ABSTRACT

In 2003 the cabotage law  was enacted with provisions  to empower  local investors to take control of the domestic shipping trade and from it develop enough muscle to assume the right of place for Nigeria as a maritime nation in the movement of her import/export cargoes including crude oil to and from international markets. The implementation/enforcement of the provisions of the Act  needs to be constantly monitored to ensure that the goals and objectives of the law are  pursued with vigor and accomplished. Thus, the object of the study is to verify the alleged unabated dominance of the coastal services by foreign flag operators; the impact on the Cabotage Act 2003 on local capacity development in terms of tonnage, human resources and cargo support. The research made effort to highlight people’s views that are relevant to the study and this formed the literature review. The major instrument used for the study is a set of questionnaires served on a population of 55 industry stakeholders out of which 27 responded. The data obtained were statistically analysed with the chi-square model and pie chart for presentation as  explanatory model. The findings of the study revealed factors hindering the achievement of the objectives of  the Acts such as lack of funds, failure on the part of NIMASA to process the applications for the cabotage vessel finance fund loan for tonnage expansion; lack of commitment by NAPPIMS and PPMC to guarantee cargo support to indigenous operators; NIMASA lukewarm attitude in enforcing the provisions of the Act. The study also noted that most of the  cabotage  vessels operated by most indigenous shipping companies are below specified standards and are un- seaworthy. Also it was noted that there was a growing lack of seafarers particularly qualified and certified marine engineers and navigators to operate the few available cabotage vessels. The study recommended strategies to enhance indigenous participation and reduce the foreign dominance.  For example, NMASA is urged to make the cabotage vessel finance Fund/loan  facility accessible to local operators for fleet  expansion and to make solid arrangements for cadet-ship  sea-training   to enhance proficiency and avoid importation of manpower. PPMC and NAPPIMS should guarantee long time charter of the fleet as a kind of incentive against idle moment. On the other hand local operators should try to present standard and seaworthy vessels for optimal cabotage operations and clean seaassurances.

CHAPTER ONE

INTRODUCTION

1.1              BACKGROUND:

According to Ekwenna (2003) Fleet Expansion Feasibility Study he found that the world depends on merchant ships to transport over 80 percent (by weight) of all international sea-borne trade. The global economics of the 1990s could not exist without ocean shipping. International economic integration supported by ocean transport has been developing for centuries. To create demand for ships, the  trade must be  sea-borne  and  the longer the distance over which a commodity moves, the greater the demand for ships  in that trade. Thus, it is the pattern of world trade that is the most important factor in determining the need for shipping activity and, in this regard, ship owners often  refer to the tonne-mile demand (one tonne of cargo transported in onemile).

Ships now transport more than four billion tones of cargo each year and the total annual tonne-mile exceeds 19 trillion. Nigeria’s shipping market (including crude  oil) accounts for about 596 billion tone-miles (about 3.1 per cent of the world total) and yet plays  a  very significant role in the nation’s economy (cf. data on cargo throughput and traffic statistics of the Nigerian Ports Authority (NPA), in Abstract of Port Statistics, 1997-99; Fleet Expansion Feasibility Study by Ekwenna2003).

The United Nations Conference on Trade and Development (UNCTAD, 1977) in recognition of this has indicated that where national investment in shipping can be  justified economically, it should be encouraged as a means of conserving foreign  exchange or increasing the invisible earning of developing nations with an export/import potential. For developing countries such as Nigeria, foreign exchange earned from international maritime trade is a factor in their economicdevelopment.

According to Ekwenna (2003), the nation’s merchant fleet comprises of three categories of watercraft. They are:

1.                  Commercial vessels –these transport cargo orpassengers.

2.                  Industrial vessels – these perform specialized marine functions such as fishing or pipe laying, often using specializedpersonnel.

3.                  Service/Supply vessels – these provide support capability to commercial ships and/or industrialvessels.

TABLE 1.1 - Representative Vessel Types:

Commercial vessels

Industrial Vessels

ServiceVessels

General Cargo ships Containerships Tankers

Liquefied Gas Carriers Bulk Carriers Ore/Bulk/Oil (OBO)

Integrated Tugs/Barges Chemical Tankers

Suction Dredges Drilling vessels Semi submersibles Incinerator vessels Upper Dredges

Carriers’ Fish processing vessels

Fish Catching vessels

Hydrographic survey vessels

Tugboats without barges Offshore Supply Boats Crew boats

Crane Support Ships Diving Support Ships Fire Boats

Pilot Boats

Ekwenna noted that analysis of Nigeria’s balance of payment for the past three decades indicates three imbalances in the shipping industry, especially in the areas of:

-                     freight earnings/conservation – loss of revenue through non-participation of indigenous shippingcompanies,

-                     ship-ownership – only five ships (70,000 dwt.) owned by indigenous carriers, and

-                     cargo sharing – less than 12 per cent of cargo carried with Nigerianships.

From the above presentation by Ekwenna it is clear that Nigerian shipping trade is dominated by foreign flag ships to the detriment  of Nigerian  economy. Records reveal that similar scenario also prevailed in the early 1950s before the incorporation of the defunct Nigerian National Shipping LineLimited.

NIGERIA INITIAL INVOLVEMENT IN SHIPPING TRADE:

According to NNSL Magazine published by its Public Relations Department captioned “Facts about NNSL you should know”, it revealed that in February 1959, NNSL was incorporated under the Company’s Act as National Shipping Line (NSL) and was jointly owned by the Federal Government of Nigeria which held 51 per cent of its share capital, and two technical partners - Elder Dempster Lines Ltd and Palm Line Ltd., which shared between them 49 per cent of its equity. In 1961 NNSL became known as the Nigerian National Shipping Line Limited (NNSL) following the Federal Government’s acquisition of the entire equity shares of the technical partners, thus making the company a wholly- owned Federal Government enterprise.

NNSL was born out of the Federal Government desire to participate in the nation’s sea- borne trade in its conviction that a nation could lose considerable amount of foreign exchange through non-participation by indigenous institutions in her sea-borne trade, and, as a major foreign exchange earner for the country, NNSL considerably reduced net out- flow of hard currency through foreign shipping lines.

NNSL commenced business with staff compliment of about 20 and three over-aged  vessels and participated in only two trade routes. In 1977 the Federal Government embarked on fleet expansion of the company and purchased 19  all-purpose  combo  vessels consisting of nine 12,000 tons deadweight (dwt.) and ten 16000 tons deadweight respectively, and in 1980 when the last of the ships was delivered, the company’s fleet stood at 27, thus making it the largest in the West African sub-region and the largest shipping company south of theSahara.

The company operated through five Conference Lines – (a) United Kingdom/West Africa Line (UKWAL); (b) Continent/West Africa Line (COWACL), (c) Far East/ West Africa Line (FEWAC); (d) Mediterranean/West African Line (MEWAC); (e) American/West African Line (AMWAC), and also operated on the Brazilian route and participated in a joint service cooperation among some members of COWAS/UKWAL under the auspices of Europe/West Africa Service(EWAS).

Apart from providing employment for 1,400 permanent shore and sea staff as well as 400 ratings engaged intermittently on six monthly Articles, NNSL invested  millions of Naira in the development of maritime training for suitable Nigerians in all facets of maritime technology both locally and abroad. NNSL achieved the commendable feat of having its fleet completely manned by its trained Nigerians by 1984 thereby conserving foreign exchange and reducing capital flight which is usual through employment of European officers and crew. In addition NNSL operations generated employment directly and indirectly for other sectors such as stevedoring, chandler, bunkering, oil companies, Nigerian Ports Authority and clearing and forwardingcompanies.

Notably and highly commendable, NNSL was in the forefront in implementing  the nation’s maritime policy long before the emergence of the National Shipping Policy Act that established the apex maritime regulatory agency (National Maritime Authority) in 1987, through its active participation in several shipping conferences where it mounted pressure for lower freight rates (at freight negotiation meetings) even to  the detriment of its economic interest but in the greater interest of the country. These notwithstanding, NNSL’s vessels were also mobilized for emergencies and special assignments such as the movement of troops, evacuation of illegal aliens, freighting of relief materials and provision of logistic support to the Nigerian Navy at one time of theother.

The benefits of indigenous fleet and its participation in the shipping trade of a nation cannot be over-emphasized. The influence the Nigerian National Shipping Line Limited wielded in the maritime world during freight negotiation meetings and the impact of her general performance on the nation’s economy during its operational days is a positive living testimony. Thus, the memory of the defunct NNSL no doubt will continue to linger in the minds of the Federal Government and the industry operators for many more years   tocome.

1.2              STATEMENT OF THE RESEARCH PROBLEM - THE PROBLEM OF A NATION WITHOUT NATIONALFLEET:

In the absence of National Fleet and indigenous participation in providing the shipping services which add value to the import/export trade of the country, foreign  shipping service providers would have absolute prerogative to determine the regularity/non- regularity and/or availability of the shipping services. In the same vein, they will have stronger bargaining power for the freight. If they decide to create artificial scarcity of service they can easily do so in order to hike the freight rate.  By  creating  artificial scarcity they could influence reduction in the price of perishable export items to the advantage of their import businessmen and to  the disadvantage of Nigerian producers. In  a time of emergency, a nation without national fleet would be at the mercy of foreign shipping service providers for a vital component of her logistics chain (shipping) to lift heavy war equipment and personnel bearing in mind that any such  third  party  undertaking is highly risky and could have political implications. The nation suffers revenue flight, depletion of her foreign exchange reserves,  imbalance  of payment  and lose of employment opportunities for the citizens amongst others.

Consequent upon the above scenario, efforts were made by the Federal Government to sustain indigenous participation in the invisible trade (shipping) of the country side byside with the private sector initiatives such as the Nigeria Green Lines, African Ocean Lines, Nigerbrass Shipping Lines, Brawal Shipping Lines, Bulkship (N) Limited, Globe Shipping Lines, Genesis Worldwide Shipping, etc that owned foreign going dry cargo vessels.

With the above stated antecedents and accomplishments Nigeria became a power  to reckon with in the International Maritime Organization (IMO) from this part of the world and the contributions of the shipping industry to the economic, social and political developments of Nigeria cannot be over-emphasized when one considers the fast developments and industrialization that are manifest at towns close to the ports, improved balance of payment and internationalrelations.

But it is unfortunate to note that from the early 1990s the fortunes of the NNSL started to dwindle to the point of liquidation in 1995 by the Military Government. Alongside the demise of the National Carrier and disappearance of the  Federal Government fleet was  the shaky unstable existence of other private owned shipping companies. Consequently, Nigeria a giant maritime nation of Africa cannot boast ofeven a single foreign  going  ship of hers now and her foreign and coastal shipping trade participation relapsed to the  pre NNSL era dominated by the foreign flag vessels due to alleged carelessness and negligence on the part of the regulatory and enforcement agencies of government; lack of enforcement of the provisions of the Nigerian Shipping Policy Act No.10 of 1987 which provided that all Public cargoes i.e. cargoes generated by Federal, State, Local Governments and the Ministries and parastatals under them should be the prerogative of the indigenous ship operators to carry.

Asoluka (2003) noted that “In seeking to implement the NSPA, the NIMASA left out the bulk of section 14 cargoes in pursuit of section 9 cargoes. Added to the fact that its application of section 18 was reduced to bureaucratic procedure, private cargoes by the  fact of ownership, size and number were quite cumbersome to identify, control and allocate. It also tended to affect usual commercial trade practice. Asoluka observed that  the cumulative effect of poor policy thrust, implementation sequencing and  will  to impose and enforce sanctions as provided  by section 26 of the  NSPA, indeed  provided the basis for the suspension of the cargo allocation program. The reluctance to use the powers conferred on NIMASA by section 26, tended to undermine the will, seriousness and purpose of the process”. Asoluka (2003): pp. 205-206 Nigerian Maritime Resources Development Issues and Challenges Vol.1.

Also according to Associations of shipping operators, Military incursion inthe management of the National Carrier (NNSL) fraught with fraudulent and sharp practices, lack of required expertise for the specialized industry and many other vices bedeviled the operations and continued existence of the company. On the other hand, the private operators are not making much impact due to greed, lack of trust and confidence amongst

themselves, lack of ability and acceptance to imbibe scientific management strategies, even to synergize financial and material resources forgrowth.

THE PROBLEM OF NON-PARTICIPATION OF INDIGENOUS SHIPPING OPERATORS:

In a bid tostage a come-back to the World Maritime scene, the Nigerian Shipping Companies Association, the then sole voice of the indigenous shipping  practitioners  under the leadership of Alhaji Aliyu Jabu Mohammed as President and Capt Emmanuel Ihenacho as the Executive Secretary, in collaboration with Messrs Agbakoba (SAN) and Associates flagged off the first sensitization workshop on the need to provide cabotage  law for Nigeria at the Kosi Wahala Hall at the Nigerdock (Nigeria)  Limited,  Snake Island, Lagos on Wednesday, 7thFebruary, 2001 ostensibly because of the robust benefits derivable from the establishment of cabotage regime inNigeria.

The awareness workshop brought a cross-section of maritime industry stakeholders together including House Committee on Transport, Senate Committee on Transport, Shipping Chieftains, Maritime Lawyers, Insurance firms, Bankers and gentlemen of the Press(the Print and the Electronics) etc. The communiqué at the end of the workshop triggered greater awareness and agitation for the cabotage law against the foreign domination of the international and domestic shipping trade of the country that had been  to the detriment of the local operators and the nationaleconomy.

According to (Maritime Quarterly May-June 2001 page 5), in response to the call for cabotage law by Nigerians, the House Committee on Transport under  the Chairmanship  of Dr. Okey Udeh organized a Public Hearing at Hearing Room 11 of the National Assembly, Abuja and Distinguished Senators and Honorable Members of the National Assembly concerned with maritime transport interests, Captains of Maritime Industry and Oil and Gas Industry operators etc were present. The impressive attendance at the Public Hearing and the caliber of the people who participated in the discussions spoke volumes and expressed the interest and passion Nigerians had for the cabotageinitiative.

The Chairman House Committee on Transport flagged off the proceedings and in his opening speech he said that the first logical step to formulating new set of laws governing the conduct of international shipping is to have an effective cabotage law in place adding that once Nigerians are able to regulate the shipping activities within the inland coastal  and territorial waters, foray into international ocean-going marine transportation will evolve naturally. According to him, in countries where the national fleet has virtually disappeared, the introduction of cabotage arrangements represents the mainand sometimes the only serious possibility remaining to prop up indigenous enterprises and secure employment for localseafarers.

Omoteso (2001) stated that given the competitive nature of international shipping and the dominant nature of some multinationals, Nigerian companies cannot compete favourably. He said if Nigeria could successfully make a second foray into international shipping, “charity has to begin at home.” Invariably, indigenous capacity in tonnage and personnel should be developed through cabotage.

Ihenacho (2001) said enacting a cabotage law followed by a “diligent implementation of  its provisions” will go a long way towards facilitating the recovery of certain major economic benefits currently foregone by Nigeria as well as strengthen the strategic and national security situation in the country’s  coastal locations. Acknowledging the concern in certain quarters of the perception of cabotage by Nigeria’s foreign trading partners at a time of liberalization and globalization, Ihenacho further said the nature of the market reservation protection which will be conferred on local maritime operators would be similar to that which is currently enjoyed by domestic road transport  operators undertaking a network passenger and freight services to destinations nationwide. He further emphasized that Nigerian cabotage business does not involve the interdiction of  the rights of international traders but involves the reservation of the rights for Nigerians   to carry Nigerian trade goods between Nigerian origin and destination points and the delivery of shipping logistics support services within Nigerian territorial waters, using available Nigerian resources in the first instance. He also pointed out that similar legislation exists elsewhere, especially among advocates of liberalization.

According to Ihenacho, Worldwide, there are over 42 countries with various shades of cabotage law in place and they are mainly developed countries. Apart  from  the U.S.  other   developed   countries   include   Japan,   Canada,    Australia,    France,    Italy, Spain and Sweden. Others are South Korea, India, Russia, Singapore, Saudi Arabia, Romania, Brazil and China. Algeria, Egypt and Malaysia are also known to have functional cabotagelaws.

Udeh (2001) declared “Most great nations have extensive coastlines. There is hardly any landlocked country that can be considered great. But the great nations first had to take control of their coastlines”.

Igbokwe (2001), held that like the U.S. Jones Act, Nigeria cabotage law will limit domestic water borne trade to Nigerian-owned, built, crewed and operated ships. Such a law will bring about the establishment of Nigeria – only ownership and control over the domestic fleet, domestic marine transportation system and the national maritime infrastructure. Since water transportation is a key aspect of the Nigerian economy, Igbokwe said it should enable Nigerians own, control andretain the ownership  and control of the operation of such a key section of the economy, eliminate foreign control, domination and competition from that sector and prevent avoidable damage to the  Nigerian economy through foreignmanipulation.

From the above inputs from distinguished eloquent contributors, participants at the public hearing were able to deduce that despite the growing call for liberation, deregulation and globalization, cabotage regimes remain an area that is immune to all the new thinking. Every maritime nation aspires to develop indigenous merchant fleet not just to protect her interests in the face of sundry international competition but also provide a strong support base for development of infrastructure, exploitation of resources and employment generation. – Maritime Quarterly May-June 2001.

THE NIGERIAN CABOTAGE ACT AND THE OBJECTIVES:

The Coastal and Inland Shipping (Cabotage) Act, 2003 (“the  Act”) came into  existence on 30th April, 2003. Its provisions became enforceable from 1st May 2004 allowing one year transitional period. In April 2004 before the enforcement date, the Honourable Minister of Transport published Guidelines on the Implementation of theAct:-

STRUCTURE OF THE ACT:

According to Nwokedi 2001, Law in many situations may be used as a tool for social engineering or economic development. This often happens in developing economies where, to keep up with international trends, government policy has to be driven in a particular direction asopposed to  allowing it evolve over times as  determined by prevalent economic factors. That has been the case in Nigeria in the past. To appreciate fully then, the challenges presented by this Act, it is necessary to look at the structure of the Act as a tool or driver for economic development. The Act itself is quite straightforward. It is set out in nine parts made up of 55sections:

Part 1:

Comprising of sections 1 and 2 define cabotage, the scope of the Act and the intention of the Legislature and by so doing dictates new parameters for the regulation of the oil and gas industry in Nigeria. In this regard it covers all aspects of exploration, production and development activities.

Part 2:

Sections 3-8 provides that a vessel other than a vessel wholly owned and manned by a Nigerian citizen, built and registered in Nigeria shall not engage in Cabotage. This restriction applies up tothe extent of the Exclusive Economic Zone, which is approximately 200 nautical miles seaward from the outer limits of the coastline.

Part 3:

Section 9-14 deals with waivers and the conditions precedent to the grant of waivers, the duration of waivers and further empowers the Minister of Transport to publish guidelines for the waiver system.

Part 4:

Sections 15-21 treats the licensing of foreign vessels, and seeks to bring the foreign flagged vessels under the control of the regulatorybody.

Part 5:

Sections 22-28 deal with registration issues. Section 22 in particular provides for the establishment of a Special Cabotage Vessels Register while Section 23 qualifies the conditions for registration of Cabotage vessels.

Part 6:

Sections 29-34 seeks to create a cabotage enforcement unit within the Nigerian Maritime Administration and Safety Agency (NIMASA) to police the implementation of and compliance with cabotage. Section 31 herein grants the enforcement officers very wide powers of arrest and detention of the vessel in the conduct of the duties.

Part 7:

Sections 35-41 criminalize acts in contravention of this Act by imposing stiff fines for non-compliance. Happily there are no jail terms.

Part 8:

Sections 42-45 established a cabotage vessel financing fund. The pertinent point to note here is that Section 43 of the Act imposes an additional surcharge or tax of 2% of the contract sum of any contract performed by any vessel.