Post by Trade facilitator on Jun 20, 2018 13:32:06 GMT 1
As Nigeria continue to be confronted with low indigenous participation in the shipping trade, the Federal Government should critically study events in the maritime sector of the country so as not to again throw taxpayers' money down another black hole. A plan being hatched by apparatchiks for yet another special intervention fund to bail out local ship owners is misplaced and alarming in a country where such funds have been serially embezzled. Stimulating the maritime industry requires a more creative policy framework that will make shipping attractive to investors, ease access to cheap funding and encourage mergers.
The government's desire to empower indigenous shipowners as is being speculated in some quarters, is commendable but needed to be meticulously studied. Doing so through another intervention fund is certainly not. According to experts, the government plans an intervention to enable indigenous shippers flying the Nigerian flag to develop the capacity to ply international harbours. They explained that the intervention would empower Nigerians to acquire ships, thereby retaining freight within the economy, boosting the insurance sector and providing jobs for several cadres of professionals and other workers.
An expert, Samsideen got it right when he said that the government sought to create the enabling environment to significantly boost the indigenous shipping business and make the right noises about fixing the roads leading to Apapa ports, providing a rail link streamlining the clearance of goods at the ports.
The fatal flaw however is the move to set up another intervention fund. Such funds have become conduits for filching public funds and have achieved very little. In June, 2012, the Senate Aviation Committee raised the alarm that part of the N300 billion Power and Aviation Intervention Fund had been diverted by operators into other uses. It is not known how much of the N181 billion the Central Bank of Nigeria said it disbursed since 2012 from the fund is recoverable. But the N35.5 billion reportedly given to the now-grounded Air Nigeria is alleged to have been misapplied. Herbert Ajayi, former President of the National Association of Chambers of Commerce, Industry Mines and Agriculture, had then said similar funds such as the N200 billion Small and Medium Enterprises Credit Guarantee Scheme, the Restructuring and Refining Facility and other intervention schemes designed to revive the real sector were likely to fail unless government changed tactics.
Usually, such funds never reach the intended beneficiaries. Again, preliminary study jointly undertaken by NACCIMA and Enhancing Nigerian Advocacy for a Better Business Environment, a non-governmental organisation, revealed that 94 per cent of applicants that then applied for FG/CBN intervention funds through the Bank of Industry were small operators who needed access to low-interest credit most and had the greatest potential for massive job creation.
The shipping industry is certainly in crisis and deserves urgent attention as part of an overall economic rejuvenation plan. The maritime sector is adjudged the second largest revenue-generating industry after oil and gas, providing about 85 percent of our import-export trade and experts say that, with the right policies, it could provide up to 30 percent of government's revenues. The government should, instead of creating another corruption-fuelled conduit, ensure the scrupulous implementation of the Coastal and Inland Shipping Act 2003, which is a bold attempt to promote indigenous shipping. The law created a Cabotage Vessel Financing Fund to give low-interest credit to local shippers to enable them to acquire ships. It also stipulated that all vessels operating on Nigeria's territorial waters be built in Nigeria, owned, crewed and maintained in Nigeria.
But it is government agencies such as the Nigerian National Petroleum Corporation and its subsidiaries that have denied local shippers patronage in preference for foreign firms, while the Indigenous Shipowners Association of Nigeria insists that most of its members have not benefited from the fund and that seven years after, 90 per cent of revenue from Nigeria's shipping sector still goes to foreign shipowners.
The problems of local shipowners include lack of finance for expansion, shortage of seafarers, lack of required tonnage to compete, lack of local ship-building and repair infrastructure and the inevitable corruption that drives officials to prefer giving lucrative contracts to foreign firms. Efforts to raise local participation in the 152 million metric tonnes of oil and non-oil cargo generated in the country should focus on effective regulation and enforcement of the Cabotage Act.
The NNPC and other operators must be made to obey the law, while the government should review its tariffs and duties on relevant equipment and machinery. Funding to the private sector is better provided through BoI and the regular banks, while fiscal and monetary policies should be harmonised to achieve a single-digit lending rate and stabilise the financial system.
But the most critical factor required is the restructuring of businesses by indigenous ship operators. The business has become too big for sole proprietors and single-ship outfits. Operators should arrange mergers and combinations similar to the banking sector consolidation. They should bring in seasoned managers from across the globe, remodel their firms for efficiency and adopt global corporate governance best practices.
The government's desire to empower indigenous shipowners as is being speculated in some quarters, is commendable but needed to be meticulously studied. Doing so through another intervention fund is certainly not. According to experts, the government plans an intervention to enable indigenous shippers flying the Nigerian flag to develop the capacity to ply international harbours. They explained that the intervention would empower Nigerians to acquire ships, thereby retaining freight within the economy, boosting the insurance sector and providing jobs for several cadres of professionals and other workers.
An expert, Samsideen got it right when he said that the government sought to create the enabling environment to significantly boost the indigenous shipping business and make the right noises about fixing the roads leading to Apapa ports, providing a rail link streamlining the clearance of goods at the ports.
The fatal flaw however is the move to set up another intervention fund. Such funds have become conduits for filching public funds and have achieved very little. In June, 2012, the Senate Aviation Committee raised the alarm that part of the N300 billion Power and Aviation Intervention Fund had been diverted by operators into other uses. It is not known how much of the N181 billion the Central Bank of Nigeria said it disbursed since 2012 from the fund is recoverable. But the N35.5 billion reportedly given to the now-grounded Air Nigeria is alleged to have been misapplied. Herbert Ajayi, former President of the National Association of Chambers of Commerce, Industry Mines and Agriculture, had then said similar funds such as the N200 billion Small and Medium Enterprises Credit Guarantee Scheme, the Restructuring and Refining Facility and other intervention schemes designed to revive the real sector were likely to fail unless government changed tactics.
Usually, such funds never reach the intended beneficiaries. Again, preliminary study jointly undertaken by NACCIMA and Enhancing Nigerian Advocacy for a Better Business Environment, a non-governmental organisation, revealed that 94 per cent of applicants that then applied for FG/CBN intervention funds through the Bank of Industry were small operators who needed access to low-interest credit most and had the greatest potential for massive job creation.
The shipping industry is certainly in crisis and deserves urgent attention as part of an overall economic rejuvenation plan. The maritime sector is adjudged the second largest revenue-generating industry after oil and gas, providing about 85 percent of our import-export trade and experts say that, with the right policies, it could provide up to 30 percent of government's revenues. The government should, instead of creating another corruption-fuelled conduit, ensure the scrupulous implementation of the Coastal and Inland Shipping Act 2003, which is a bold attempt to promote indigenous shipping. The law created a Cabotage Vessel Financing Fund to give low-interest credit to local shippers to enable them to acquire ships. It also stipulated that all vessels operating on Nigeria's territorial waters be built in Nigeria, owned, crewed and maintained in Nigeria.
But it is government agencies such as the Nigerian National Petroleum Corporation and its subsidiaries that have denied local shippers patronage in preference for foreign firms, while the Indigenous Shipowners Association of Nigeria insists that most of its members have not benefited from the fund and that seven years after, 90 per cent of revenue from Nigeria's shipping sector still goes to foreign shipowners.
The problems of local shipowners include lack of finance for expansion, shortage of seafarers, lack of required tonnage to compete, lack of local ship-building and repair infrastructure and the inevitable corruption that drives officials to prefer giving lucrative contracts to foreign firms. Efforts to raise local participation in the 152 million metric tonnes of oil and non-oil cargo generated in the country should focus on effective regulation and enforcement of the Cabotage Act.
The NNPC and other operators must be made to obey the law, while the government should review its tariffs and duties on relevant equipment and machinery. Funding to the private sector is better provided through BoI and the regular banks, while fiscal and monetary policies should be harmonised to achieve a single-digit lending rate and stabilise the financial system.
But the most critical factor required is the restructuring of businesses by indigenous ship operators. The business has become too big for sole proprietors and single-ship outfits. Operators should arrange mergers and combinations similar to the banking sector consolidation. They should bring in seasoned managers from across the globe, remodel their firms for efficiency and adopt global corporate governance best practices.
