The Nigerian Operatives in the Domestic Coastal Shipping - Term Paper Example

Introduction Nigeria is in the West Africa, a country endowed with over 863 km coastline and almost 3000 Km shipping canal. The predominant sector of the Nigerian economy especially within the coastline is the oil and gas sector that is approximated to be about 95%, hence providing the country with a number of opportunities along the shoreline (Akopobolokemi, 2012). However, despite such immense resources, over the years foreigners at the exclusion of Nigeria natives have dominated the maritime industry along the coastline mainly because the indigenous were unable to match the capital muscles of their foreigner counterparts. Therefore, in full acknowledgement of this fact, consistent efforts have been initiated by successive governments to develop policies aimed incorporating the indigenous people to the coastline trade sphere. For instance, a remarkable milestone to address this concern was "the passage into law of the Coastal and Inland Shipping (Cabotage) Act in 2003 whose objective was to empower the natives’ capacity in the maritime industry” (National Maritime Authority, 2003). Moreover, after the ratification of the act, the Cabotage vessel financing fund (CVFF) was established to facilitate the development of native ships and acquisitions, which provided financial aid to the Nigerian operatives in the domestic coastal shipping (Balouga, 2012). The implementation of the Act was to be accomplish by two agencies, the Maritime Labour Industrial Council and the National Maritime Authority. “The two agencies through an amendment of the Act were merged in the year 2007 and gave birth to the Nigerian Maritime Administration & Safety Agency (NIMASA)” (Akpobolokemi, 2012). This agency was formed with the objective of regulating the maritime activities; promoting its development and providing an interface between Nigeria and the international maritime industry and community. Thus, through the Cabotage law and the amendments, several opportunities surfaced gaving Nigerians competitive opportunities against the foreigners. Such opportunities include ownership rights, employments, new education system, business opportunities, economic growth, and port development. However, all has not been smooth all through as the Act is yet to positively influence the performance of the Nigerian maritime commerce and industry. This is because of the eminent challenges facing the industry such as corruption, frequent change of CEO’s, inadequate indigenous capacity, liberalization policy, and Cabotage vessel financing fund inefficiencies. Opportunities realized in the Nigeria shipping industry Ownership Rights With the inception of the Cabotage Act, the coastal trade opportunities which were at the exclusion of foreigners were opened to Nigerian citizenry. The initiation of the Act and its incorporation in the Constitution of the Federal-Republic of Nigeria, made it possible for Nigerian citizenry to have ownership rights. As foreigners, they too we able to own maritime companies and shipping vessels. The structure envisaged policies that in a way excluded the foreign corporate entities. Subsequently, the ownership structure thus was redefined by the identity of the person who truly possessed and managed the equity of both the vessel and the ship-holding business (Akpobolokemi, 2012). Therefore, the competitive advantage held previously by the foreign entities was relatively lowered to what it is today, which has enabled more Nigerians to enter into the shipping business. Development of New Businesses Several businesses followed the enactment of the Act in 2003. The support for such business opportunities is envisaged in the four pillars of the Nigerian Cabotage system particularly, in sections 3-6 of the 2003 Cabotage Act. The section reserves the coastal enterprises for the Nigerians such as “the carriage of goods and commuters on ferry vessels built, owned, registered within Nigeria, and operated by qualified Nigerian seafarers.” (Akpobolokemi, 2012). In addition, such businesses include passengers ferry services for ferrying commuters, “towage and salvage; liquid bulk carriage (chemicals, oil and its derivatives) and dry bulk transport (coal, iron ore & grains) as well as other facilitation businesses such as Marine engineering spare parts supplies, Shipbuilding & repair [ship yards, emergency repair facilities, repair yards & anchorage]” (Akpobolokemi, 2012). A New Education System The rapid growth of the maritime trade meant that there was a need to equip people with skills to facilitate efficient service delivery. This led to a new system of education to offer training corresponding to the needs of the maritime industry. Consequently, deliberate efforts with a vast spending by the Nigerian National Petroleum Cooperation (NNPC) in partnership with other corporations, realized a new-crop of professionals needed in the industry. Some of these highly experienced and competent practitioners are proficient in the fields of engineering, geology, geophysics, clearing, and forwarding specialists (Balouga, 2012). Further, there are plans also to develop new maritime training schools to boost the existing ones to ensure there is a full exploitation of the country’s resources. For instance, in support of the act, Dr Okey Ude- the Chair of house of representative wrote a letter to the former president Obasanjo urging him to establish training facilities at the Nigeria Maritime academy (Ajiye, 2013). Employment Opportunities Unlike the situation before when most of the best jobs were a reserve for the foreigners, the ratification of the Cabotage Act prioritized employment opportunities to the native Nigerians. For instance, Nigerian Maritime service providers with potential and certification especially, in the oil and gas sectors, were given priority in employment in the industry. Additionally, the Agency of Employment of Seafarers Cabotage Vessels maintains that there is the need replacing or substituting any foreigners on Cabotage Vessel boards with local equivalent personnel if available. Further, being the chief employer of the ship operators and service-men in Nigeria, the oil and gas industry has instigated full implementation of its local content strategies by utilizing the Cabotage Act as a yardstick for vessel employment. (Akpobolokemi, 2012). Nigerian Economic Growth The ultimate Agenda of the Federal Republic of Nigeria was at attaining economic growth. For instance, as outlined in the Act, the ultimate endeavour of Cabotage regime is to achieve significant participation of the country and Nigerians in the coastal maritime businesses to increase the competitiveness of the country in the global shipping industry (Ekpo, 2011).. Moreover, besides providing infrastructure for the coastal maritime development, the flourishing local maritime sector is also a probable Revenue earner for the federal republic of Nigeria. That notwithstanding, the act has enabled Nigeria realize massive economic benefits such as diversification of the economy, employment provisions, etc. (NMA, 2003). Other significant developments include the dispensation of the major port terminals in the country to private operators (Ekpo, 2011). Challenges facing Nigeria shipping and the Cabotage Act Corruption in the Sector Despite cheerful aspiration by the initiators of the Cabotage act, the trending corruption within the sector is reaping the efforts of hardworking Nigeria citizens. It is notable despite the government’s failure to provide enough financial support to facilitate the attainment of the Act’s goals. As noted by Olukoju, immediately after the ratification of the Cabotage Act of 2003, the federal government of Nigeria offered only 25 million dollars for maritime operation development, an extremely meager amount against the huge Nigeria population. Instead of Nigerian Maritime authority putting these meager resources into meaningfully development of the industry, the funds are being embezzled by corrupt dealings by successive governments and their fellows (thenigerianvoice.com, 2012). Another range of corrupt dealings is in movement of sophisticated goods to Nigeria, and the trend is very risking for an average Nigeria-owned vessel. Such rampant corruption is evident, as Japanese, and Singaporean owned vessels are seen flooding Nigerian coastline with prohibited substances and goods amid face of the Cabotage regulation (Lazarus and Ukpere, 2011). That remains a big worry if the act is to achieve its milestone of promoting native participation in the maritime industry. Frequent Change of CEO and Overall Management In addition to corruption, the frequent unnecessary reshuffle of management of the Agencies is another huge challenge facing the Cabotage Act. There is an absolute lack of goodwill and leadership tolerance, which is diminishing the achievements and goals of the Cabotage act. Since inception, the agencies that were mandated to implement the policy have lacked stability as they are faced with time-to-time change of Chief executive officers. For instance, according Mr Akinola (CEO at Singal gas & oil Ltd), the government has consistently failed to promote leadership stability in the shipping sector. He accuses the government of frequent changes of CEO’s of relevant agency heads and the politicization of specialized appointments. Mr. Akinola, further notes that the unwillingness attitude of the government to support the CEO’s, is evident due to the reluctance of the National Assembly passing bills to facilitate the implementation of the act. For instance, the Ports and Harbours bill has failed to pass despite being in the corridors of the National Assembly for five years since the executive arm of government of the government drafted it. Such lack of seriousness by the national assembly on matters ailing the shipping industry is a precipitate for lack of goodwill (Shipsandports.com.ng, 2013). Consistent Lack of Enough Capacity Further, despite the efforts that have been invoked since the inception of the policy in 2003 on training and equipping human capital, not so much has been achieved because the inadequacies are still prevalent. The shortage of native ownership, construction and building skills, and operating capacity is recurrent and much is due to the continued evolvement of shipping technology and lack innovativeness to cope with changes (Balouga, 2012). The acts’ stipulation that vessels must be owned built and managed by only Nigerians is totally impractical. This is because the natives do not have enough vessels to feed the market for Cabotage operations as visualized by the Act. There is also inadequate shipbuilding technology and ship maintenance yards in Nigeria to facilitate the building of necessary vessels. Since the shipping industry is capital intensive in either nature when acquiring new or second-hand vessels, it is difficult for the local investors to control fully and run the industry. Moreover, the shipping industry is a long-term venture in which returns often take a long time to suffice, therefore, since many young Nigerian investors lack collateral to guarantee loans, the hardship to establish the businesses is inevitable. (Akpobolokemi, 2012; Wilson, 2002). Liberalization Effect The influence of liberalization is another factor that has negatively impacted the Nigerian shipping industry. Certain international policies in the shipping industry sometimes make it difficult to implement state or national level policies. For instance, the formulation and implementation of Nigerian Cabotage Act was a direct intervention by the government via the Nigerian Maritime Administration and Safety Agency (NIMASA). This was to penetrate the lucrative Nigerian marine sector, which was highly dominated by foreign entities as a way to liberate the indigenous operators from looming extermination (Ekpo, 2011). As a result, this was a manipulation or breakdown of the UN Committee on Trade & Development (UNCTAD) policy of 1987, which envisaged a cargo allocation formula established by a 10th Decree of the policy about cargo reservations to native shipping companies. Thus, for it to be practicable in Nigeria situation, it led to the enactment of the Cabotage Act to safeguard the indigenous operatives such as vessel builders, seafarers and other associated maritime services suppliers. Such evidence is clear that certain international policies that control maritime trade are sometimes unfeasible at least at the national level. This is because they often contain certain some ambiguities at the execution stage that conflicts with national or local Acts (thenigerianvoice.com, 2012). Ineffectiveness of the Cabotage Vessel Financing Fund (CVFF) As envisaged in part VII, section 42 of the act, the CVFF’s purpose was to facilitate the development of native ships and acquisitions by providing financial backing to Nigerian operatives in the domestic shipping industry (Akpobolokemi, 2012). However, this has not yielded much because local operators who submit applications to quest for the funds do not meet the necessary risk criterion of the Primary Lending Institutions. The criterion is permitted by the maritime Agency, which means the agency will bear all the risks of every institution they propose or guarantee for the loan. Moreover, the CVFF fund requires that all applicants make a 15% equity contribution to the fund as required by the guiding principle. However, most of the native operators are incapable of providing such equity and therefore they are hampered from accessing the fund. (Akpobolokemi, 2012; Obaremi, 2007). Therefore, it is apparent that the Nigeria maritime sector together with the Cabotage Act, which acts as a facilitation tool, is yet to fully realize the goals as well as realizing the full potential of a sustainable social and economic development of the maritime industry. Nonetheless, the industry has offered a number of opportunities to the local people amid a number of challenges facing the industry and the implementation of the Cabotage Act. Therefore, to achieve full potential of the industry there is a need to invoke several deliberate initiations and measures focused on improving workforce development; maritime security; improving ports management and encouraging political and leadership goodwill. Ultimately, NIMASA ought to ensure stringent compliance with the Cabotage Act while the government should fight corruption and show political tolerance by respecting the CEO’s of the maritime industry. Bibliography AJIYE, S. O., 2013. Nigerian Cabotage: Its Policy, Prospects, and Challenges. Journal of Economics and Sustainable Development, 4(14), 11-1 AKPOBOLOKEMI, P., 2014. CABOTAGE: A CASE STUDY OF THE NIGERIAN REGIME. 1st ed. [eBook] South Africa, pp.1-42. Available at: http://www.samsa.org.za/sites/samsa.org.za/files/CABOTAGE%20-%20%20A%20CASE%20STUDY%20OF%20THE%20NIGERIAN%20REGIME-Patrick%20Akpobolokemi.pdf [Accessed 6 Nov. 2014]. BALOUGA, J., 2012. Nigerian local content: challenges and prospects. International Association for Energy Economics International Association for Energy Economics. EKPO, E. I., 2011. Impact of Shipping on Nigerian Economy: Implications for Sustainable Development. Journal of Educational and Social Research. LAZARUS, O., & Ukpere, W. I., 2011. A strategic reposition of the maritime industry for economic recovery and sustainability: “The Cabotage Act”. OBAREMI, N., 2007. Insurance in Nigeria. African Business, (330). NATIONAL MARITIME AUTHORITY. (2003). Compilation of Nigerian maritime laws (Vol.1). Lagos: El-Machi Publishers Ltd. ORJI U.J, “How has the Nigerian Maritime Industry Performed in the Last 50 years?”Ships and Ports Weekly (January, 2011) available at https://www.academia.edu/1037968/How_has_the_Nigerian_Maritime_Industry_performed_in_the_Last_50_years SHIPSANDPORTS.COM.NG, 2013. Ships & Ports ...the voice of the maritime industry.. [Online] Available at: http://www.shipsandports.com.ng/news.php?id=938 [Accessed 6 Nov. 2014]. THENIGERIANVOICE.COM, 2012. CABOTAGE REGIME: NIGERIA STILL LOSES $100M ANNUALLY. [Online] Available at: http://www.thenigerianvoice.com/news/81266/1/cabotage-regime-nigeria-still-loses-100m-annually.html [Accessed 6 Nov. 2014]. WILSON, I.N., 2012.Opportunities in Nigeria’s Cabotage: Foreign. (n.d.). Retrieved from http://www.mondaq.com//33887/Marine+Shipping/Opportunities+in+Nigerias+Cabotage Read More