THE IMPACT OF CABOTAGE ACT ON LOCAL MARITIME CAPACITY DEVELOPMENT

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THE IMPACT OF CABOTAGE ACT ON LOCAL MARITIME CAPACITY DEVELOPMENT (A CASE STUDY OF THE NALCOMET, APAPA-LAGOS)

CHAPTER ONE

INTRODUCTION

1.1       BACKGROUND OF THE STUDY 

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. Ndikom (2006), observed that the maritime transport subsector of Nigeria, has over the years played key role in the economic development of the nation through the lubrication of import and export trade, and facilitation of exploration and exploitation of natural resources located offshore.

The word “cabotage” which means inland trade along coastal water is the navigation and movement of ships in coastal water by a country to its own domestic traffic. Ndikom, (2004). The Coastal and Inland Shipping (Cabotage) Act, 2003 signed into law by the President in April in 2003 has a very wide definition of the word cabotage which is used interchangeably with coastal trade. The obvious outlook and characteristic of the maritime industry over the years occasioned by the inconsistencies of government policy and foreign domination in the carriage of our locally generated cargo necessitated the desire for local operators to seek for the establishment of a Nigeria concept of cabotage.

According to Echezona (2014), the importance of shipping, whether coastal or liner shipping in the economic and socio-political development, as well as sovereignty of nations, remain a major casual factor for qualitative but radical maritime policy formulation and its diligent implementation, by traditional maritime nations of the world. Most time, these policies are aimed at attracting massive foreign and local investment in shipping, empowerment and development of indigenous ship operators, achieving maritime technology transfer and advancement, maritime manpower training and empowerment, expansion in national fleet sizes, radical seaport facility development and port technology advancement, and strategic positioning of national shipping industry and fleet for carriage of domestic and global seaborne trade through formation of shipping conferences, (Echezona, 2014).

According to Ndikom, (2004) it is common knowledge that the Nigerian cabotage is a vessel type of cabotage, which is similar to what operated elsewhere as in most advanced countries such as the United States of America. Ideally, operational modalities of U. S based cabotage are quite distinct from the Nigerian concept of cabotage. Taking account of inadequate indigenous capacity, the cabotage advocated a policy through the use of internationally recognized waiver system. The waiver principle, as approved by the Act, is based on the non- availability of Nigerian-owned or built vessels. The objective of the cabotage act is goods within the Nigerian coastal and inland waters to vessels flying the Nigeria flag and owned by persons of Nigeria citizenship. It is important to note here that the operational management and performance of the cabotage regime in Nigeria is anchored on the four points below.

  • Nigerian citizens must wholly own cabotage vessels
  • Cabotage vessels must be registered in Nigerian
  • Cabotage vessel must be manned by Nigerian citizens
  • Cabotage vessel must be built by Nigerian shipyards

Across the globe, the wind of change is blowing. The global economy is daily witnessing unprecedented structural changes with privatization and commercialization being the driving market forces. The nature of our economy. Its peculiar position and the role it play in the world does not permit undue stagnation. It must move with time and in accordance with international pace and standard. The Nigeria cabotage Act was fashioned after the Jones act of the United States of America which has since the enactment developed an enviable fleet of vessel and generated considerable employment for its citizens.

Over the years, the carriage of Nigeria Waterborne trade, both domestic and global waterborne trade was dominated by foreign registered vessels to the extent that there exists a near total lack of indigenous operators and throughout (Agidi, 2014). Onyemechi (2005) noted that that Nigeria adopted the cabotage policy in 2003 as an option to reverse the effect of foreign domination of its coastal shipping market and to empower  indigenes to acquire maritime skills through training for employment in the sector, increase the size of the national fleet (throughout), achieve transfer of shipbuilding technology, as well as enhance the development of the maritime transport subsector to make it contribute more to the local economy, using more indigenous manpower and operators as the dLagos than foreigners.

The institution of an indigenous cabotage regime is seen as a necessary tool for the protection of local ship-owners interest in the carriage of locally generated cargo. The world cabotage has indeed become a familiar word in recent times especially within the Nigeria maritime industry. It is also seen by stakeholders as a way of restricting coastal trading to the citizens of a nation’s state. Nigeria is daily confronted with the realities of a need to strengthen the economy. A means of doing that reflects in the development of a vibrant maritime factor. A large percentage of revenue in any country with a coastline like Nigeria is generated through import and export of goods.

According to Igbokwe, (2003) an intended effect of the Act on the local shipping industry is the institution of a “liberal protectionistic maritime industrial policy” for the protection of the local shipping industry from death or incapacitation due to the domination of carriages from point to point within Nigerian waters and unhealthy competition by the highly subsidized foreign vessels. In this regard, the Act sees the local shipping industry as a strategic industry which being in its “infant” stage of development and not being in control of indigenous shipping operations and ship ownership, in the interest of Nigeria’s economy and national security, requires some guidance, conducive environment and protection from foreign competition so as to be nurtured into maturity and given room to develop through its acquisition and building of the necessary capacities to become sufficiently commercially viable and strong. Thus, the local shipping industry will be able to control and become very strong in domestic shipping before venturing into regional or international shipping where it will then be able to withstand competition from the highly subsidized foreign ships in international shipping. Alternatively, the Act intends that if the local shipping industry cannot or it is yet to compete favourably with foreign vessels in international shipping, it should for the time being be in a position to control and dominate carriages of cargo and passengers from point to point in Nigerian waters(Sumaila, 2008),).

The liberal protection by the Act creates for the local shipping industry an enabling environment and gives the necessary assistance and incentives to indigenous shipping companies, shipbuilders and seafarers in order to empower and position indigenous carriers and operators to be able to acquire more vessels, more experience and greater capacity for shipping and to compete fairly with foreign ship owners and among themselves in the carriage of cargo internationally or domestically without totally excluding foreigners and foreign vessels from participating in domestic shipping. (Igbokwe, 2003)

This is why under the Act, only vessels that are wholly owned, wholly manned by Nigerian citizens, built in Nigeria and registered in Nigeria, are allowed to participate in cabotage trade whilst foreign vessels are granted ministerial waivers or licensed to participate in cabotage trade where there is no wholly-owned Nigerian vessel suitable or available to provide the services or perform the activities concerned.(Isabu, 2013) This intention is quite understandable because all countries that have enacted cabotage laws intend among other things that the laws would protect the local shipping industry from foreign shipping domination.

1.2       STATEMENT OF PROBLEM

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, Cole (2010) suggested that 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, and imbalance of payment and loses 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 by side with the private sector initiatives such as the Nigeria Green Lines, African Ocean Lines, Niger brass Shipping Lines, Brawal Shipping Lines, Bulk ship (N) Limited, Globe Shipping Lines, Genesis Worldwide shipping, etc that owned foreign going dry cargo vessels.

Okoroji & Ukpere (2014), strongly argue that cabotage implementation in Nigeria has not offered enough business opportunity for local vessel operators to participate in coastal shipping as the tide of foreign domination of the industry persists, citing funding difficulties for vessel acquisition and low throughout as a major problem hindering local shipping companies from securing coastal shipping contracts. The above view was supported by Isabu (2013), who argue that over the past 15 years period of cabotage implementation in Nigeria, there are more foreign owned, registered and manned vessels than Nigerian owned, registered and manned ones. Hire revenue (charter fee) earned by ship operators in the cabotage regime indicate that foreign operators (Non-Nigerian Operators) have earned more revenue from ship charter than Nigerian operators.

Echezona (2014), observed that a key causal factor to the derailment of the cabotage policy implementation in favour of foreign- non- Nigerian operators is pressure on the implementation agency (NIMASA) from foreign interest through public authorities, politicians, top public servants and the ministry of transport which  oversees cabotage implementation. As a result the local content development objective of Government using cabotage as a tool in both increase in indigenous fleet ownership, and throughput, ship building technology transfer, maritime manpower development and employment may fail at the long run. The joint venture (Merger between Nigerian and non-Nigerian companies) provided for in Part IV of the policy as identified by Onyemechi (2005) has as well failed. Arbitrarily waivers are corruptibly granted to foreign ship operators. These foreigners seem to prefer the corrupt acquisition of waivers to joint venture arrangements on the basis of 60% and 40% shareholding for Nigerians and foreigners respectively as provided in the policy.

Also Okoroji (2010) is of the opinion that part of the problems with the implementation of cabotage by NIMASA is the failure of the agency to adopt sound modalities to disburse the ship acquisition and ship building fund to local operators as provided in the policy to enable them buy new vessels and increase capacity to compete the foreigners. To ensure successful implementation of cabotage policy, the Nigeria maritime Administration and safety Agency has identified the Nigeria National Petroleum Corporation (NNPC), the Nigeria liquefied Natural Gas (NLNG), the department of petroleum resources (DPR) and pipeline products marketing and Distribution Company as its key Partners (Isabu, 2013). Thus, there is the need to analyze the cabotage Act and local content among shipping operators in NALCOMET in Nigeria over the 10 years of its implementation for improvement in coastal shipping business opportunities for local and joint venture ship operators in Nigeria.

1.3       OBJECTIVES OF THE STUDY

This study set out to assess cabotage Act and local content development among shipping operators in NALCOMET, APAPA-LAGOS. The study would be guided by the following specific objectives;

  1. To evaluate the impact of the Cabotage Act implementation on the indigenous shipping operators;
  2. To obtain a quantitative relationship between cabotage Act implementation and local capacity development in Nigeria;
  • To evaluate the impacts of the implementation of the Cabotage Law on the Nigerian economy;
  1. To assess the performance of the Government Regulatory Agencies charged with the responsibilities of implementation of the law.

1.4       RESEARCH QUESTIONS

The following research questions would be used for this study;

  1. What are the impact of the Cabotage Act implementation on the indigenous shipping operators?
  2. Is there any relationship between cabotage Act implementation and local capacity development in Nigeria?
  • What are the impacts of Cabotage law on Nigerian economy?
  1. Has the implementation mechanisms positively impacted on the participation of the local operators in the coastal trade?

1.5       research hypotheses

the following hypotheses would be tested;

Hoi: Cabotage Act implementation has no significant impact on the indigenous shipping operators

HOii: There is no significant relationship between cabotage Act implementation and local capacity development in Nigeria

HOiii: There is no significant relationship between Cabotage Act and development of Nigerian economy

HOiv: NIMASA training programmed has not made significant impact on the level of human capital capacity development for the Cabotage trade operations

1.6       SIGNIFICANCE OF THE STUDY

A study on cabotage Act and local content among shipping operators is very important and significant because the significance of the study lies on the fact that it would serve as a monitoring device to highlight the success or failure of the cabotage Act so far. It would prove to the public whether the implementing/enforcement agencies have put the Act on the bookshelves or the objective is being vigorously pursued. The outcome would have the useful effect of exposing the government agencies that had failed to carry on the responsibility assigned to them towards the accomplishment of the objectives of the Cabotage regime.

A way forward would be recommended that would encourage positive impact on the local shipping capacity development. In summary the justification of the study lies on the fact that it will verify and highlight the strategies and course of actions being taken by the Regulatory Agency (NIMASA) towards effective implementation of the Cabotage Act. The result obtained will add to existing body of knowledge and it would be useful and serves as a good reference material to future researchers, policy makers, Regulatory Authorities in shipping and indigenous shipping companies as well

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