship owner who brought in a vessel and it turned out that the duty he was expected to pay was almost the same with what he would need to buy another vessel. That is an example of how government could intervene through lowering of duty on such ventures, to encourage shippers to buy and operate their own vessels.

We need to have in place policies that would enable ship ownership and repairs to thrive. Such policies should address the issue of tariffs on importation of vessels.

Findings have shown that the Nigerian shipping industry is not performing optimally as it should. This could easily be confirmed from the performance of the industry over a certain period. Take ship repairs, for instance, for which some valid questions require compelling answers. What is the optimal output of the shipyards? What has been their position over the last five years? How many ships do they repair in a day, week or month? What is the capacity of those ships? What are the success factors of such repairs?

Other questions would include whether or not their business has increased or decreased over the period. Most of the shipyards have closed down because of the twin problem of high cost of importation of spare parts which makes maintenance of the shipyards costly, as well as low patronage.

A question to ship owners about how many of them own ocean-going vessels would most likely show that none has. In the area of repairs and maintenance, statistics show that out of the over 2,400 vessels that pass through the Gulf of Guinea in a year, Nigeria receives about 70 per cent but the percentage that utilizes our shipyards is not up to five. That is huge capital flight arising from the fact that there are no adequate provisions for them to repair and carry out maintenance of their ships in Nigeria.

However, the picture is not all gloomy. We cannot continue to lament about what ought to have been done that was not done if we must move forward. There is light at the end of the dark tunnel, as they say. The government is trying to address the issues that militate against success of the maritime industry in a holistic manner. The aim is to make the industry attractive for investment, so the country can have its fair share of the economic benefits that accrue to countries that are actively involved in maritime business.

We have undergone the process of amending the Cabotage Vessel Financing Fund (CVFF), which deals with fleet expansion. Only recently, President Muhammadu Buhari directed the disbursement of funds to ship owners for the purpose of acquiring ships and this is expected to begin. This would put an end to the previous practice, between 2003 and 2004, of collecting money from ship owners and keeping it somewhere without utilization. Access to the CVFF would enable Nigerian ship owners not only to be able to acquire ships, but to also carry out repairs and maintenance on their ships.

On the issue of flag carrier, registry all over the world is a major determinant to attracting investors into a country to register, using its registry. There is open and closed registry. Nigeria has a closed registry, or what is called a hybrid registry.
We are trying to start with the Nigerian Liquefied Natural Gas Company, to see how they can register their vessels here. They are conducting a gap analysis of our own registry, while we are looking at ways to close the gaps. The wind of change that is currently blowing across the country’s maritime sector is one that will re-write the history of the sector and open new vistas for it to thrive.


Dr. Jamoh can be reached on Twitter: @JamohBashir. #Thevoiceofmaritime.

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