15th October, 2012
Indigenous ship owners in Nigeria contend with an unfavourable business environment
Given the harsh environment in which they operate, the business life of Indigenous ship owners in Nigeria faces the risk of extinction. While some are clutching at straws, others who are unable to cope have abandoned their businesses. The problems militating against the running of their operations are traceable to several factors hampering their efficiency; thus preventing them from competing fairly with their foreign counterparts. These factors, according to Chief Isaac Jolapamo, Chairman, Indigenous Ship Owners’ Association of Nigeria, include indebtedness, dominance of foreign operators, lack of opportunities and contracts. He told TheNEWS, for instance, that indigenous ship owners have invested about $30 billion in the industry, yet are unable to recoup one quarter of their investment. “The chunk of the contract are awarded to foreigners because of the belief that they can do it best, leaving local ship owners to scramble for the limited opportunities,” he said.
Most indigenous ship owners also face capacity problems. Not only do they contend with the unavailability of seafarers but also with employees who are not conversant with the latest technological trend in the industry. Many of them need to take advantage of international developmental courses like the International Maritime Organisation mandatory two-year training. Executive Vice-Chairman and Chief Executive Officer, Sifax Group, Dr. Taiwo Afolabi, echoed this view recently in Ibadan, Oyo State: “Indigenous operators lack what it takes to compete with their foreign counterparts. Principally, the indigenous ship owners labour under the burden of lack of the required tonnage capacity (minimum of 500GRT) to immediately take over from their foreign competitors, as many of the indigenous operators are small vessel-owing companies. They also face problems of inadequate manpower as regards the seafarer requirement under the Act, inadequate infrastructural support base which reflects in the nation’s low ship building and ship repair capacity.
“Their financial muscle is too weak to solely and easily source the required funds for ship acquisition and other heavy capital-intensive elements associated with shipping. There is the lack of collaboration among the domestic operators leading to their refusal to come together and put up a unified front during bidding processes for contracts.”
Jolapamo also revealed that local shipping companies are not contracted by Nigerian National Petroleum Corporation, NNPC, due to the excuse that their vessels are substandard or are not seaworthy vessels to carry wet cargoes. Sam Epia, Chief Executive, Cloverleaf Shipping Nigeria Ltd, an indigenous shipping company that specialises in the export of agricultural produce, bemoaned the volume of trade indigenous shipping companies lose on a daily basis to foreign shipping operators. He is sorely pained by the fact as a result of this capital flight, Nigeria is also losing a large job-creating platform to foreigners who own ships and dominate the industry. While narrating the ordeal his company faced, Epia revealed that Cloverleaf used to do 35 to 50 vessels annual export in the past but now manages to do five vessels. “Is that not sad enough? What do we do? In every aspect, we have to encourage shipping business in this country,” he lamented.
When the Coastal and Inland Shipping Act, otherwise known as the Cabotage Act, was introduced in 2003, it elicited great excitement. The policy gives the right of certain cargo affreightment within the nation’s territorial waters to Nigerian shipping companies. It also made it compulsory for the ship operating crew to be 100 per cent Nigerians; a move which many believed would create more employment opportunities for seafarers. Stakeholders had expected a drastic change but, unfortunately, their expectations were dashed. Many have complained about the ineffectiveness of the Cabotage Law as indigenous ship owners have being marginalised, especially by NNPC, its subsidiaries and multinational oil companies. They have also pointed accusing fingers at past ministers of transport who by virtue of their power could have effected a change. As it is, indigenous shipping companies cannot trade in international waters while the foreign operators enjoy waiver to engage in shipment of wet cargoes which ought to be the prerogative of the indigenous companies.
Dr. Taiwo Afolabi, in a lecture titled Impact of Cabotage Act On Entrepreneurial Opportunities in a Developing Economy, said about 90 per cent of the revenue accruing from the shipping sector goes to foreign ship owners. He attributed the low involvement of indigenous operators to their lack of capacity to compete with their foreign counterparts. “Available statistics indicate that an average annual traffic of about 152 million metric tonnes of both oil and non-oil cargo worth over $5 billion (or N750 billion) in freight earnings is generated in the country. “Ensuring that the indigenous shipping interests have access to 50 per cent of these earnings may go a long way to solve the problem. Instead, what you have is that over 90 per cent of this income is earned by foreign shipping companies alone. Until the issue of cargo rights is addressed, it is my submission that the present controversy raging among the stakeholders concerning the cargo which has become to sound like the proverbial egg and the chicken conundrum may prove diversionary, useless and nauseating,” he warned.
Afolabi also said that out of about 400 vessels owned by indigenous operators, over 70 per cent of them are allegedly not being used due to the presumption that they are unsuitable and sub-standard. As a way out of the situation, Afolabi said: “Indigenous shipping companies should not ignore the practical wisdom that it is better to own 1 per cent of a viable fleet with strong cash flow and balance sheet than to have 100 per cent ownership of a cash-strapped shipping company with obsolete ships.” He faulted the provision of the law that states that vessels used by local operators should be built, wholly owned and run by Nigerians. He opined that the establishment of ship building and ship repair yards (dry docking) in Nigeria to build vessels for sale to indigenous shippers, the establishment of dredging services for clearing and maintenance of the 3,000 kilometre length of inland waterways under the jurisdiction of the National Inland Waterways Authority, NIWA, as well as maintenance dredging of the channel will relieve the pains of indigenous shipping companies.
—Femi Ayodele. Published in TheNEWS magazine.