How Nigerian maritime laws shield foreigners, weaken local firms

Despite Nigeria’s strategic position in global maritime trade, over two decades of poorly enforced and inadequate local policies have left indigenous players vulnerable to exploitation and unfair foreign competition calling for urgent reforms to protect the local industry, ADAKU ONYENUCHEYA reports.

Nigeria’s maritime sector, a vital component of the nation’s economy, has suffered from inconsistent policy implementation. Laws such as the Cabotage Act and the Nigerian Content Development and Monitoring Board (NCDMB) Act were drafted to promote local participation but have largely remained unenforced.

As a result, foreign companies dominate critical operations, including cargo handling, terminal management, warehousing, shipping, clearing of cargo and haulage, among others, sidelining indigenous operators.

This systemic exclusion has turned local operators into spectators in an industry where they should be leading.

Stakeholders at a recent forum in Apapa, themed ‘Port Reforms and Local Content: Has Nigeria Fared Well?’ emphasised the urgent need for comprehensive policy reform and enforcement.

Economic impact
Data from the National Bureau of Statistics (NBS) highlights Nigeria’s trade with N36 trillion in merchandise trade accounted for in 2019; while N25.2 trillion was recorded in 2020; N39.7 trillion in 2021; N52.9 trillion in 2022 and N71.9 trillion in 2023.

However, indigenous players remain marginalised despite this robust trade volume, as local companies are excluded from lucrative activities involved in this trade, resulting in significant capital flight and lost opportunities for economic growth.

The Chief Executive Officer of the Centre for the Promotion of Private Enterprise (CPPE), Dr Muda Yusuf, lamented that foreign dominance persists, with local players sidelined despite these laws’ intent to promote local content.

Challenges in local content development
The establishment of the NCDMB in 2010 marked a step toward increasing indigenous participation, but the maritime sector has seen limited progress.

The Chief Executive Officer of Genesis Worldwide Shipping Company, Captain Emmanuel Ihenacho, attributed this to factors such as limited capacity and expertise among local operators, high operational costs, limited access to financing, and stiff competition from well-established foreign companies.

Yusuf also highlighted the underutilised potential of the Cabotage Act of 2003, a law meant to promote indigenous shipping, calling on the Nigerian Maritime Administration and Safety Agency (NIMASA), the Nigerian National Petroleum Corporation (NNPC) and other regulatory bodies to prioritise its enforcement.

He voiced strong concerns about the ineffective enforcement of the Cabotage Act and called on key agencies, emphasising that without stricter enforcement, the Act’s potential to promote local content and empower indigenous operators in the maritime sector remains unrealised.

Yusuf further advocated for the expansion of the presidential executive orders to protect local jobs and bolster indigenous participation in the maritime industry.

Drawing parallels with the Local Content Act in the oil and gas sector, he highlighted its success in fostering local inclusion and suggested that similar policies could yield positive outcomes in maritime.

Yusuf further recommended a review of the Nigerian Investment Promotion Commission (NIPC) Act, criticising it for enabling foreign dominance in critical sectors, including maritime.

He argued that this imbalance has undermined local operators’ growth and competitiveness, calling for a shift towards policies that:
A lecturer at the Nigeria Maritime University, Dr Charles Okerefe, noted that while cargo handling and throughput have improved, the dominance of foreign players persists.

He said the disbursement of the Cabotage Vessel Financing Fund (CVFF), intended to empower local shipping firms, remains a contentious issue, with little progress in supporting indigenous operators.

Reforms pitfalls
The 2006 port reforms aimed to enhance efficiency and encourage local content. However, stakeholders argue that these reforms have failed to deliver on their promises for indigenous operators.

The General Secretary of the Association of Bonded Terminal Operators, Haruna Omolajomo, criticised the exclusion of indigenous operators from key maritime activities, despite their critical role in Nigeria’s trade ecosystem following the port concession agreements of 2006.

He described the reforms as a “re-colonisation” of Nigeria’s ports, where indigenous operators are sidelined despite their significant contributions, including decongesting ports and preventing vessel diversions to neighbouring countries.

Omolajomo said the concessionaires refuse to engage local operators in the movement of goods, thereby putting over N3.5 trillion investment in bonded terminals at risk.

Haruna, who is also the Managing Director of Harsecom Logistics Limited, highlighted the Federal Government’s decision to privatise Nigeria’s ports, with the expectation that local operators, including bonded terminal operators, would continue playing significant roles.

However, the reality following the 2006 port concessions has been starkly different.

Indigenous players, despite substantial financial investments such as cashable bank bonds worth up to N100 million, have been sidelined by concessionaires.

Omolajomo lamented the unrealised partnership expected with the Nigeria Ports Authority (NPA) and concessionaires, stating, “Instead, we’ve been shut out of key operations.”

BTOs, as recognised by entities like the World Trade Organisation (WTO) and the United Nations Committee on Trade and Development (UNCTAD), despite their integral role in ensuring efficient port operations worldwide, these operators have been marginalised in Nigeria’s port reform process.

Omolajomo recounted the pivotal role played by Bonded Terminal Operators between 2001 and 2008 in alleviating congestion at Nigerian ports.

During this period, they handled over 500,000 TEUs, effectively preventing vessel diversions to neighbouring ports like Cotonou.

Despite these significant contributions, Omolajomo said many indigenous operators now face mounting debts and closures, highlighting the disconnect between their past successes and current struggles.

Unfulfilled concession agreements
The National President of the Association of Nigerian Licensed Customs Agents (ANLCA), Emenike Nwokeoji, criticised concessionaires for failing to meet key provisions of their agreements, including commitments related to equipment, manpower, and training.

He said over 20 years later, many concessionaires have not implemented up to 15 per cent of the agreements, emphasising the urgent need for a review of these agreements to safeguard local businesses.

Another pressing issue highlighted by Nwokeoji is the underdevelopment of inland container depots (ICDs).

Despite licensing six indigenous ICDs, most remain underutilised, leading to persistent congestion at major ports like Apapa.

Goods from regions such as Onitsha are transported long distances to Lagos, bypassing closer ports in Warri, Calabar, and Port Harcourt.

Stakeholders in Nigeria’s maritime sector have proposed several recommendations to address the industry’s challenges and promote indigenous participation.

Nwokeoji underscored the importance of addressing policy gaps and enforcing existing regulations to unlock the sector’s potential.

He advocated for greater local content participation in the maritime sector, ensuring indigenous companies have fair opportunities to secure contracts and participate in port operations.

Also, Nwokeoji recommended implementing training programmes to enhance the skills of local workers and companies, equipping them to compete effectively in the industry.

Iheanacho emphasised the need for the government to continue implementing policies that support port reforms and local content development.

He called for regular evaluation of these reforms to enhance performance and ensure their effectiveness.

Iheanacho highlighted the importance of providing local port terminal operators with access to financing at competitive rates.

He noted that this would facilitate their growth and enable them to compete effectively with foreign companies.

He also stressed the need for increased government investment in infrastructure, particularly in intermodal transport linkages, to improve connectivity between ports and inland transportation networks.

Omolajomo proposed a review of concession agreements to ensure a fair allocation of operations, suggesting a 60:40 ratio in favour of indigenous BTOs.

He urged a clear distinction between local and foreign content in operations such as clearing agencies, inland container depots (ICDs), empty holding bays, and barge services.

Omolajomo suggested that the Nigerian Ports Authority (NPA) allocate specific berths exclusively for local content operations to protect indigenous players from being overshadowed by concessionaires.

He also advocated for the regulation of fees and tariffs, ensuring Bonded Terminal Operators are not forced to collect fees for third parties, which diminishes their earnings.

On cargo handling and contracts, Omolajomo recommended that the NPA facilitate agreements that allow Bonded Terminal Operators to enter cargo-stemming contracts with concessionaires, enabling them to manage a portion of container movements.

Furthermore, he called for enforcement of the use of ports as transit areas rather than storage zones to align with local content objectives.

Omolajomo urged the government to enforce constitutional requirements for local content, which he argued have been violated in the past.

He also proposed granting indigenous BTOs a seven-day free demurrage period for containers they handle, giving them adequate time to process and transfer goods without financial strain.