This Day (Lagos)

10 August 2012

Nigeria: 'Govt Should Provide Adequate Security in the Maritime Industry'

interview

Chief Executive Officer of Stone Bridge Maritime Services, Mr. Samuel Owa, told Chika Amanze-Nwachuku, that insecurity, shortage of manpower and inadequate finance were major challenges confronting the Nigerian maritime industry. Excerpts:

Can you give a brief overview of your business activities

Our flagship is Stonbridge business Maritime, which is into shipping oil products for oil marketers. We have tankers that service West African Coast, that is to say service Nigeria, Benin Republic, Ghana and Ivory Coast. We have different sizes of vessels just to support the oil industry in Nigeria. We are one of the few indigenous companies that have an A class vessel chartering business. There is also the oil arm of Stonebridge group. We are also marketers of refined oil products- Premium Motor Spirit, (PMS), automotive gas oil (AGO) and Dual purpose Kerosene DPK, but mostly we deal in Bulk trading with some oil majors.

There are claims that foreigners are the major operators in the maritime industry. Do you agree?

It is unfortunate that we find ourselves in this situation, the shipping industry is an international business that is being run locally and running shipping company you have to conform to the international standards that guide the operations of the industry. Your vessels have to comply with International Maritime Organisation requirement. They have to be in class and good condition if not, the class would not pass you.

The major problem which we have in Nigerian shipping industry is manpower. The shipping industry is a specialised industry but after the death of the Nigerian Shipping Line, the level of manpower depreciated terribly. Most of the people that were trained by the Nigerian Shipping Line are getting older. They are within the age range of 60 and 65. The younger ones in the system who are mariners do not have the opportunity to get where they could better their skills.

The Maritime school in Oron has not been able to do much. You are very much aware of the economic situation of the country; I am one of those people that really feel bad. Sometimes, some have to go to Ghana to upgrade their certificates. Shortage of manpower is big problem. You also realise that shipping is highly capital intensive business because you are talking of about machinery of between $40 and $50million.

Another major problem that we have is financing; as you know, shipping is capital intensive; the foreigner has the advantage of easy access to money to funding. In their own case, the funding scheme is such that they have longer years to repay back. When they buy vessel in their own countries, it takes between 20 to 30 years to repay unlike in Nigeria, where for the same size of vessel, you have a minimum period of three years to pay back. With this type of situation, the pressure of paying back the money borrowed from the banks, coupled with cost of maintaining it, becomes highly unbearable.

Again, the problem is that the foreigners bring their vessels to come and trade in the country without necessarily passing through the regulatory requirement set by Nigerian government. They come and charge the lower price. They also have the manpower to support their vessels. So, it takes a great deal of challenge because we are competing with foreigners who have newer machinery. Above all, most of these foreigners are backed up by first class insurance companies abroad.

However, having said that, I must give credit to Nigerian banks they are coming on strongly unlike what it used to be and they still need a lot of support from government. Talking in terms of repayment period and we should have what we call Maritime fund or cabatoge fund and the patronage from the government too. For instance, Nigeria is one of the few countries in the world that allow its crude oil under the contract that is called free on Board (FOB) - that is buyers of the crude bring their vessels and lift it, but this is not so in other countries.

The local shippers are the ones that do that lifting. If we the local shippers have the opportunity to lift the crude, the source of repayment of loans taken from the banks are guaranteed and the Nigerian banks would be ready to give loans that would have long tenure of about 10 or more years, knowing that you have haulage contract with Nigerian National Petroleum Corporation that has a life span of about 5 to 10 years. With this, local operators would be able to fund new vessels and they are supported with technical know-how. But in this country, the businessmen in the shipping business are just left to struggle on their own. We really want government to intervene in growing the local shipping industry.

But the Nigerian local content board has promised to intervene in order to help the local shipping operators?

Yes, the process has started, but you know they have just come on board not quite three years now, but we have been discussing with them. The discussion has been going on and it may, at least, have brought some improvement on the industry. But we need to appeal to Nigerian businessmen to allow the Nigerian Content Programme in the maritime industry to run with all sincerity. If they fail to ensure sincerity in the execution of the scheme, we may have ourselves to blame because it could run into problems.

What I mean by being sincere is that we should ensure that those companies are really indigenous; this is when we can benefit from it as skills can be transferred to local people. But if the situation is such that the company is Nigerian and the people behind it are foreigners, it would not augur well for us, and we must watch out for this particular area very well if the indigenous companies are to survive.

Are there no insurance companies that give full support to maritime business in Nigeria?

The insurance is quite different from the day to day insurance that is operated as vehicle insurance. There is what is called P and I club. The level in which we are now is that we are trying to see if we can have our own P and I club. It is an association of ship owners and different operators in the Maritime industry that takes the risk for the insured vessel so that when there is an accident the group would protect you. For now, we have to continue to patronise the foreign-based P and I club which we don't have in Nigeria.

There are some insurance companies that are in the business though, but they still have to go to other insurance companies overseas to reinsure them after they insure you locally. Time was when a vessel hired to go to the eastern part of the country such as Calabar, Port Harcourt and Warri would be asked to pay war risk insurance which was phenomenal.

A lot of foreign exchange that would be made available for us to develop as industry is paid to these foreign companies. This is one of the problems we have.

How can government help in this matter?

We have been calling for the establishment of maritime bank because shipping business is different from the lending business in the banking industry. Banks in Nigeria take short term funding. You cannot take short term funding and go and invest it in long term investment. It can lead to the liquidation of the bank. But a Maritime bank would understand the business better- the challenges, ship owners can have at any point in time. If there were to be a Maritime bank, it would not happen because it is something they do every day. They would appreciate it better.

The second area is the developing of our coastal route. The busiest jetty here where we discharge products is about 6.4 metre draft. This is too low for any vessel to operate. It is not something an individual can do. We should be able to have 9 or 10 metres draft so that there would no restriction for any vessel to come in and discharge. Most of the time, we have our vessels run aground because of the poor management of the channels. So, if government can do this, it would help the business a lot.

Thirdly, the issue of security is also important; this is because the rate at which pirates attack vessels nowadays is becoming too frequent. This was alien to us here two years ago. But now, it is a daily occurrence. So, if the government assists us to tackle the issue of insecurity, funding by establishing Maritime, ensuring good maintenance of the channels, these would go a long way to make the business easy for the operators.

What are the impacts of these things you have mentioned on your operations

These have a lot of impact on the economy. The poor draft being experienced has prevented larger vessels from coming. So, you have to engage in Transshipment. This is a waste of resources and it constitutes serious delays in the distribution of products. The poor funding system does not allow you to have access to buy equipment in the market. Consequently, you are forced to buy old vessels with all the problems associated with them.

In 2015 single hall vessel is going to be phased out, but to buy a 24,000-metric ton double vessel, you are talking about $35 million. The cost of running and maintenance is going to be very high. At the end of the day as a businessman your bottom line is going to be very thin. And if you don't have enough funds for the maintenance, it will not allow you to secure business from your clients.

If there is no security, the neighboring countries would take the business away from Nigeria. All these problems we address as fast as possible because of our large market. About 80 percent of the vessels owned on the Nigeria, seas are owned by foreigners. They believe this fertile market where they can make money. Nigerians are charged higher rates that they can never get anywhere in the world. This is because the users of the vessel don't have alternative and whatever they charge, Nigerians have no choice but to patronise them.

As a trader, because you are lifting a product of about 10,000 metric tons which is almost about $10 million, you will not want to take the risk of using a vessel that is not in a good condition. Therefore, you will prefer to use a foreign vessel. Nigerian businessman that bought a rickety vessel would not be patronised and would not be able to meet up with the repayment programme on time and may eventually park up thereby increasing the unemployment level in Nigeria.

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