Opinion: Clarion Call To Reform Nigeria's Shipping Sector

Mrs Bisi Akodu

 BY Bisi Akodu

Ngozi Okonjo-Iweala, Finance Minister and Coordinating Minister for the Economy, stated late last year that Nigerians should henceforth view the country as a non-oil producing nation and explore other sources of revenue. She made this statement as a result of the global decline in the price of oil.

Between June and December 2014 oil prices plummeted 60% from $115 per barrel to $48 per barrel. At the meeting of the Organization of Petroleum Exporting Countries held on November 27, OPEC failed to reach agreement on production curbs. This event together with other global trends in the oil market sent prices tumbling and the rest, to coin a phrase, is history.
Macroeconomics states that when there is surplus supply in a commodity prices automatically fall, hence most countries have adjusted their fuel prices downwards in sync with the decline in the price of oil. It is ironical that the best we could do in Nigeria was a N10 per liter reduction, where countries such as Ghana, Zambia, South Africa and Tanzania have made reductions that are far more reasonable, adding economic value that will impact positively on their currency.
Economists and financial analysts in Europe, the United States, China and other countries are looking at the effect of the decline in oil prices on their economies. However, it does not take an economic analyst to conclude that the worst hit will be the oil producing nations amongst which is Nigeria.Nigeria along with Saudi Arabia, Canada, Iraq, Kuwait, UAE, Venezuela, Russia and Libya produces 85% of the world’s oil. Nigeria will be more hard hit because we operate an import-orientated economy to the extent that we import fuel and other refined petroleum products.

Nigeria has long depended on oil revenue to the detriment of neglecting other vital sectors of the economy. Our dependence on oil has made us blind to economic reality and has given us false hope for Nigeria’s future, which is bleak. If we are to turn around our economy, we must turn around our thinking and explore alternative revenue sources. Ours is an import dependent economy that gives rise to the flight of foreign exchange. Unfortunately, our maritime cabotage regime has done little to prevent this due to weak structures and regulations. Nigeria’s ship owners are moribund with no incentive or finance to play in the big league with foreign vessel owners; hence, they have been excluded from the lucrative opportunities in Nigeria’s oil and gas industry.

Over the years the maritime industry has been totally neglected. Nigeria’s shipping sector is estimated to be capable of generating N7 Trillion annually. However, in order to tap revenue from this sector there will need to be an overhaul of policy, institutional, regulatory and legal framework. We need to develop a new national shipping policy.Nigeria’sshipping policy dates back to 1987 when the Nigerian Shipping Policy Act, No.10 of 1987 was enacted following Nigeria’s ratification of the United Nations Code on Trade and Development (UNCTAD). UNCTAD was to adopt the 40: 40: 20 code which covers ship acquisition, cargo sharing and shipping activities. Under the code 40% of the total volume of cargo traffic and revenue was reserved for indigenous Nigerian carriers, 40% was reserved for carriers of cargo originating in destination countries and 20% for recognized third flag carriers. If implemented this would have gone a long way to correct the imbalance in shipping trade as it affected Nigeria. The purport behind the Nigerian Shipping Policy was to develop a vibrant shipping industry that would generate revenue for Nigeria and Nigerians.

In pursuit of developing our maritime industry, the Nigerian Maritime Authority (NMA) was established to co-ordinate and implementNigeria’s National Shipping Policy. NMA’s successor the Nigerian Maritime Administration and Safety Agency (NIMASA) when established in 2007 had no defined purview regarding Nigeria’s Shipping Policy, though it was mandated to promote and develop indigenous commercial shipping in international and coastal shipping trade, and regulate and promote maritime safety, security, marine pollution and maritime labour. The Merchant Shipping Act, 2007 was enacted to provide for merchant shipping and related matters. This Act was to be implemented by NIMASA and lays down a list of regulations for ships operating in Nigeria regarding licensing, registration, certification and penalties for non-compliance with the Act.There exist multiple government agencies in the maritime industry with duplication of functions. There is an urgent call to re-organize these agencies for better function and output.

Nigeria has approximately 60 legislative enactments comprising its maritime and shipping laws. There are also critical Bills before the National Assembly such as the Ports and Harbour Bill, the Petroleum Industry Bill, the Maritime Zones Bill etc. that if passed will have positive impact on the shipping sector. Of importance also is the need for an Oceans Act for Nigeria to harness the resources due to it as a sovereign coastal state. Now is the time to pass these Bills into law and lay out a strategic plan for reforming the maritime industry in the shortest time possible.

Shipping is the life-wire of international trade and Nigeria is positioned to be the commercial hub for Africa. A developed maritime industry implies a boost in international trade, development in port linked flows and all the associated ancillary services. We have a plethora of stakeholders in the sector that have largely been uncoordinated often working at a tangent in uncontrolled confusion. Our ports are not yielding their full potential and are now being abandoned for ports in Benin Republic and Togo due to the multiplicity and level of various official and private sector port charges. The low volume of traffic at our ports is a deep concern to Government.

The Nigerian Shippers Council (NSC) the economic regulator for the shipping sector was established to provide a forum for the protection of the interest of shippers in matters affecting the shipment of imports and exports to and from Nigeria and to advise the Government on sundry matters related thereto. As economic regulator the NSC has the task of dealing with a plethora of stakeholders as its functions include, the structure of freight rates, availability of shipping space, terms of shipment, class and quality of vessels, port charges, entering agreement with Conference and Non-Conference Lines, the Nigerian Ports Authority and other bodies on matters affecting ship owners’ interests.

Recently the powers of the NSC were the subject matter of an action instituted against the NSC at the Federal High Court by a group of shipping companies, challenging the NSC’s power to issue directives to shipping companies. In response to the suit filed by the shipping companies, the NSC in a counter-claim sought a declaration that the Shipping Line Agency Charge (SLAC) unilaterally imposed by the shipping companies on Nigerian shippers is illegal. The Federal High Court dismissed the case of the shipping companies and held that the NSC has power to issue directives as the economic regulator of the ports. A similar suit filed by the Terminal Operators against the NSC was also dismissed. These decisions stand as a watershed in Nigeria’s maritime law and is a clarion call for Government to prioritize its attention towards improving the sector and turning it into a “cash cow’’ for the nation.

A reformed Nigerian Shipping Policy will have to review local content and formulate an action plan for shipping reforms that will involve Nigerians. We can learn a lesson from Malaysia .Seaborne transportation is a key facilitator of Malaysia’s trade-oriented economy. This is underlined by the fact that an estimated 95 percent of the country’s trade is carried via seaborne means. Malaysia has the world’s largest owner-operator of LNG tankers. Two of its ports, Port Klang and TanjungPelepas are in the list of the world’s top 20 container ports by way of throughput volume handled. Malaysia is a country that gained independence the same year as Nigeria. It should be noted Malaysia has exclusive control of its domestic maritime industry.

In conclusion,the potential Nigeria’smaritime industry is massive. To tap into this huge revenue source will requires a total overhaul of legislation, institutions and regulatory framework. TheNigerian Shipping Policy Act, the pilot law of the maritime industry, must be revised and re-branded to align with global maritime trends. A review of all legislation on maritime law is mandatory if we are to reform this sector to our advantage.The creation of a new ministry that will exclusively handle maritime matters is needed. A Maritime Ministry would unburden the Ministry of Transport and allow for better efficiency in the maritime industry. The NSC, as economic regulator of the shipping sector, has a big role to play in the future of shipping and allied services and can be further empowered by Government to fulfill its mandate in this regard.

Bisi Akodu is a partner at OAL and heads the Corporate/Commercial & Public Sector Group of the Firm.