By Kenneth Jukpor
Capt. Sunday Umoren is the Secretary General of the Abuja Memorandum of Understanding (MoU) for Port State Control for West and Central African Region. In this exclusive interview with MMS Plus newspaper, he speaks on several pertinent maritime issues ranging from untapped areas of investments, ship financing solutions, strategies to avail Nigerian seafarers’ seatime experience and permanent employment, among others.
One of the biggest challenges limiting Nigeria’s shipping sector is finance. Unlike other nations, there isn’t access to single digit interest rates for ship acquisition and other aspects of shipping which are capital intensive. What approach could be utilized to address this problem?
Government policies are key in meeting shipping finance needs. Every day a ship is afloat; there is a cost in managing it. Government policy should be strategic in addressing this. In some countries loans for acquisition of ships will come in single digit interests and are highly subsidized by the government. Some ship building nations also offer extra loans to ship owners. If you’re building a ship in Korea, you can take a loan from Korea to complete the financing aspect of the ship.
Spare parts for ships aren’t usually manufactured locally, they are imported. The Customs clearance for these spare parts in most countries is free. So, these additional import charges are avoided. We know that ships cost colossal sums and when you get investors who buy ships and have to pay double digits interest rates and high Customs duties, it’s almost like they are working for the banks.
The importation cost for shipping should be addressed. In some countries it’s actually free for new vessels.
When we talk about ship registry and the need to bring it to international standards which is something NIMASA is trying to achieve, the marketability is a crucial factor. People want to know what the gains will be for coming to a nation’s ship registry. What are the incentives? How much cargo is generated in the nation? Are the ship owners guaranteed a chunk of the available cargoes? These types of inducements can help in increasing a nation’s shipping capacity.
Again, we look at the oil sector and say Nigeria is an oil producing country. So, if an investor brings in an oil vessel, what’s the deal for such an operator? Are we still selling on Free on Board (FOB)? If it is Cost Insurance and Freight (CIF), Nigerian vessels can be given international carrier status that would give them the opportunity to lift Nigerian oil. These things have a knock-on effect. This issue of looking for opportunities to train Nigerian cadets, such arrangement would provide opportunities to train cadets. If we don’t change to CIF, we actually have an agreement with the buyers of the crude because these are long term business contracts for as much as 10 years. We could strike an agreement to say that for every ship that comes to lift the nation’s crude there should be a minimum of Nigerians onboard.
Most of the local airlines in Nigeria use foreign pilots, so vessels coming to lift NNPC cargoes could structure an agreement so that certain ranks be left for Nigerians onboard the vessels. If the companies decline, we can opt to sell our cargoes to other buyers. This is something that we need to think through and implement. Sometimes, the big problem in Nigeria isn’t about thinking through but the implementation.
Can you speak specifically on the proposed Maritime Development Bank and other alternatives? NEXIM Bank and AFREXIM Bank are import and export banks and ships are utilized for such activities, shouldn’t these banks be open to finance shop acquisition?
You’re right with your analogy but I’m not an expert in this area and I would rather leave that issue to the finance experts. Whichever bank would drop the digits with respect to loans for ship acquisition will be a welcome development.
Bunkering and tourism are two aspects of maritime yet to be optimized in Nigeria. What’s your opinion on this and what other aspects of maritime should be prioritized in the nation?
The issue with maritime tourism is that it is closely tied to security especially when you consider night-time sailing. In places like the United Kingdom, Holland, among others, you have boats moving around round the clock carrying people not just for transport from home to work, but also for sightseeing. We need to explore this aspect in Nigeria. We could have nice looking passenger cruise vessels taking people from Lagos to Warri or Port Harcourt.
If the security is guaranteed and the ships are upto standard, a lot of people will opt for this cruise. If you’re not in a hurry, especially during the festive seasons, you could take a boat ride and enjoy yourself on the journey. It could also be a short break on the weekend. So, maritime tourism could also rake in a lot of money with bigger ships as well as smaller ships in seaworthy condition.
Safety and security is paramount because one accident on the sea has a way of scaring people away for long periods. Maritime tourism is an area we really need to invest in.
Nigeria is ranked highly among the Organization of Petroleum Exporting Countries (OPEC). We should have functional refineries and by virtue of the nation’s geographical location in the Gulf of Guinea, all the ships passing through from America to the Middle East or East Africa should be coming to Nigeria to bunker.
This nation could become a bunkering hub. If a vessel is coming to a place to bunker, all it needs is about 4 hours to bunker. Before it arrives, the bunker has been cleared, the vessel comes in and it’s serviced and it goes away. The administrative protocol of getting approvals before bunkers can be sold out should be eliminated. The boats or barges used for the supply should also be standard and open to the vetting system of top International Oil Companies (IOCs).
Bunkering shouldn’t be mystified as a dirty business because it’s purely service driven and Nigeria can make a lot of money from it. However, if the standards for bunkering don’t meet global best standards, ship owners wouldn’t be willing to take bunkers in Nigeria. They would rather opt to go to other countries where these services are rendered easily and without additional costs. We shouldn’t have complex processes and restrictions around bunkering services like curfews, etc.
Nevertheless, the primary thing is to get the Nigerian refineries to work because the bunker has to come from somewhere. The cost of a bunker if it is taken from Las Pamas at Cost X and the cost of transportation is Y, the cost of that bunker in Nigeria will be X plus Y. For the nation to remove the extra cost (Y), we should refine petrol in Nigeria.
In recent times, Nigeria has witnessed unpleasant incidents in the maritime domain with the explosion of FPSO Trinity Spirit as well as the operations of the Danish Frigate which are regulatory issues. As Secretary General of Abuja MoU, could you share insights as to how Nigeria could prevent such anomalies in future?
The International Maritime Organization (IMO) provides regulations for the maritime sector and flag states domesticate, ratify and enforce these regulations. So, it’s the responsibility of every flag state to ensure that ships within its flag are seaworthy, maintained, manned and flagged in acceptable conditions. Foreign vessels visiting a flag state’s ports should also be compliant with all the known conventions. So, enforcement is key. Enforcement means going out to inspect the vessels to be sure that they meet standards.
Substandard vessels should be detained. What we tell all the flag states is to ensure that they have a positive and effective enforcement strategy and that’s the only way to deter substandard vessels from trading within your waterways.