27 October 2017

Nigeria: Awaiting New National Shipping Line

Eromosele Abiodun wonders what happened to the report on the establishment of a new national shipping line that was submitted to the Minister of Transportation, Rotimi Amaechi last June by State-owned companies are often touted as necessary tools for development in emerging economies. This is because they can be directed by governments to achieve development ends. The model has been a success in some countries but it has been an epic failure in others. Such companies are not generally needed to provide goods. Rather, they are needed to provide the foundation for a well-functioning economy and a healthy, well-informed populace. The companies operate in a wide range of sectors across all countries, although they are mostly common in emerging markets.

Research suggests that electricity infrastructure roll-out increases employment. Related to this, transport infrastructure expansion increases economic growth in the long-run and has relatively high rates of return in industrialising countries, although that effect might not be as strong as initially believed.

Thus, state-owned companies that provide the backbone of an economy can be expected to help spur economic growth and development. While some have argued that the era of state sponsored enterprises is over, the story is different in Asia and Africa. For instance, the share of state-owned companies among the top 10 firms is 96 per cent in China, 88 per cent in the United Arab Emirates, 81 per cent in Russia, and 59 per cent in India. Given that China and India are among the fastest-growing economies in the world, it is tempting to conclude that state-owned enterprises can spur economic growth. But analysts believe that conclusion is not supported by any empirical research, and ignores the fact that even China believes it is necessary to further reform its state-owned enterprises sector.

Experts told THISDAY that state-owned companies can be found in every country in the world.

"Norway has, arguably, seen greater success than other countries, especially in Europe, while South Africa cannot point to the same levels of success. State ownership itself is not necessarily the problem. Instead, success more often hinges on managerial skill and autonomy. In Norway the government operates through the board and treats all shareholders as equals. Chinese state-owned enterprises have been spurred on by a variety of events, including increased autonomy and the impact of market forces, "said an expert in the sector who do not want his name in print.

Nigerian example

Historically, governments have set up companies to develop industries where investors seem reluctant. But is this still important in today's world? The Minister of Transport, Mr. Chibuike Amaechi believes that it is still important for government to set up companies. Last year, the minster unfolded the federal government's plan to float a new national shipping line.

Amaechi, who spoke at a Maritime Technical Summit in Lagos, explained that the new national carrier of ocean-going vessels would not be funded via the Cabotage Vessel Financing Fund (CVFF).

To this end, in April last year, the minister constituted a committee to screen shipping operators interested in acquiring part of the 60 per cent holding for Nigerians in the proposed National fleet.

The fleet is expected to have a 40 per cent foreign ownership. A members of the committee , Greg Ogbeifun, who is chairman of the Ship Owners Association of Nigeria, SOAN, and chairman/CEO, Starzs Investments Group, made this known at the Taiwo Afolabi annual maritime conference hosted by the Maritime Forum of the University of Lagos.

Ogbeifun, who said the committee has commenced work, also expressed confidence that the new national fleet, unlike the old one, will be a success. He pointed out that Amaechi, had assured of government's political will at ensuring that the new project gets cargo to carry. He quoted the minister as saying that the present government is determined to do everything possible to ensure that the new national carrier succeeds. Nigeria and Singapore recently reached an agreement to establish a private sector driven national carrier with stake-holding of 60 to 40 per cent respectively.

Minister Receives Report

Following the timeline given to the committee, it submitted its report the Minister of Transportation last year June. However, since then nothing has been hard from the Ministry of Transport, raising fears that the effort may yet be another pipe dream.

On presentation of the report from the Chairman of the committee, Mr. Olu Olusoji, in Abuja, the minister immediately constituted an implementation committee, which he said would be headed by the Chief Executive Officer of the Nigerian Shippers' Council (NSC), Mr. Hassan Bello.

According to him, it has become expedient to constitute the implementation committee immediately because government attaches premium importance to the revival of the national shipping line, adding that it will greatly impact on the socioeconomic development of the country.

Amaechi said international regulator and willing investors in the industry have given Nigeria August as deadline to put all the necessary framework and foundation for viable international maritime activities which will attract foreign investors.

According to him, "Investors have given us August as deadline on this issue. And we have said government is going to use part of the cabotage fund in this direction. We must also advise on how to choose who qualifies to benefit from the fund because the 60 per cent that we have must be accessed from the cabotage as part of their equity contribution."

He, however, warned the committee members not to allow private vested interest in the utilisation of the cabotage fund jeopardise government's good intention in the allocation of the fund to ship owners at the detriment of national interest.

"I will leave that to the committee, I don't want to see your private interest because everybody wants to access the fund. The law states that the minister decides and that is why I have said NSC should chair the committee," he said.

Making clarification on how much Nigeria loses as a result of patronage of foreign fleet in international waters, Akinsoji said in 2014, Nigeria lost $2.2 billion because of the absence of national shipping line.

He said: "If 50 per cent out of the 5,000 ships that landed in Nigeria in 2014 were Nigerian ships and managed by Nigerians, the country would have saved $2.2 billion."

He said Nigerian seafarers that would have been engaged to work on the fleet would have been earning about $3,000 per month.

"So you can imagine the number of families that would have benefitted from that and these are the kind of loses that we are making by not having ships carrying our cargoes in the international waters," he added.

Akinsoji said international cargoes generated are carried by foreigners and foreigner ship as the country presently does not have ships in the international waters carrying dry cargo.

While pleading with Amaechi not to allow the report gather dust, he said the roadmap to the successful establishment of a Nigerian fleet is the implementation of the report as well as the repositioning of NIMASA.

He said: "On our part, we have taken a bold step to advise the minister on the way forward on the establishment of a Nigerian Fleet Implementation Committee (NFIC) in flying Nigeria's flag in international waters."

Obasanjo's Fears

Former President Olusegun Obasanjo had while reacting to the matter advised the federal government against resuscitating the defunct Nigerian National Shipping Line (NNSL).

Obasanjo, who gave the advice in his address as Chairman of a two-day stakeholders conference on the maritime industry in Lagos, blamed the collapse of NNSL on the lack of professionalism and high level corruption at the time.

He said: "NNSL had been liquidated. They tried Nigeria Unity Line, it collapsed. Nine brand new ships were specially built for Nigeria and we did not take delivery of some of them until I left office in 1979. When I came back in 1999, NNSL had been liquidated with all 19 ships and the five already in existence gone. Two of the ships were missing for almost two years and it was discovered that one military man was using them all over the world without accountability."

Obasanjo urged the present administration to 'think out of the box' and come up with what should be done to grow the maritime industry.

Amaechi, however, promised that the federal government was ready to create an enabling environment for steering the maritime industry to its rightful position.

He said government would provide safe environment for both foreign and indigenous investors to reap returns on their investment without compromising the nation's economic benefits.

The Fall of NNSL

Meanwhile, Obasanjo and other stakeholders' fears may not be out of place given what happened to the NNSL in the past. The company was established by the Nigerian government in 1959. Despite heavy investment and subsidies, the state-owned company was unable to compete with European lines. Much of the investment went to enriching the political elite. Deeply indebted, the NNSL was liquidated in 1995 and all 21 of its vessels were sold.

At inception in 1957, 33 per cent of the capital was held by the Elder Dempster Line and 16 per cent by the Palm Line, both British companies, while the Nigerian government held 51 per cent. In 1961, the Nigerian government acquired all the shares. The NNSL started operations in 1959 with three vessels. Nigerian seamen who had been employed by British shipping companies in the colonial era moved to work for the Nigerian Line. By 1964 it had grown to a total of 16 vessels. The public company was assisted by private businessmen. The Sir Louis Ojukwu was an early member of the board, dying in 1966. The chairman from 1967 to 1973 was Oloye Adekunle Ojora, formerly of the United Africa Company (UAC), who later became a highly successful businessman in his own right.

During the Nigerian civil war the army made free use of the NNSL for transport of troops. The ships played a key role in the advances along the coast in 1969. With the end of the civil war in January 1970, General Yakubu Gowon announced an extensive programm to revive the economy. In place of expensive hired vessels two new ships were bought for the NNSL and the ports at Calabar and Port Harcourt were rehabilitated. In 1977 the government ordered the construction of 19 new vessels to replace the aging fleet. By 1979 the company had 24 oceangoing ships. The NNSL was an important source of training for seamen of the Nigerian Merchant Navy (NMN).

While addressing newsmen in January 1980 about his first 100 days in office, former President Shehu Shagari said that during this period the NNSL increased its percentage of imported goods from about 8 per cent to 11.3 per cent and had started bringing in components for the Peugeot assembly plant in Kaduna, components that had previously been flown in. On a less positive note, heroin smuggling by crew members was a significant issue in the 1970s and 1980s, with Nigeria serving as a major transit point for drugs bound for Europe.

A 1987 study of the NNSL for the World Bank compared results to the benefits that the United Nations Conference on Trade and Development (UNCTAD) had estimated would come from entry of Nigeria into shipping. The findings were that the investment had made no significant contribution to Gross Domestic Product (GDP), employment, the balance of payments, exercising countervailing power, national security or the country's image. The gains had been less than the opportunity costs of the resources used.

In 1988 the National Maritime Authority (NMA) granted six Nigerian shipping lines "national carrier" status, including the state-owned NNSL. The NMA planned to extend this status to more domestic companies so as to reduce control of trade by foreign-owned lines. The Shipping Policy Decree of 1987, which established the NMA, gave approval for a 50-50 share between foreign and domestic lines for non-conference cargos. However, in 1988 the 24 ships of Nigerian national carriers including the NNSL took only 11 per cent of the cargoes at Nigerian ports. The NNSL and the private companies suffered from financial problems and lacked the facilities needed to attract cargoes. In the 1990s several of the company's vessels were seized in different parts of the world for alleged breach of contract and unpaid bills.

Finally, the NNSL was liquidated in September 1995 and its assets were assumed by the newly formed National Unity Line (NUL). The NUL, fully owned by the Nigeria Maritime Authority, began commercial operations in July 1996 as Nigeria's national flag carrier. The NUL had just one ship, MV Abuja. In August 2005 the government put the NUL up for sale. The company now had no vessels, but owned a shipping license. In July 2010 it was reported that the Nigerian Maritime Administration and Safety Agency (NIMASA), the successor to the NMA, had completed arrangements to establish a new national shipping line for Nigeria. A fresh attempt was made to re-launch and sell the NUL in 2011.

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