“The national fleet will assist in the economic integration of West and Central Africa, provide employment and capacity development for Nigerian seafarers”
Uche Usim, Abuja
Hassan Bello was appointed the Chairman, National Fleet Implementation Committee (NFIC), by the Minister of Transportation, Chibuike Amaechi, in 2017 to ensure Nigeria has sufficient vessels to participate in the lucrative international freight business currently carried out totally by foreign vessel owners.
READ ALSO: CIF: Ship owners lack financial muscle to lift crude –Stakeholders
According to him, figures from the Nigerian Maritime Administration and Safety Agency (NIMASA) show that Nigeria lost a whopping $16.2 billion in wet and dry cargo imports and exports between 2016 and 2017, as the local ship owners lack capacity to compete with offshore players. Consequently, the committee visited the Ministry of Budget and National Planning in Abuja to secure needed support and incentives for the project to be realised and sustained.
In this interview, Bello speaks on the gains of national fleet and the journey so far.
Excerpts:
Why national fleet
Let me start by saying that maritime transportation is a critical sector of the economy of many nations of the world today. Nigeria, with its long coastline and abundant natural resources has very huge maritime potential that remain to be explored for the benefit of its teeming millions. As a major oil producer with cargo throughput of over 60 percent of the West and Central African sub-regional cargo market, vessel traffic to Nigeria is far higher than the whole of West Africa combined.
Regrettably, Nigeria gains little or nothing from this huge traffic because of its insignificant participation in the carriage of its cargo, notwithstanding the immense opportunities that abound in the sector. All of Nigeria’s foreign trade is carried out in foreign-owned vessels thereby creating business opportunities and employment to foreign ship owners who deploy their vessels to carry Nigeria’s cargo. This gives rise to huge outflow of financial resources in terms of freight paid by Nigerians to foreign ship operators and increasing the GDP and economic well-being of their home countries.
Benefits
The benefits of a national fleet are many. It will, among other things, enhance the development of the Nigerian maritime industry with significant contribution to the GDP. Presently, shipping contributes a paltry 0.05 percent of GDP. In other countries such as Greece, it is 3.6 percent and in the United Kingdom, it is 0.2 percent.
Another benefit is that it will massively support Federal Government’s economic diversification drive by stimulating the rise of various ancillary services, creating wealth and providing employment to Nigerians.
It will also stem and preserve the outflow of foreign exchange for the carriage of the nation’s cargoes and guarantee that Nigerian vessels obtain a fair share of Nigeria’s seaborne traffic. The national fleet will assist in the economic integration of West and Central African sub-region, provide employment and capacity development for Nigerian seafarers and others and influence reasonable freight rates in the carriage of Nigeria’s cargo, etc. The committee noted that broad objectives of the Economic and Recovery Growth Plan (ERGP) is to build a globally competitive economy by tackling the obstacles hindering the competitiveness of Nigeria’s businesses, notably poor or non-existent infrastructural facilities and the difficult business environment.
The committee identifies with the principles of the plan which, among others, include the need to leverage on the power of the private sector to achieve economic recovery and transformational growth, harnessing the entrepreneurial nature of Nigerians and prioritising the provision of a more business-friendly economic environment.
The business environment in Nigeria is not conducive to the development, operation and sustainability of shipping as a business. The indigenous ship owners who operate in the cabotage regime are finding it difficult due to the high cost of operation in Nigeria today.
This is why shipping in Nigeria is dominated by foreigners to the detriment of the national economy. Governments of major shipping nations approach the development of the shipping sector as a national policy, which triggers incentive measures from relevant agencies of government such as Ministries of Finance, Commerce and Trade, etc. They design special incentives for their shipping industries to make them competitive in the global space. Nigeria cannot be different as shipping is global. Nigerians had tried and failed to enter into international shipping, not necessarily due to the huge capital investment required, but because of their inability to compete with foreign operators who have lists of incentives from their home governments. Therefore, for the government to realise its programme for the transport sector, a conducive environment backed by strong political will with incentives to operators have to be in place.
The full potential of the agricultural, manufacturing and solid mineral development programmes cannot be realised in isolation of the transportation and indeed the shipping sector incentivised programme.
The committee, therefore, has developed fiscal incentives which in its wisdom ought to be considered, approved and implemented to trigger an era of growth and sustainability in shipping business for Nigeria to realise the benefits highlighted above. The committee presented the fiscal incentives to the Vice President and the Economic Management Team (EMT) in July who directed that the Nigerian Investment Promotion Commission (NIPC) should work with the committee and other relevant Ministries, Departments and Agencies (MDAs) to harmonise the requests and re-present for consideration and approval. Work is in progress in that regard now.
Economic losses
The National Bureau of Statistics (NBS) in 2015 disclosed that a total of 5,014 vessels entered Nigerian ports with cargo throughput (excluding crude oil) of 77,387,687 metric tonnes. Using the NIMASA benchmark freight rate of $92.5 per metric tonne for general cargo from Europe, total freight of $7,158,361,047.5 was paid.
Also, the Nigerian National Petroleum Corporation (NNPC) figures in 2015 showed that about 107,179,115 metric tonnes of crude oil was lifted from Nigeria. Using NIMASA benchmark freight of $18 per metric tonne for crude oil to Europe, freight paid 10 foreign ship owners amounted to $1,929,224,070. This represents opportunity loss to the Nigerian economy.
Therefore, a total sum of $9,087,585,117.5 was paid as freight for dry and wet cargo to foreign ship owners by Nigeria in 2015 alone due to absence of Nigerian-owned fleet plying international trade.
The above has been the recurring trend of economic losses over the years till date. For instance, in 2016 dry cargo import was carried out by 2,047 vessels, while dry cargo export involved 987 vessels. In all, $3,709,261.189.79 was paid as freight to foreign ship owners, which was our loss. Again, in the same year, wet cargo imports and exports involved 2,486 vessels and the freight loss totalled $7,551,304,167.12.
Also, in 2017, dry cargo import involved 1,967 vessels while dry cargo export involved 1,145 and the freight loss stood at $4,370,779,495.96. Again, wet cargo imports/exports involved 2,294 vessels with a freight loss of $4,231,101,680.12. So, the total loss for wet and dry cargo was $8,601,881,176.08.
In analysis, in 2016 we lost $7,551,304,167.12, in 2017, $8,601,881,176.08 and the grand total for both years was $16,153,185,343.20. These figures are from NIMASA.
Incentives sought
There are quite a number of incentives needed for the growth and sustainability of the Nigerian shipping industry. We also have agencies that can intervene accordingly. For instance, the committee seeks zero import duty on vessels and this is directed to the Federal Ministry of Finance and the Nigeria Customs Service (NCS). Also, there is need to abolish temporary importation permit or imposition of stringent measures also by NCS. Others are shipping sector support refund (real sector support fund of two per cent per annum/9 per cent) to be handled by CBN. Waiver of export tariff for use of Nigerian vessels (CBN/NCS) and right of first refusal for national carriers in the procurement process for cargo, and this involves all government agencies; work permit to be issued only upon verification of unavailability of ratings or officers (Immigration/NIMASA/NIPC). Others are change of Nigeria’s crude oil trade policy (FMF/Petroleum Resources); CAC to adopt FIRS’ zero duty for ship finance registration at the CAC, preferential berthing privileges, among others. The committee notes, as in the ERGP, the huge transport infrastructure deficit leading to a high cost of operation and disincentive to investments.
However, we are happy that to build a competitive economy, the government is working to remove structural bottlenecks that prevent private companies from investing in and operating backbone infrastructural projects. The committee aligns with the government’s critical intervention in this regard and believes that creating and implementing incentives wiIl provide the stimulus needed to attract private sector investment and achieve the competitive edge required to operate successfully in the sub-regional and global shipping environment.
It is in realisation of the important role the Ministry of Budget and National Planning plays in fiscal policy direction of government and the development and implementation of the ERGP that the committee seeks the Planning Ministry’s support because this project, if fortified with incentives, will become the focus of implementation priority in the transport infrastructure programme.
Committee
In realisation of the perennial losses and in a bid to reposition the nation’s maritime industry in line with the core strategy of the present government to drive a structural and sustainable ERGP, correct the imbalance in Nigeria’s maritime trade and the imperative for Nigeria to re-enter international shipping, the Minister of Transportation, Chibuike Rotimi Amaechi, constituted a committee in April 2016 to propose modalities for the establishment of a private sector driven and sustainable Nigerian fleet. The terms of reference include providing guidelines on the procedures and processes of establishing shipping company/companies to operate the Nigerian fleet; examining the possibility of using existing shipping companies to run a Nigerian fleet and identifying areas of requisite government support.
The reference is also to provide guidelines and recommendations for technical human capacity development; identify institutional framework that will support the establishment of a sustainable Nigerian fleet; set out the action items to encourage the development of shipbuilding, ship repair and ship recycling facilities.
The committee successfully completed the assignment and submitted its report to the Minister in June 2016. He expressed gratitude to the committee for the work and thereafter transformed the committee to an Implementation Committee to implement the recommendations towards the establishment of the proposed Nigerian fleet, which, among others, include the establishment of privately owned and operated shipping company/companies to operate various categories.
One is wet cargo (tanker) and it involves crude, refined/semi refined, chemical gas, etc. Another is dry cargo (general, container, bulk, RoRo, etc) and there is the regional trade and national cabotage.
Committee members
Membership of the committee cuts across professionals in the public and private sectors of the maritime industry representing the Federal Ministry of Transportation, the Nigerian Shippers Council (NSC), Nigerian Ports Authority (NPA), NIMASA, NEXIM Bank, Shipowners Associations, Association of Master Mariners, Marine engineers and Surveyors and NNPC.