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13 Years On: Cabotage law fails to promote local shipping operators

By Sulaimon Salau
04 December 2016   |   3:26 am
Thirteen years after the Cabotage Act was signed into law, the poor implementation of the legislations has left Nigerian operators in the maritime industry in the doldrums.
Maersk Line

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Thirteen years after the Cabotage Act was signed into law, the poor implementation of the legislations has left Nigerian operators in the maritime industry in the doldrums.

Indeed, the law, which was designed to restrict the use of foreign vessels in domestic coastal trade to promote the development of indigenous tonnage and establish a Cabotage Vessel Financing Fund (CVFF), has not recorded any meaningful contribution to the industry.

The Guradian investigations revealed that foreign firms own about 90 per cent of the vessels in the country today, while the local operators are groaning under poor utilization and insufficient capital to buoy their capacity.

The Cabotage Act also established the CVFF, which is under the custody of the Nigeria Maritime Administration and Safety Agency (NIMASA). The current situation of the fund, which is currently estimated at N100b, suggests that it has failed to live to its billing as no indigenous shipping company has drawn from it.

The CVFF is derived from the two per cent deductions from all contract value on ships operating within the nation’s coastal and inland waters under the Coastal and Inland Shipping Cabotage Act 2003, to enable indigenous ship owners acquire ships that would enhance their ability to partake in the coastal and inland region.

It was however gathered that the agencies was not keen on full implementation of the law due to certain reasons bordering on personal benefits, as some government officials rely on Section three of the law (which granted certain waivers), to enrich themselves.

Section three, sub-section nine of the Cabotage law reads: “The Minister may on the receipt of an application grant a waiver to a duly registered vessel on the requirement for a vessel under this Act to be wholly owned by Nigerian citizens where he is satisfied that there is no wholly Nigerian owned vessel that is suitable and available to provide the services or perform the activity described in the application,”

The Guardian learnt that the waiver request to the minister is done through NIMASA. This process made some officials of the agency to be involved in the deal, which also involves to the ministry of transportation.

A maritime expert told The Guradian that the non-implementation of the Cabotage law is due to embedded corruption in the industry.

The sources alleged that the regulatory agencies in the sector are engrossed in corruption, coupled with wrong priority on matters that could spring up development in the industry.

He said: “Inside the Cabotage law, section three of the law provides for waiver clause to enable foreign shipping companies trade on Nigerian waters. Some officials of the agencies rely on this clause, get grants and secure waiver for them,”

“What they are supposed to do was that before granting a foreigner the waiver, the officials must first enquire if there is any local counterpart that could render the same service, but the situation is not like that, rather, they just collect the money and facilitate the waiver at the expense of local vessels,” he said.

He noted that the CVFF fund is not really the matter on ground, but the need to guarantee jobs for Nigerian vessels through the effective implementation of the Cabotage law.

The fund is mean to support indigenous operators to acquire vessels, but some of the existing vessels are not even getting jobs, with a number of them scrapping away on the deep ocean.

A top official of Marine Platforms, Baji Nyam, told The Guardian the Cabotage law will go a long way to aid indigenous shipping if properly implemented.

He said, although there were impediments in the law, the stakeholders have made recommendations to NIMASA and the Nigerian Content Development and Monitoring Board (NCDMB).

Worrying that that the hopes of implementing the law is fading away, Nyam said: “We must ensure full implementation of the Cabotage law such that vessels that are Nigerian owned are getting jobs. There are vessels and there are vessels, Nigerians should look into getting vessels of extremely high quality that will deliver consistently quality service to the client with very minimal down time,”

On the Cabotage Fund, he said: “I don’t believe that people should be given direct access to the fund. Government, should structure it in such a way that if you want to buy a vessel, you should approach your bank with 10 per cent of the value of the vessel that you want to get, the bank can put in about 20 per cent of the money. Then, the Cabotage Fund can give guarantee for the 70 per cent balance. The bank will be diligent in monitoring that project because they have put their money where their nose is. That is basically what we are asking for,” he said.

Besides, Nyam said there should be some physical incentives that government should give.

“They should realise that if Nigerians bring in good quality vessel, we will able to increase tonnage in the Nigerian shipping industry, we will be able to provide jobs and training facilities for Nigerian seafarers. These incentives will bring in more benefits than the cash benefits. For example, government should spread the import duty over several years as against waivers on duty. With this, revenue will still go to government over an extended period. The full duty will be paid and everybody will be happy,” he urged.

The Head of Public Relations of NIMASA, Hajia Lami Tumaka, in her response to The Guardian enquiries said: “ NIMASA is doing everything possible to provide opportunities for Nigerian operators, including collaboration with NCDMB. The director general has stated before that due diligence will be followed in disbursing the CVFF so that it does not suffer the same fate as the Ship Building and Ship Acquisition Fund (SBSAF).”

She denied the involvement of NIMASA staff in the alleged deal, saying “We are not aware of any staff obtaining waivers for foreign operators.

“For the records, granting of waivers is not the responsibility of NIMASA but that of the Ministry of Transportation. So, staff could not have granted waivers to any operator. The new management in NIMASA is committed to engendering greater opportunities for local operators and the full enforcement of the Cabotage Act is our priority.

The Governor of the Central Bank of Nigeria (CBN), Godwin Emefiele, had said the Cabotage law has been grossly violated and at best, not fully implemented, as foreign interests have dominated both the operations and the accruing revenues to the loss of the country.

“Out of about 600 ships that operate within our waters, only about
60 of them are owned by Nigerians and are mostly idle, in violation of the Act,” he said.

Emefiele said the industry is losing as much as N2t yearly from the anomaly.

The Coastal and Inland Shipping Act, otherwise known as the Cabotage Act was enacted in 2003 in order to restrict the use of Foreign Vessels in domestic coastal trade to promote the development of Indigenous tonnage and to establish a Cabotage vessel financing fund and for related matters.

Nigeria aspires to be amongst the top 20 largest economies by the year 2020, according to the economic policy of Vision 2020 and successful implementation of the Cabotage Laws in Nigeria is critical to the success or otherwise of the plan because of the important role shipping plays in not just the movement of goods and services around the country and the revenues collected as tax from companies in the sector.