Vicious circle in coastal shipping (1)

The concept of equality is one of the oldest in Western thought, and one of the most elusive and controversial. The proposition by Thomas Jefferson, American statesman and philosopher, that ‘all men are created equal’ may or may not be indisputable. The basis of that equality, however, and the conditions under which it may exist have always been a matter of intense dispute. Much of the debate about the meaning and purpose of equality arises from two antithetical conceptions, namely: equal opportunities for individuals against equal distribution of wealth. Claims to equality are often reflected in terms of rights, especially the right to equal treatment within a system of unbiased law.

The maritime industry in Nigeria is a very critical sector of the economy, because Nigeria is a major oil and gas producer, with an estimated population of 170 million people. Shipping is at the core of activities within Nigeria’s maritime industry. It is also a major consuming nation with the implication of huge seaborne trade. Statistics indicate that average cargo traffic of 152 million metric tonnes worth over $5 billion (that is, about N1 trillion) in freight earnings is generated in the country annually. The Nigerian oil and gas sector which is the mainstay of the economy requires huge shipping and logistics services for its operations. However, this sub-sector of the marine industry is also dominated by foreigners and the nation has been losing about $4 billion (about N8 trillion) to foreign ship owners yearly due to lack of indigenous capacity in local maritime transportation.

Before the Cabotage Act was enacted, indigenous shipping operators could not compete with their foreign counterparts because of poor level of manpower and infrastructural development in the country. Consequently, Nigeria lost huge revenue annually to foreign ship owners who in the past denied the nation’s seafarers employment opportunities, coupled with their reluctance to invest in local maritime infrastructure development, amongst other reasons. This necessitated the Federal Government’s intervention in the maritime industry. The intervention was to enable accelerated economic development through increased local content in the nation’s maritime sector. The first intervention was the UNCTAD 40:40:20 introduced by Decree 10 of 1987, while the second was the Nigerian Cabotage Act (Coastal and Inland Shipping Act 2003).

The Cabotage Act of 2003 is to conserve and generate foreign exchange for the nation, engender economic prosperity and create employment in the maritime industry. The Act has four pillars upon which its implementation rest. These are: cabotage vessels must be wholly owned by Nigerians; must be registered in Nigeria; must be crewed by Nigerians; and Nigerian shipyards must build and repair them. In Part III of the Cabotage Act, however, waivers are to be implemented by the Ministry of Transport in the following areas: waiver on the requirement for vessel to be wholly Nigerian-owned; waiver on the requirement for vessel to be wholly manned by Nigerian citizens; and waiver for the vessel to be built in Nigeria. Perhaps those who crafted and assented to the law were aware of the limitations of the nation’s maritime industry in areas of shipbuilding, human capacity and funds before inserting waivers. If these waivers are not included, would indigenous ship owners be able to provide qualified manpower, infrastructure and appropriate type of vessels required to enable objectives of the Cabotage Act to be achieved? This is a question that operators of the maritime industry need to answer. Let us look at issues affecting the implementation of the Cabotage Act one after the other starting with ownership of vessels.

Report has it that indigenous vessels owners participating in the Cabotage in Nigeria have over 200 ocean-going vessels, and 700 offshore supply vessels. According to reports, this figure constitutes about 20 percent of ships involved in the Cabotage, while foreign vessels constitute about 80 percent. It is alleged that 90 percent of indigenous vessels are not contractually engaged, while the remaining 10 percent secure contracts on a short-term basis. The participation of indigenous ships in the carriage of crude oil and other forms of cargo is below par and it is not consistent with the spirit of the Act. Available records, however, show that out of the 42,276 ships that entered Nigerian ports between 1997 and 2006, only 3549 (8.39 percent) were Nigerian ships while 38,727 (91.61 percent) were foreign ships. Also, out of a total of 1,236,986,185 GRT of cargo, only 16,297,759 (1.0 percent) were shipped by indigenous ships while 1,220,690,426 (99 percent) were shipped by foreign vessels.