A CRITIQUE OF THE NIGERIAN CABOTAGE ACT AND RECOMMENDATIONS FOR EFFECTIVENESS
Prior to the enactment and implementation of the Cabotage Act in 2003 and 2004 respectively, the National Unity Line (which replaced the defunct National Shipping Lines in 1995) had become comatose. Its only surviving vessel, the MV Abuja, was auctioned off at an incommensurate price in 2003. Foreign shipping lines dominated the shipping business to the tune of over seventy-five (75) percent. The Cabotage Act, -the first in sub-Saharan Africa- thus became a watershed in the maritime history of Nigeria. The desired effect of the Cabotage Act as gleaned from its preamble is to restrict the use of foreign vessels on domestic coastal trade, promote the development of indigenous tonnage and establish a Cabotage Vessel Financing Fund. At present, however, indigenous vessels still get stuck in their earlier dilemma- like a vicious cycle that informs the examination of the industry in the context of the interventionist Cabotage Act.
Policy ensures that priorities are set in national development and when they are not well configured in lines with the existing realities, the system suffers. With the dual opposite mandates of both protectionism (through the exclusion of foreign vessels) and liberalism (through the grant of waiver) the 2003 Cabotage Act is practically contradictory and can create a scenario of possible derailments and overlaps administratively. For instance, the differentiation in staff capacity building for both policies can lead to an administrative divide and when there is incompleteness of administration, the breeding of incompetence is inescapable. These dual modes will also lead to a haphazard way of engaging and disengaging foreign entrepreneurs and may, ipso facto, lead to the weakening of international relationships.
By disconnecting from the economic concept of healthy competition, protectionism protects mediocrity, recycles laxity while retarding the developmental ingenuity of shipping lines. The Nigerian Cabotage Act truly betrays its protectionist ambition since the expensive nature of ships; corruption and parallel poverty level make Nigerians lack the wherewithal to acquire Nigerian ships. Worse still, is the fifteen-year age limit on vessels imposed by section 28 which places the country’s shippers in the embarrassing position of being able to trade everywhere in the world except in their own backyard; Nigeria.
In the area of ship manning, Nigeria is yet to train the 30, 000 professional seafarers as recommended by NIMASA notwithstanding the National Sea Farers Development Programme (NSDP) which was introduced as a short-term interventionist measure. With ship building equally fraught with the challenge of Steel and Aluminum and Niger Dock, the country’s major ship producer, relaxing into a comfort zone of ship repairs, the protectionist policy will only lead to sinking Cabotage vessels, which must call for and atone to the dictates of foreign rescuers.
Nigeria has not attained the status of technological independence unlike the developed United States of America whose 1920 Jones Act forbids any form of waiver concession for foreign vessels even during disasters like the British Petroleum oil spill in the Gulf after Hurricane Katrina. It is strongly advised that protectionism in the Cabotage Act be neutralized to ensure mutual cooperation instead of competition between local and foreign shipping lines. In this connection, the government should also provide subventions to assist would-be ship owners while The Maritime Academy of Nigeria, Oron, should be funded and developed with IT based management procedures akin to international best practices.
Furthermore, in line with the religious aphorism that anointing without money is annoyance, section 42 (1) of the Act establishes the Cabotage Vessel Financing Fund (CVFF) which is to be financed through a surcharge of 2% of the contract sum on vessels as well as tariffs, fines, fees for licenses and waivers. The major snag, however, is that the fund has a far better standing in the Central Bank of Nigeria than it does in the heart of the industry stakeholders. NIMASA and the ministry of transportation faltered on its promise to disburse the $100 million (36 billion Naira) in the first quarter of 2019. Lastly, corruption accounts for the loss of over four (4) billion naira annually to foreign investors whose shipping lines practically explore the loopholes created by lack of transparency.
As a matter of expediency, the approved 2007 guidelines on how the CVFF can be disbursed should be implemented. This is particularly necessary to prevent a situation where phony companies would access the loans through document falsification, as in the erstwhile Ship Acquisition and Ship Building Fund (SASBF) Again, the issuance of high interest lending rate charges by banks should be looked into so that the maritime companies will not be overburdened by liabilities while a specialized banking system and adaptation of cognate institutions like insurance should be established for the maritime sector. I recommend that the final decision making authority for disbursement of loans shift from the minister to the primary lending institutions subject to due diligence conducted by the institutions. More so, the 2% surcharge for the CVFF is to a large extent, anti-local content should either be eliminated or reduced to 1%. This is because a surcharge implies a kind of punitive measure against indigent indigenous participants whom the Act has failed to empower financially.
The defect of the current definition of a vessel in section 2 (d) of the Act was brought to the fore in Noble Drilling (Nigeria) Limited v NIMASA where the court held that the defendant had failed to establish that a drilling rig qualified as a vessel. Importantly, in view of the need for increased off shore exploration, the existing law should be amended to include rigs, floating, production, Storage and Offloading Platforms (FPSOs) since this will bring structures used in hydrocarbon exploration under the tentacles of the Act. Moreover, in view of the increasing marine environmental crimes and Nigeria’s obligations to tackle same, section 15 (f) of the Cabotage Act in this dispensation, should not only be responsible for environmental protection, it should also be responsive to increasing global security concerns by providing that licensed vessels should meet all security requirements, (in addition to safety and pollution requirements) imposed by law.
It is suggested that the unilateralism of the Minister of Transport in effecting a waiver regime leaves too wide a discretion in his hands and may be shrouded in secrecy. This should be changed, for according to Lord Denning, in the darkness of secrecy, evil in all its shade and sinister interests have full swing. It is recommended that the NIMASA and Indigenous Ship Owners Association of Nigeria (ISAN) should put forward the specific database and industry references to determine vessels that are wholly owned by Nigerians. Lastly, cargo patronage from sources like The Nigerian National Petroleum Corporation, (NNPC), its subsidiaries and other oil companies operating in the country should be assured on favourable terms. Terms of trade for affreightement of cargo especially Nigerian crude oil should be shifted from Free on Board to Cost Insurance and Freight (CIF) as this would ensure that Nigeria gains control over distribution of its crude oil with respect to carriage, insurance and other ancillary services.
In conclusion, with a coastline of about 800 kilometres, an inland waterway covering 3,000 kilometres, and a wealth of natural resources – including hydrocarbon deposits, zinc, ore, iron and billions of crude oil reserves- Nigeria has a myriad of global trade opportunities. For the maritime industry to explore the opportunities, the above recommendations on the Cabotage Act should not be mere legislative carrots dangled in the faces of stakeholders which they cannot eat. They should be implemented through the tripartite contributions of private sector (which must fully participate), the government (which must create an enabling environment) and the public (which must remain an ever alert watchdog to prevent unscrupulous elements from the disrupting the noble goal of improving maritime industry.)
REFERENCES:
Nigeria Coastal and Inland Shipping (Cabotage) Act, Number 5 of 2003, Laws of the Federation of Nigeria
Airahubhor Andrew, ‘Cabotage Act, Vessel Fund and Many Unanswered Questions’ (Daily Independent, 2014)
Akpobolokemni Patrick, Challenges of Indigenous Shipping Under the Cabotage and NOGIC Act, (25th -26th June, 2012) a paper delivered at the local content summit by the house of representative committee on local content held, at the Presidential Hotel, Port Harcourt, Rivers State.
Charlie Nwekeaku, John Atteh, “Cabotage Act and the challenges of Nigerian Shipping Lines in Sub-Saharan Africa” (2016) Volume 3, Number 5, Advances in Social Sciences Research Journal
Usoro M, Cabotage, Policy and International Maritime Politics – The Nigerian Coastal and Inland Shipping (Cabotage) Act 2003, (A paper presentation at the annual Maritime Seminar of the Nigeria Maritime Law Association, 2003)
Savage Oyekunle Oluremi, ‘Effect of the Cabotage Act 2003 on the Nigerian Maritime Industry’ in Rickey Mustapha Tarfa, SAN, Olarenwaju Fagbohun, Gbolahan Gbadamosi (eds) Rethinking The Administration of Justice; Essays in Honour of Hon. Justice Abdullahi Mustapha
https://allafrica.com/storiues/2019/03270594.html Nigeria: Nimasa, Cabotage Law and its Compliance Strategy by Sulaimon Salau 27th march 2019
Nigeria Coastal and Inland Shipping (Cabotage) Act, Number 5 of 2003, Laws of the Federation of Nigeria
Eromosele Abiodun, Nigeria: Ship Owners to Engage Government on Disbursement (27th March 2019)
https://allafrica.com/stories/201903270724.html All Africa News
Eromosele Abiodun, Nigeria: Ship Owners Push for Disbursement of U.S. $100 million Cabotage Fund (29th March 2019) https://allafrica.com/stories/201903290731.html/
https://t.guardian.ng/business-services/13-years-on-cabotage-law-fails-to-promote-local-shipping-operators/
https://www.this daylive.com/index.php/2016/04/08/the-yearning-for-review-of-the –Cabotage-Act?amp
https://www.internationallawofffice.com/Newsletters/shipping-transport/Nigeria/Akabogu-Associates/Notable-amendments-to-cabotage-Act accessed on Wednesday, June 26, 2019 at 4:44 pm
Prior to the enactment and implementation of the Cabotage Act in 2003 and 2004 respectively, the National Unity Line (which replaced the defunct National Shipping Lines in 1995) had become comatose. Its only surviving vessel, the MV Abuja, was auctioned off at an incommensurate price in 2003. Foreign shipping lines dominated the shipping business to the tune of over seventy-five (75) percent. The Cabotage Act, -the first in sub-Saharan Africa- thus became a watershed in the maritime history of Nigeria. The desired effect of the Cabotage Act as gleaned from its preamble is to restrict the use of foreign vessels on domestic coastal trade, promote the development of indigenous tonnage and establish a Cabotage Vessel Financing Fund. At present, however, indigenous vessels still get stuck in their earlier dilemma- like a vicious cycle that informs the examination of the industry in the context of the interventionist Cabotage Act.
Policy ensures that priorities are set in national development and when they are not well configured in lines with the existing realities, the system suffers. With the dual opposite mandates of both protectionism (through the exclusion of foreign vessels) and liberalism (through the grant of waiver) the 2003 Cabotage Act is practically contradictory and can create a scenario of possible derailments and overlaps administratively. For instance, the differentiation in staff capacity building for both policies can lead to an administrative divide and when there is incompleteness of administration, the breeding of incompetence is inescapable. These dual modes will also lead to a haphazard way of engaging and disengaging foreign entrepreneurs and may, ipso facto, lead to the weakening of international relationships.
By disconnecting from the economic concept of healthy competition, protectionism protects mediocrity, recycles laxity while retarding the developmental ingenuity of shipping lines. The Nigerian Cabotage Act truly betrays its protectionist ambition since the expensive nature of ships; corruption and parallel poverty level make Nigerians lack the wherewithal to acquire Nigerian ships. Worse still, is the fifteen-year age limit on vessels imposed by section 28 which places the country’s shippers in the embarrassing position of being able to trade everywhere in the world except in their own backyard; Nigeria.
In the area of ship manning, Nigeria is yet to train the 30, 000 professional seafarers as recommended by NIMASA notwithstanding the National Sea Farers Development Programme (NSDP) which was introduced as a short-term interventionist measure. With ship building equally fraught with the challenge of Steel and Aluminum and Niger Dock, the country’s major ship producer, relaxing into a comfort zone of ship repairs, the protectionist policy will only lead to sinking Cabotage vessels, which must call for and atone to the dictates of foreign rescuers.
Nigeria has not attained the status of technological independence unlike the developed United States of America whose 1920 Jones Act forbids any form of waiver concession for foreign vessels even during disasters like the British Petroleum oil spill in the Gulf after Hurricane Katrina. It is strongly advised that protectionism in the Cabotage Act be neutralized to ensure mutual cooperation instead of competition between local and foreign shipping lines. In this connection, the government should also provide subventions to assist would-be ship owners while The Maritime Academy of Nigeria, Oron, should be funded and developed with IT based management procedures akin to international best practices.
Furthermore, in line with the religious aphorism that anointing without money is annoyance, section 42 (1) of the Act establishes the Cabotage Vessel Financing Fund (CVFF) which is to be financed through a surcharge of 2% of the contract sum on vessels as well as tariffs, fines, fees for licenses and waivers. The major snag, however, is that the fund has a far better standing in the Central Bank of Nigeria than it does in the heart of the industry stakeholders. NIMASA and the ministry of transportation faltered on its promise to disburse the $100 million (36 billion Naira) in the first quarter of 2019. Lastly, corruption accounts for the loss of over four (4) billion naira annually to foreign investors whose shipping lines practically explore the loopholes created by lack of transparency.
As a matter of expediency, the approved 2007 guidelines on how the CVFF can be disbursed should be implemented. This is particularly necessary to prevent a situation where phony companies would access the loans through document falsification, as in the erstwhile Ship Acquisition and Ship Building Fund (SASBF) Again, the issuance of high interest lending rate charges by banks should be looked into so that the maritime companies will not be overburdened by liabilities while a specialized banking system and adaptation of cognate institutions like insurance should be established for the maritime sector. I recommend that the final decision making authority for disbursement of loans shift from the minister to the primary lending institutions subject to due diligence conducted by the institutions. More so, the 2% surcharge for the CVFF is to a large extent, anti-local content should either be eliminated or reduced to 1%. This is because a surcharge implies a kind of punitive measure against indigent indigenous participants whom the Act has failed to empower financially.
The defect of the current definition of a vessel in section 2 (d) of the Act was brought to the fore in Noble Drilling (Nigeria) Limited v NIMASA where the court held that the defendant had failed to establish that a drilling rig qualified as a vessel. Importantly, in view of the need for increased off shore exploration, the existing law should be amended to include rigs, floating, production, Storage and Offloading Platforms (FPSOs) since this will bring structures used in hydrocarbon exploration under the tentacles of the Act. Moreover, in view of the increasing marine environmental crimes and Nigeria’s obligations to tackle same, section 15 (f) of the Cabotage Act in this dispensation, should not only be responsible for environmental protection, it should also be responsive to increasing global security concerns by providing that licensed vessels should meet all security requirements, (in addition to safety and pollution requirements) imposed by law.
It is suggested that the unilateralism of the Minister of Transport in effecting a waiver regime leaves too wide a discretion in his hands and may be shrouded in secrecy. This should be changed, for according to Lord Denning, in the darkness of secrecy, evil in all its shade and sinister interests have full swing. It is recommended that the NIMASA and Indigenous Ship Owners Association of Nigeria (ISAN) should put forward the specific database and industry references to determine vessels that are wholly owned by Nigerians. Lastly, cargo patronage from sources like The Nigerian National Petroleum Corporation, (NNPC), its subsidiaries and other oil companies operating in the country should be assured on favourable terms. Terms of trade for affreightement of cargo especially Nigerian crude oil should be shifted from Free on Board to Cost Insurance and Freight (CIF) as this would ensure that Nigeria gains control over distribution of its crude oil with respect to carriage, insurance and other ancillary services.
In conclusion, with a coastline of about 800 kilometres, an inland waterway covering 3,000 kilometres, and a wealth of natural resources – including hydrocarbon deposits, zinc, ore, iron and billions of crude oil reserves- Nigeria has a myriad of global trade opportunities. For the maritime industry to explore the opportunities, the above recommendations on the Cabotage Act should not be mere legislative carrots dangled in the faces of stakeholders which they cannot eat. They should be implemented through the tripartite contributions of private sector (which must fully participate), the government (which must create an enabling environment) and the public (which must remain an ever alert watchdog to prevent unscrupulous elements from the disrupting the noble goal of improving maritime industry.)
REFERENCES:
Nigeria Coastal and Inland Shipping (Cabotage) Act, Number 5 of 2003, Laws of the Federation of Nigeria
Airahubhor Andrew, ‘Cabotage Act, Vessel Fund and Many Unanswered Questions’ (Daily Independent, 2014)
Akpobolokemni Patrick, Challenges of Indigenous Shipping Under the Cabotage and NOGIC Act, (25th -26th June, 2012) a paper delivered at the local content summit by the house of representative committee on local content held, at the Presidential Hotel, Port Harcourt, Rivers State.
Charlie Nwekeaku, John Atteh, “Cabotage Act and the challenges of Nigerian Shipping Lines in Sub-Saharan Africa” (2016) Volume 3, Number 5, Advances in Social Sciences Research Journal
Usoro M, Cabotage, Policy and International Maritime Politics – The Nigerian Coastal and Inland Shipping (Cabotage) Act 2003, (A paper presentation at the annual Maritime Seminar of the Nigeria Maritime Law Association, 2003)
Savage Oyekunle Oluremi, ‘Effect of the Cabotage Act 2003 on the Nigerian Maritime Industry’ in Rickey Mustapha Tarfa, SAN, Olarenwaju Fagbohun, Gbolahan Gbadamosi (eds) Rethinking The Administration of Justice; Essays in Honour of Hon. Justice Abdullahi Mustapha
https://allafrica.com/storiues/2019/03270594.html Nigeria: Nimasa, Cabotage Law and its Compliance Strategy by Sulaimon Salau 27th march 2019
Nigeria Coastal and Inland Shipping (Cabotage) Act, Number 5 of 2003, Laws of the Federation of Nigeria
Eromosele Abiodun, Nigeria: Ship Owners to Engage Government on Disbursement (27th March 2019)
https://allafrica.com/stories/201903270724.html All Africa News
Eromosele Abiodun, Nigeria: Ship Owners Push for Disbursement of U.S. $100 million Cabotage Fund (29th March 2019) https://allafrica.com/stories/201903290731.html/
https://t.guardian.ng/business-services/13-years-on-cabotage-law-fails-to-promote-local-shipping-operators/
https://www.this daylive.com/index.php/2016/04/08/the-yearning-for-review-of-the –Cabotage-Act?amp
https://www.internationallawofffice.com/Newsletters/shipping-transport/Nigeria/Akabogu-Associates/Notable-amendments-to-cabotage-Act accessed on Wednesday, June 26, 2019 at 4:44 pm
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