Shipping is the movement of
freight from one location to another. It meets the need to move cargo from one
place to another. So, shipping sector is a section of the economy that engages
in income generation from moving cargo from one place to another. It is a
well-known fact that the shipping sector is a key sector of the Nigerian
economy owing to the fact that as an oil producing and exporting country, as
well as a consumer nation, the country is a large market for foreign goods,
because of its population.
In this regard, the
shipping sector holds the key to the nation’s growth and development. Presently,
the shipping sector is characterised by the domination of foreign flag vessels.
This situation has led to the loss of billions of naira annually in freight
revenue.
To boost indigenous participation
in the shipping sector, the followings should be done:
IMPLEMENTATION OF THE 2003
NIGERIAN
COASTAL AND INLAND SHIPPING (CABOTAGE) ACT
The Cabotage Act
is essentially a framework to restrict domestic shipping business from complete
foreign domination. It was enacted
to encourage indigenous companies participation in shipping generate freight,
expose them to coastal shipping business as a lunch pad to deep and
international shipping and provide employment for Nigerian seafarers.
It is very
unfortunate that the Act has presented nothing but 12 years of failed
expectations and worries because there are still several foreign owned vessels
providing shipping services locally. There are over 100 vessels owned by
foreigners but trading in Nigeria under questionable circumstances.
To implement
the Cabotage Act, the Federal Government should give incentives to indigenous
ship owners, for instance granting 12 years tax holiday to Nigerian
incorporated companies investing in green field projects; designating some
shipyards free trade zones to allow for import of equipment, spare-parts and
allied infrastructure and granting waivers of Value Added Tax (VAT) on ship,
engines, spare parts etc as subsidy for the capital intensive nature of the
industry in line with global practice. Other incentives are income tax
exemption for seafarers employed locally as a means of encouraging more people
to take up seafaring jobs, 50 per cent reduction in berthing charges for ships
awaiting repairs, ship laid-up after repairs and ships lying afloat for repairs
to help shipyards facilities in the country and also help reduce the overhead cost
of business.
Also, NIMASA
should give accelerated depreciation regime for ship and capital assets to
assist Nigerian companies accumulate capital for future investment in fleet
expansion, and also ensure regular maintenance for any ship that has made use
of local shipyards for upward of three times consecutively.
There should
be a review of International Commercial Terms (Incoterms) for the sale/purchase
of crude oil/petroleum products from Free on Board (FOB) to Cost, Insurance and
Freight (CIF) which is expected to enable Nigerian carriers participate in the
lifting of Cargo, especially as it affects petroleum products.
REMOVAL OF
WAIVERS CLAUSE AND THE ROLE OF NIMASA
Owing to the
waiver clause in the Cabotage Act, the Minister of Transport has powers to
grant waivers to foreign vessels to partake in Cabotage trade where he is
satisfied that there is no capacity on the part of the Nigerians with respect
to satisfying the requirements.
To boost the
indigenous participation in the shipping sector, the waiver clause must be
removed so that Transport Minister does not have the power to grant waiver to
any foreign vessel.
Also, NIMASA
should carry on the shipping sector regulation duties without interference from
anybody including the Ministry of Transport. For this to happen, the legal
framework of Cabotage must be amended in such a way that wherever the name of
the minister occurred in the Cabotage Act must be deleted and its place, it
will be inserted NIMASA.
There should
be the required synergy between NIMASA and the various government agencies and
Ministries like the Finance and Agriculture Ministries, and others that will
assist in the realisation of Cabotage. Also, there should be modernisation and
institutionalisation of NIMASA, which is the agency with the mandate of
implementing Cabotage and building shipping capacity in the country.
DISBURSEMENT
OF CABOTAGE VESSEL FINANCING FUND (CVFF):
Part of the
Federal Government’s mechanisms to indigenous local participation is the
floating of the Cabotage Vessel Financing Fund (CVFF), currently warehoused by
NIMASA. The CVFF is an intervention loan with very low interest rate meant to
assist debt-ridden local players in the shipping business, majority of whose
vessels (in near comatose state) lay idle in various ports across the country.
CVFF was also
designed to enable indigenous shipping companies acquire adequate tonnage to be
able to participate in coastal and inland trade currently dominated by foreigners,
who also dominate deep sea shipping.
The groaning
local operators are desperately longing for the CVFF loan and, painfully, no
single ship owner has successfully accessed the loan. The government has not
shown any sincere plans to assist them via the loan, as there are incredible
bureaucracies in place that have naturally robbed them of any opportunity to
access the fund.
To boost indigenous participation
in the shipping sector, the
government should demonstrate the will to develop the shipping industry through
faithful and committed disbursement of the Cabotage Vessels Financing Fund
(CVFF).
MAKING
CREDIT FACILITIES ACCESSIBLE FROM MARITIME BANK:
Loans should
be accessible from a special bank called Maritime bank that will fund shipping
industry and activities.
EXTENSION OF TENURE OF LOANS BY COMMERCIAL
BANKS:
Owing to the
fact that the Cabotage Vessels Financing Fund (CVFF) will not be enough to
satisfy the demands that will be made on it, recourse will have to be made to
other sources of funds like commercial banks.
To boost
indigenous participation in the shipping sector, Nigerian commercial banks
should learn to focus on ship building and ship ownership by funding indigenous
players. The tenure for loan repayment in Nigeria (24 months) is very
short and unfavourable for the growth of shipping business because shipping is
a long-term business that takes a long time for the investment to mature and
investors to make profit. Nigerian banks need to think of long-term borrowing
for shipping firms.
Nigerian
commercial banks should also engage professionals to head their shipping
departments, so that they do not get their fingers burnt after having invested
in ship acquisition. They also need to employ more shipping experts to help
them navigate the intricacies of vessel acquisition.
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