New Telegraph

February 26, 2024

Cabotage Waivers: Nigeria Loses $13.7BN to Foreign Firms

Nineteen years after, Nigerian ship owners have lost $13.7 billion to foreign liners as waivers in Cabotage Act continue to deny local operators businesses reserved for them. Nigerian Cabotage trade is governed by the Coastal and Inland Shipping (Cabotage) Act 2003, which became operational in April 2004. The purpose is to reserve commercial transportation within Nigerian coastal and inland waters to vessels flying the Nigerian flag, owned, built and crewed by Nigerian ship owners.

However, it was revealed that the country had been losing $720 million annually to foreign liners on costal shipping since its implementation which commenced in 2004. The Cabotage Act permits the minister of transportation to grant waivers in certain prescribed circumstances where the local ship owners have no capacity and expertise to carry out the jobs under Part III, Sections 9-11 of the Act.

The Act further specified in Section 9 that the minister of transportation may, on the receipt of an application, grant a waiver to a duly registered vessel where the minister is satisfied that there is no wholly Nigerian owned vessel that is fit to provide the services described in the application.

Worried by this, Nigerian Indigenous Shipowners Association(NISA) called for the elimination of waivers in the nation’s inland shipping to bolster the opportunities for the Nigerian shipowners as well as create a competitive environment for increased patronage and employment chances as the Direct Sale-Direct Purchase (DSDP) vessels and petroleum cargo shipments into Nigeria between January and August 2020 indicated that about 320 vessels were chartered for the shipment of the imported 1.7 million metric tonnes, equivalent to 20 billion litres of petroleum products.

According to the National Fleet Implementation Committee (NFIC), in the 2019/2020, DSDP contract valued at $9 billion was undertaken, while freight expenditure on import tankers was approximately $60 million monthly or $720 million annually. Also, the committee noted that this involved the average monthly importation 2.4 billion litres (1.8 million metric tonnes) of gasoline in foreign-owned tankers of 35,000 to 90,000 deadweight (DWT) capacity (approximately 40 ship loads monthly), making Nigeria to lose over $163.54 billion in gross freight paid on import and export cargoes to foreign owned vessels in the past 19 years (2004 to 2023).

The President of NISA, Otunba Sola Adewumi, explained that only a cocktail of approaches could deliver the potential of the cabotage initiative. He said the Federal Government should consider the establishment of a specialised maritime bank to offer financial assistance at single-digit interest rates to provide the needed impetus for growth and development in the maritime industry. Adewumi called for the disbursement of the Cabotage Vessel Finance Fund (CVFF) and effective implementation of Cabotage Act, saying it was pivotal in providing financial support to operators to enhance their capacity to compete more robustly on a global scale.

He added: “Efficient ship building cannot be achieved without the commencement of our steel rolling mill. Encouraging and promoting local shipbuilding can play a significant role in reducing costs for ship- owners. This strategy would not only make ship acquisition more affordable but would also stimulate the local economy and technological development.” Also, Adewumi stressed that granting national carrier status to Nigerian ship owners would provide them with preferential treatment in national and international trade, enhancing their competitiveness and visibility in the global maritime industry.

He called for the establishment of an African P&I Club, noting that setting up an African Protection & Indemnity (P&I) club would be a strategic move, adding it would provide tailored insurance and risk management services that cater specifically to the unique needs of the African maritime sector. The President explained: “For Cabotage Law to truly be effective and achieve its intended goals, there must be strict enforcement of its provisions.

This enforcement ensures that the benefits of the policy are realized, ultimately leading to the growth and development of the Nigerian maritime industry. Adewumi stated that Investing in research and training is essential for capacity building within the maritime sector, saying tahg this approach ensures that the workforce was skilled and knowledgeable, ready to meet the challenges and demands of a rapidly evolving global maritime industry. He believes that these recommendations, if implemented effectively, could dramatically transform the landscape of the Nigerian maritime sector, leading to economic growth, technological advancement, and enhanced global competitiveness for Nigerian shipowners.

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