Recently, the National Fleet Implementation Committee(NFIC) submitted its interim report to the Minister of Transportation, Engr. Mu’azu Sambo, applauding their work so far. But the path to final glory is replete with thorns. Enjoy the report.
The immediate past Honourable Minister of Transportation, Rt. Hon. Chibuike Rotimi Amaechi, in pursuit of the economic diversification agenda of the Federal government, identified the development of a Nigerian fleet for active participation in international and domestic maritime trades as a priority area. In light of this realization, the Honourable Minister, after attending a Summit organized by the Association of Marine Engineers and Surveyors (AMES) on 21st April 2016, and a subsequent meeting with representatives of the Associations of Marine Engineers and Surveyors, Nigerian Association of Master Mariners, Ship Owners Associations and other critical stakeholders on 25th April 2016, constituted two (2) Committees.
The first Committee was to restructure Nigerian Maritime Administration and Safety Agency (NIMASA) and reposition the organization to carry out its statutory functions, while the second Committee was to examine modalities for the development of a private sector driven Nigerian Fleet.
1.2 Inauguration of the Committee by the HMOT
The Committee on Modalities for the Development of a Nigerian Fleet successfully completed its assignment and formally submitted a report to the Honourable Minister on 20th June, 2016. The HMOT subsequently transformed the Committee to the Nigerian Fleet Implementation Committee to successfully implement the recommendations contained in the report.
1.3 Terms of Reference
The Terms of Reference of the Nigerian Fleet Implementation Committee (NFIC) are as follows:
i. Develop an institutional framework to support the establishment of a sustainable Nigerian Fleet;
ii. Develop strategies that will incentivize the private sector to invest in ship ownership and to register the ships in the Nigerian Ship Registry;
iii. Identify areas of “government support” in the shipping industry;
iv. Set out the action items to encourage the development of ship building and ship repair facilities;
v. Provide guidelines and recommendations to augment maritime manpower capacity;
vi. Provide practical guidelines for attainment of the mandate and to midwife the implementation of the recommendations of the Ministerial Committee on Modalities for the Establishment of a Nigerian Fleet.
In the course of deliberations, the Committee observed that the objectives of some of the terms of reference are interwoven. Therefore it was resolved that these terms of reference be merged as follows:
i. Develop an institutional framework to support the establishment of a sustainable Nigerian Fleet as well as provide guidelines to augment maritime manpower capacity
ii. Develop strategies in form of ‘government support’ that will incentivize the private sector to invest in ship ownership and to register the ships in the Nigerian Ship Registry;
iii. Set out the action items to encourage the development of ship building and ship repair facilities
iv. Provide practical guidelines for attainment of the mandate and to midwife the implementation of the recommendations of the Ministerial Committee on Modalities for the Establishment of a Nigerian Fleet.
1.4 Vision of the Nigerian Fleet Project
To Stimulate Sustainable Economic Development in the Maritime Sector by attracting investment, expanding business activities and creating jobs.
1.5 Objectives of the Nigerian Fleet Project
The objectives of the proposed private sector driven Nigerian fleet project are to:
i. Create a robust and sustainable Nigerian owned flagged vessels
ii. Stem and preserve the outflow of foreign exchange (Capital Flight) for the carriage of the nation’s cargoes;
iii. Guarantee Nigerian flagged vessels obtain a fair share of Nigeria’s seaborne traffic
iv. Provide sea training and employment for Nigerian sea farers;
v. Influence reasonable freight rates in the carriage of cargo for Nigeria etc.
vi. Assist in the economic integration of West and Central African sub region
1.6 Membership of the Committee
Members of the Committee were drawn from the public and private sector with the pioneer members as follows:
1. Mr. Hassan Bello ES/CEO, Nigerian Shippers’ Council
2. Dr. Peterside Dakuku Director General ( NIMASA)
3. Mr. Habib Abdullahi Managing Director, NPA
4. Mr. Abubakar A. Bello Managing Director, NEXIM Bank
5. Mr. Maikanti Baru GMD, NNPC
6. Mrs. Mfon. E. Usoro Secretary General, Abuja MOU
7. Ms Funmi Folorunso Sec-Gen, African Shipowners Association
8. Mr. Lawal Sade Managing Director, NIDAS Marine LTD
9. Mr. D. M. Dauda DMSS FMOT
10. Mrs. Uche Okoro Director Legal Services, FMOT
11. Capt. Iheanacho Ebubeogu Nigerian Ports Authority
12. Chief Isaac Jolapamo Chairman, Morlap Group
13. Ahmed Tijani Ramallan National Seafarers Welfare Board
14. Engr. Greg Ogbeifun Chairman, Starzs Group
15. Engr. Ibukun O. Akinsoji AMES/ SNM
16. Mr. Aminu Umar Chairman, Sea Transport Services
17. Mr. Hope Yongo NEXIM Bank
The current members of the Committee are as follows:
1. Mr. Emmanuel Jime ES/CEO (Nigerian Shippers’ Council) Chairman
2. Mr Mele Kyari GMD, NNPC
3. Mr. Pius Oteh Director, Legal Services FMOT
4. Dr. Bashir Y. Jamoh Director General, NIMASA
5. Mr. Mohammed Bello-Koko Managing Director , NPA
6. Mr. Abubakar A. Bello Managing Director, NEXIM Bank
7. Dr. Mkgeorge Onyung President, Ship Owners Ass of Niger
8. Ahmed Tijjani Ramalan National Seafarers Welfare Board
9. Ms Funmi Folorunso SG, African Shipowners Association of Nigeria
10. Chief Isaac Jolapamo Chairman, Morlap Group
11. Mr. Aminu Umar Chairman, Sea Transport Group
12. Mrs. Mfon E. Usoro Paul Usoro Chamber
13. Capt. Iheanacho Ebubeogu Omick Marine Services
14. Engr. Adeyinka Okunade Ass. Of Marine Engineers &Surveyors
15. Mr Hope Yongo
In achieving its mandate, the Committee:
i. Held twenty-two (22) meetings so far
ii. Created a Technical Sub-Committee to drive engagements with relevant Ministries and Agencies of government on specific items relating to the mandate of the Committee. Thereafter, presentations on these assigned tasks were made to the main Committee.
iii. Made use of electronic correspondences to exchange ideas as well as convey inputs on specific issues.
iv. Had interviews with stakeholders with relevant knowledge and critical information on its mandate.
v. Made extensive use of relevant data on the maritime industry obtained from NPA, NIMASA and National Bureau of Statistics
vi. Carried out extensive internet/library research for valuable information.
3.0 MEMORANDUM OF UNDERSTANDING (MOU) WITH PACIFIC INTERNATIONAL LINES
Pacific International Lines (PIL) submitted a proposal to the Committee to partner with local investors and establish a Nigerian flagged Shipping Line with 40% equity contribution from PIL and 60% equity from local investors.
The immediate past HMOT and NFIC held a meeting with Nigerian ship owners to brief them on the proposal made by Pacific International Lines (PIL) to partner with Nigerians to establish the proposed shipping line. The Ship owners were excited about the idea and indicated interest to invest in the Joint Venture.
The HMOT, accompanied by some members of NFIC and Ship Owners, travelled to Singapore to sign a Memorandum of Understanding (MoU) with PIL for the establishment of the proposed shipping line before the end of 2016.
3.1 Objectives of the MoU
The objectives of the MoU are to:
i. Establish a commercially viable Nigeria based shipping company operating Nigerian flagged vessels
ii. Provide platform for promoting active participation of Nigerian citizens in international seaborne trade
iii. Train and employ Nigerian cadets and seafarers
iv. Provide crude oil and dry cargo transportation services, cabotage services, international transhipment and shipping services
v. Enlist the company in the Nigerian Stock Exchange
3.2 Key Contents/Agreements Reached
3.2.1 Ownership Structure
Nigerian Investors- 60%
3.2.2: Voting Rights
Nigerian Investors: 49%
3.2.3 Office Location: Lagos, Nigeria
3.3 Withdrawal by PIL
To implement the MoU and operate the shipping line successfully, PIL made the following requests:
i. That 50% of all government cargoes should be transported by the proposed Nigerian flagged Carrier.
ii. Vessels purchased by the Company should be exempted from Import Duty.
iii. Exemption from paying the 3% NIMASA levy.
iv. Exemption from Corporate Income Tax.
v. Allowed to make payment in Naira for all government levies or taxes, if any.
vi. Dividend proceeds to be remitted out of Nigeria.
vii. Review transhipment procedures in Nigeria in line with best practice: this mainly addresses issues on custom declaration/formalities and VAT related expenses to transhipment related expenses.
viii. Concessionary tariff rates from Nigerian Ports Authority
ix. Priority berthing for Nigerian flagged vessels
As some of the requests outlined above could not be met, PIL found it could not implement the MoU and subsequently withdrew from the Agreement citing unfriendly business environment and absence of requisite incentives compared to other countries with viable shipping industry as reasons for the withdrawal.
3.4 Lessons learned from the Withdrawal
i. Shipping is global and Nigeria cannot be isolated. Nigerians had tried and failed to enter into international shipping, due to huge investment capital required, coupled with absence of incentives to enable them compete favourably with foreign operators who enjoy an array of incentives from their home governments.
ii. The NFIC notes that for government to realize its programme for the shipping industry, a conducive enabling environment backed by strong political will with necessary incentives to operators have to be in place.
iii. In view of the above, the Committee developed and recommended fiscal incentives which if considered, approved and implemented will trigger growth, development and sustainability in shipping business for Nigeria to realize the benefits.
4.0 THE CASE FOR INCENTIVES/ENABLING BUSINESS ENVIRONMENT
4.1 The Committee suggested the following fiscal incentives for the growth and development of a sustainable Nigerian fleet
i. Zero import duty on vessels
ii. Introduction of Tonnage Tax on Nigerian shipping companies
iii. Impose stringent measures on application of Temporary Import Permit for foreign-owned vessels
iv. Expand and implement the existing Shipping Sector Support Fund (Shipping fund/CVFF/ NCDMB Maritime Fund)
v. Waiver of export tariff for use of Nigerian vessels
vi. Right of first refusal for National Carriers in the procurement process for government cargo
vii. Change of Nigeria’s crude oil terms of trade policy (CIF as against FOB)
viii. Preferential Berthing privileges
4.2 Visit to the Vice President, Prof Yemi Osinbajo
In July 2018, the Committee visited the Vice President and the Economic Management Team (EMT) and presented the proposed fiscal incentives. He directed that the Nigerian Investment Promotion Commission (NIPC) should work with the Committee and other relevant Ministries, Departments and Agencies (MDA) to harmonize the requests and re-present for consideration and approval.
4.3 Consultation with Relevant Ministries, Departments & Agencies (MDA)
4.3.1 Nigerian Investment Promotion Commission
The meeting deliberated on the proposed Maritime sector-based incentives and resolved to constitute a Technical Sub-Committee comprising of members of NFIC and NIPC with the aim of looking at the Maritime sector-based incentives and the possibility of its inclusion in the compendium of incentives in Nigeria.
Outcome of the Engagement
In the course of engagement with NIPC, the NFIC has been able to:
i. Categorize the list of expected fiscal incentives necessary for the development of the Nigerian Maritime Sector for the consideration and approval of the Commission. The categorization include ; Tax Incentives, Waivers and Business Policy Incentives
ii. Request that Ship Repairs and Ship Scrapping be given separate headings as complementary to ship building which is already in the Pioneer List catalogue during the review of incentives by NIPC. The NIPC after much deliberation has given its commitment that this request will be granted in the Commission’s list of approved incentives.
iii. Request that Pioneer status incentive be extended to existing shipyards to enable them grow and contribute to the GDP and national development.
4.3.2 Ministry of Budget and National Planning
The Committee visited the former Honourable Minister of Budget and National Planning Senator Udoma Udo Udoma on 26 October, 2018 to brief him on the activities of NFIC as well as seek his support to ensure that fleet development with requisite incentives is among the focus of the implementation priority in the transport infrastructure programme.
Outcome of the Engagement
NFIC had several engagements with the Economic Recovery and Growth Plan (ERGP) team of the then Ministry of Budget and National Planning. The outcome of these engagements was the development of a framework for a Focus Lab aimed at achieving the Nigerian Fleet project within a specified timeframe
4.3.3 Nigerian Content Development and Monitoring Board (NCDMB)
The Committee visited the ES/CEO of Nigerian Content Development Monitoring Board (NCDMB) to seek for the Agency’s participation in the realization of the mandate of the Committee.
Outcome of the Engagement
NCDMB expressed readiness to participate in the project, but the Board requested the NFIC to provide a detailed operational framework designed by the Committee to provide guidance in the execution of its assignment particularly in view of the fact that the Committee called on the Board to provide guarantees in the area of contract of affreightment in the lifting of crude oil by Nigerians.
4.3.4 Nigerian Maritime Administration & Safety Agency (NIMASA)
The immediate past Chairman led a delegation of NFIC on a courtesy visit to DG NIMASA to acquaint him with the activities of NFIC and to solicit for financial support on executing the programmes of the Committee. At the end of the meeting the then Chairman presented a budget proposal to the DG NIMASA who promised to do everything necessary to ensure that the agency provides necessary financial assistance to enable the Committee implement some of its programmes and activities.
Outcome of the Engagement
NIMASA through the DG expressed strong commitments to efforts aimed at enabling the Committee achieve its mandate by providing necessary funding requirements for the execution of some of the activities and programmes of the Committee.
4.3.5 Nigerian National Petroleum Corporation (NNPC)
Members of the NFIC led by the then Chairman paid a working visit to the Group Managing Director (GMD) NNPC to seek for participation and support of the Corporation towards achieving the objective at establishing a Nigerian fleet, because it is known fact oil and gas products are primarily evacuated via marine platforms. At the meeting, the GMD NNPC was informed that NNPC is a critical part of the Nigerian Fleet development project which has the potential to propel investment in other areas such as ports and terminals, cargo handling, channels and harbours, warehouses and intermodal transport generally.
The Committee also identified the following areas of support required from NNPC;
i. Renewed involvement of representatives of NNPC on the Committee in its meetings and other activities.
ii. Right of First Refusal to Nigerian Flagged vessels in the transportation process of oil and gas and project cargo.
iii. Continued enforcement by NNPC of local content laws in its operations so as to encourage and support indigenous ship owners.
iv. The GMD should encourage NNPC subsidiaries to engage Nigerian ship owners in the sourcing of storage tankers and barging activities in the Upstream sector.
v. NNPC should continue to take the lead in the review process of the terms of trade on oil and gas contracts from FOB to CIF
vi. NNPC should also take the lead in the development of tanker shipping business in Nigeria through deliberate policies to encourage tanker shipping such as NNPC making it mandatory for NIDAS to enter into joint ventures with Nigerian shipping companies in coastal shipping operations and not exclusively with foreign companies, because what Nigerians lack are opportunities and not capacity.
vii. Commercial relations between NNPC and its subsidiaries and their supply chains should consider locals for transfer of technology, employment etc.
viii. In addition to becoming more active in the activities of the Committee, NNPC should equally fund some of the Committee’s programmes, provide support for seafaring colleges, Nigerian Ship Registry (in collaboration) with NIMASA, ship building industries etc. An aggregate of all these support from NNPC will go a long way to assist in the creation of a sustainable Nigeria Fleet.
Outcome of the Engagement
NNPC pledged to align completely with NIFC towards ensuring that government becomes fully involved in the efforts at developing a sustainable Nigerian Fleet. The Corporation believes that Nigerians should be encouraged to participate in oil and gas shipping business.
4.3.6 Ministry of Industry, Trade and Investment (FMITI)
The NFIC led by the immediate past Chairman also visited the Hon Minister for Industry Trade and Investment Chief Adeniyi Adebayo. The visit was to brief the Minister on the activities of the NFIC and seek his endorsement for fleet development to be supported with requisite incentives, granted by the Ministry and its Agencies, as practised in other notable maritime nations.
Outcome of Engagement
The Honourable Minister set up a Joint Committee comprising of officials from the Ministry and the NFIC to work out how the incentives requested by NFIC can be secured expeditiously. Furthermore, he promised to reach out to his counterpart i.e. Hon Minister for Transportation to deliberate and strategize on ways of securing the support of the Federal Executive Council for the project.
4.0 ACHIEVEMENTS OF THE COMMITTEE
In line with the terms of reference of the Committee, the following achievements have been recorded:
4.1 TOR I: Develop an institutional framework to support the establishment of a sustainable Nigerian Fleet as well as provide guidelines to augment maritime manpower capacity.
In achieving TOR 1, the Committee carried out an in-depth analysis to determine which agency/agencies are responsible to implement the actions toward achieving the mandate of the Committee. In summary, the various actions came in the form of who will grant/drive certain fiscal policies or incentives as may be required, stated below:
Suggested Fiscal Incentives for the Growth and Sustainability of the Nigerian Shipping Industry/Agency intervention
i. Zero import duty on vessels (Federal Min of Finance/Nigerian Custom Service)
ii. Application of Tonnage Tax (Federal Min of Finance/Federal Inland Revenue Service)
iii. Abolish Temporary Importation Permit or Impose stringent measures (Federal Min of Finance, Budget and Planning /Nigerian Custom Service)
iv. Shipping Sector Support Fund (Real Sector Support Fund -2% per annum/9%) (Central Bank of Nigeria)
v. Waiver of export tariff for use of Nigerian vessels (Central Bank of Nigeria/Nigerian Custom Service)
vi. Right of first refusal for National Carriers in the procurement process for cargo (ALL)
vii. Work permit to be issued only upon verification of unavailability of ratings or officers ( Nigerian Immigration Service/Nigerian maritime Administration and Safety Agency/Nigeria Investment Promotion Commission)
viii. Change of Nigeria’s crude oil trade policy (Federal Ministry of Finance/ Federal Ministry of Petroleum Resources)
ix. Corporate Affairs Commission to adopt Federal Inland Revenue Service’s Zero duty for ship finance registration at the Commission.
x. Preferential Berthing privileges.
Based on the above framework, the NFIC set out to meet with the agencies and recorded the achievements stated herein.
NFIC had engagements with management of NIMASA in respect of the challenges confronting shipowners in registration of vessels which has made the Nigerian Registry unattractive to Nigerian shipowners.
i. As a result of this, NIMASA has commenced the repositioning of the ship registration to make it less cumbersome and attractive to indigenous ship owners. This process is on-going and NFIC will continue to engage with the Agency.
ii. The Committee developed a basket of actions/incentives that if implemented will reposition the shipping industry with respect to vessel ownership and management.
4.2 TOR ii: Develop strategies in form of ‘government support’ that will incentivize the private sector to invest in ship ownership and to register the ships in the Nigerian Ship Registry
4.2.1 Zero Duty on Imported Vessel
One of the incentives requested by the Committee was for the Federal Government to grant zero duty on imported vessels and spare parts across board for vessels between 0-20 years.
Towards this, the Federal Government in the 2022 Fiscal Policy Measures and Tariff Amendment granted 0% duty for cargo ships and similar vessels for the transportation of goods, mechanically propelled vessels for the transportation of goods by inland navigation of a Gross Tonnage (GT) more than 500 tonnes .
With this development, it is only logical that Nigerians will be able to own vessels that can be deployed in coastal and international trade thereby increasing national tonnage and retaining freight earnings within the national economy which ultimately will improve Nigeria’s balance of trade position.
4.2.3Nigerian National Petroleum Corporation (NNPC) Crude Carriage Contract
In fulfilment of the pledge made by the GMD to NFIC to support the development of indigenous capacity, the NNPC in early 2021 started implementing the following measures;
i. Coastal distribution of oil products is now being carried out exclusively by Nigerian registered ships
ii. Inserted a clause in crude oil lifting contracts that gives priority to Nigerian shipping companies.
iii. Through NFIC advocacy in collaboration with Ship Owners Association to NCDMB and Federal Ministry of Transportation, NNPC cancelled all contracts for coastal shipping with foreign ship owners. Subsequently, SOAN was requested to submit list indigenous ship-owners with requisite capacity to participate in coastal shipping of products, while NNPC will only procure services of foreign ship owners where it is ascertained that Nigeria lack capacity or have been fully utilised.
4.2.4 Local Content Clause in Nigeria’s Crude Oil Contracts
NFIC in collaboration with Nigerian Local Content Development Monitoring Board (NCDMB) ensured the insertion of local content clause in NNPC Oil lifting contracts whereby Nigerian shipping companies with requisite capacity are given first right of refusal
As a result, many Nigerian shipping companies are now participating in crude and product lifting. A notable example is Sea Transport Services, an indigenous shipping company that recently signed a contract with NIDAS Marine Ltd, the international shipping arm of NNPC for crude oil and product lifting.
4.3 TOR iii. Set out the action items to encourage the development of ship building and ship repair facilities
4.3.1 Granting of Pioneer Status to Ship-Repair yards by NIPC
The Committee interacted with several ship repair yards, and identified their challenges. These challenges made them to operate at very high cost and uncompetitive with other shipyards in Africa notably Ghana, Senegal and Namibia.
i. In addressing these challenges, the NFIC is currently engaging NIPC with a view to ensure that Pioneer Status incentive is granted by the Commission to existing ship repair yards in the country to enable them compete favourably with their counterparts in Africa.
ii. In addition, the Committee is also working towards securing Value Added Tax (VAT) exemptions for all spares, precision equipment and imported materials for construction of shipyards, shipbuilding, ship repairs and ship recycling. This will encourage investment in the shipbuilding, ship repair and ship recycling sector in Nigeria.
iii. Furthermore, the Committee have finalised preparations that will enable discussions with Asset Management Company of Nigeria (AMCON) to see possible ways of expediting actions on sale of seized vessels to shipyards for recycling their steel for new construction/repairs rather than leaving to become threats to safety of navigation and marine environment.
5.0 Inclusion of the Maritime Industry in 2021-2025 National Development Plan
During the visit to the Vice President and members of the Economic Management Team (EMT) in 2018, the NFIC drew the attention of the Economic Management Team to the neglect of the maritime industry in various economic development plans of the government such as Vision 2020:20 and Economic Recovery Growth Plan (ERGP). As a result, the Committee was promised that the maritime industry will feature prominently in subsequent national economic plans.
It is pertinent to note that in the 2021-2025 National Economic Development Plan, a total sum of (N7.7) trillion naira has been earmarked for investment in the transport sector which includes the maritime sub-sector.
6.1 Lack of adequate awareness /understanding of the Committee’s mandate
The Committee observed there was low level of awareness in respect of its mandate among stakeholders who thought that the mandate of the Committee was to procure vessels to float a new national shipping line. The Committee had planned to address this misconception by organising sensitization/enlightenment programmes for stakeholders.
However, these programmes have not been implemented due to paucity of funds. The sensitization programmes are aimed at increasing the level of awareness of the project and the potential benefits to the national economy in terms enabling the country gain control of her international trade and improve the national economy.
6.2 Securing the buy-in of the project by government agencies.
Governments of major shipping nations approach the development of the shipping sector as a national policy which triggers incentive measures from relevant agencies of government such as Ministries of Finance, Commerce and Trade, etc. Those countries design special incentives for their shipping industries to make them competitive in the global space.
However, the critical buy-in of the project by key MDAs such as Federal Ministry of Finance, the Nigeria Customs Service and Federal Inland Revenue Service (FIRS) is still largely non-existent, as there is currently an over-emphasis by these MDAs on what Nigeria stands to lose in the short run in terms of revenue generation, in contrast to what will accrue to the national economy in the long run in terms of increased indigenous tonnage, growth in ship registry and retention of freight earnings on cargo and contribution to the nation’s Gross Domestic Product (GDP).
6.3 Funding of the Committee’s Activities.
There is currently lack of funds to enable the Committee carry out its activities.
i. The Committee wish to humbly recommend that the Honourable Minister of Transportation may consider a meeting with her counterpart in the Federal Ministry of Industry, Trade and Investment as the Committee believes that this gesture will further emphasise the need to consider granting necessary fiscal incentives as proposed by the NFIC.
Contemporary developments in the international political space such as the on-going Russian/Ukraine war as well as American-China trade war have underscored the need for maritime countries to place themselves in a position to participate actively in international transportation of national goods and services for national economic protection.
Currently Nigeria’s shipping business is at the mercy of foreign ship owners who earn more than $5billion in freight annually, which represents an economic loss to the national economy.
The development of private sector driven Nigerian Fleet is a task that must be achieved for the present as well as future security of the national economy as it presents an opportunity for a paradigm shift in the current dominance by foreign ship-owners of Nigeria’s international trade.
However, in order to achieve this, efforts must take the form of a deliberate national policy to create conducive business environment with the requisite incentive measures by relevant agencies of government.
It is only by doing this that Nigeria can hope to attract the needed private sector investment for the project, which will ultimately help the country reclaim her position among the comity of ship owning nations.