Remodeling Nigeria’s Ship Registry: Panama, Liberian Examples
Every nation which aspires to be a leading shipping nation in terms of fleet size and tonnage must have an efficient and viable ship register. This ship register provides the template for economic growth as availability of ships opens additional avenues for foreign exchange and massive employment opportunities for seafarers as well as ancillary services.
Ship registration is a process by which nationality and related rights and duties are conferred on a ship. The country in which the ship is registered also assumes jurisdiction over the ship. Registration provides title to a ship which is important for the ship to enter into trade relations.
In Nigeria, the maritime sector has been accused of contributing far less than its potentials in the nation’s Gross Domestic Product (GDP) and a lot of emphasis has been on the development of indigenous ship-owning capacity. While the place of indigenous operators can’t be discountenanced, this write-up intends to study the winning models of nations with the largest ship registers comprising foreign vessels and the merits of having an international ship register.
A registry that is open only to ships of its own nation is known as a traditional or national registry. In other words they allow only vessels that are owned by companies or persons that are residents of that country.
Traditionally, closed registries have a two-fold requirement, firstly, incorporation in the country of registration and secondly, principal place of business in the country of registration. In a closed registry, the tax is charged on the earnings as compared to open, wherein the taxes are on the basis of tonnage.
An international registry has virtually no restrictions; however, this has led to allegations of sub-standard ships. International registry incorporates a second registry, hybrid system and bareboat charter registration.
Open registers denote flags of convenience for ships. More than half of the world’s shipping countries follow an open registry, such as Panama, Liberia and Bahamas.
Panama, a small nation of just 3 million, has the largest shipping fleet in the world, greater than those of the US and China combined. According to the Clarksons Research, Panama-flagged bulk carriers represent 22% of the world´s bulk carrier fleet, with 2,725 vessels and 112.1 million gross tons (GT). Between January and August 2021, Panama has incorporated 218 newly-built ships to its fleet, contributing 6.6 million GT, of which 61 vessels are from the bulk carrier segment.
Despite the pandemic caused by Covid-19, the Panamanian Registry is the most favorable option for ship owners thanks to the country´s legal security, the 24/7 attention and human resources´ level of professionalism and effort. Panama, as a flag state, has registered the 24 largest container ships in the world, in relation to their cargo capacity, totaling 5.5M GT and having less than 2 years of construction. In the cruise ship segment, the Panama Ship Registry is among the three flags most chosen by ship-owners. The Panama fleet includes 42 cruise vessels representing 3.4 million GT
Liberia, a small African nation with a population of 5 million is ranked second with over 4,800 vessels in its fleet. The Liberian Registry is the fastest growing major open registry and its vessels represent 13% of the world’s oceangoing fleet that account for 200 million GT.
While Liberia and Panama both operate international ship registers, Nigeria currently has a closed registry but the nation is looking at having a second register that will be an international one. This international register is also called a ‘hybrid’ or a ‘second’ register.
During an exclusive chat with MMS Plus newspaper recently, a veteran maritime lawyer, Barr. Osuala Nwagbara harped on the need to expeditiously attain this international ship register, stating that it holds a key to additional forex earnings and viable employment opportunities for seafarers.
His words: “Presently, Nigeria is only operating a closed registry. Many countries like Panama, Liberia, among others have both open and closed registries. This is an attraction for vessel owners who benefit from the tax incentives, even as these nations see ship registration as a source for generating forex for their economies.”
“Perhaps, with the ongoing reforms in the system, Nigeria should consider having an open ship registry. One of the benefits is that it brings acceptance as a leading maritime nation. One of the conditions to rate a significant maritime nation is the number of ships in its registry and the total tonnage of ships registered in the registry. Opening our registry to foreign ships wouldn’t only guarantee more forex; the fact that there are more Nigerian flagged ships sailing all around the world is another selling point for the nation even at the International Maritime Organization (IMO).”
“This is also an opportunity to provide training and employment opportunities for indigenous seafarers. It would be a good policy decision for Nigeria to open its registry to other foreign nationals so that they can have their ships registered in the country.”
As NIMASA considers opening a second or an international ship register, experts have agreed that it is the right move because most nations have a second registry that is an international one.
Nevertheless, what has made Nigeria’s registry closed is the ownership requirement which stipulates in the Coastal and Inland Shipping (Cabotage) Act, that one must be a Nigerian citizen, a Nigerian registered company or has 60% Nigerian crew to be registered in the country, and such other persons as the Minister may by regulations approve.
Although Nigeria intentionally operates a closed registry to boost indigenous shipping as its Merchant Shipping law states the qualification for any Nigerian vessel, perhaps it’s time to look at other nations operating international registries, their requirements, successes and economic benefits that could sway Nigeria to plan differently.
Operating an international ship registry would mean that more vessels would come into Nigeria’s register. Consequently, there will be more ship inspections, certifications and these vessels will be charged fees for certain services NIMASA renders such as registrations and surveys.
“If there are more foreign vessels that are flying Nigeria’s flag, it also creates opportunities for indigenous seafarers onboard those vessels. When you grow tonnage and capacity, it also means that there is more space and the volume increases in terms of job opportunities,” a maritime expert who preferred anonymity said.
Speaking with MMS Plus last week, the Director General of Nigerian Maritime Administration and Safety Agency (NIMASA), Dr. Bashir Jamoh confirmed that the agency is considering establishing an international or second register.
He, however, noted that the effort is targeted towards vessels that are involved in export so we are not in breach of the Cabotage Act.
Jamoh noted that the popularity of the open registries or flag of convenience lies in the fact that they offer registration regimes with minimal links between vessel ownership and nationality, very competitive tax benefits and relaxed labour laws as far as crewing is concerned, whereas Closed Registries refers to registers that set requirements regarding ownership, management and manning.
“Many commercial ships are registered under a Flag that do not match the nationality of the vessel owner (Open Registry) and that is what you have in the big ship owning nations like Panama, Liberia, and Marshal Islands,” the NIMASA boss said.
Contrary to the opinion shared by Barr. Nwagbara that opening an international registry could augment Nigeria’s status at IMO ahead of the upcoming Governing Council elections, the NIMASA Director General, Dr. Jamoh posited that a nation’s type of registry does not affect its rating in IMO.
“The type of registry a country operates does not affect its ratings at IMO. What is important is for a country to establish its footprint in International waters, when vessels flying its flag operate and call at international ports and show compliance with international conventions that we have all signed on to. In addition vessels calling in your ports are required to be in full compliance with the international conventions when subjected to Port State inspections. So every country needs to have a robust Port State Inspection Regime and in Nigeria our Port State Inspections are commendable.”
“A country’s political stability, sound business system, financial and legal framework, excellent communication links and automated processes aid the development of commerce including Merchant Shipping,” Jamoh said.
Recall that Nigeria’s current ship registry has gone through several developments to enhance its technical integrity and expedition ship registration processes. NIMASA has commenced electronic verification of the new Ship Registry Certificates introduced July 1, 2021.
In a press statement, NIMASA said the new Ship Registry Certificates now have QR Codes (Quick Response Codes) embedded in them to enable Ship-owners, Stakeholders and Regulatory Agency’s Enforcement officers verify the validity of the certificates.
The agency, said it has also commenced enforcement of full compliance with the marine environment protection statutory requirements and documentation on Nigerian and foreign flagged vessels operating within the country’s maritime domain.
“All ship-owners and operators are now required by law to update their vessel documentations, which include all permits or exemptions, levies, record books and plan approvals. This is also a pre-condition for further processing of any vessel or company requests with the agency,” NIMASA said.
Despite these efforts by the nation’s apex maritime agency, a former Nigerian Alternate Permanent Representative to the IMO, Engr. Olu Akinsoji argued that the nation’s ship register is fraught with numerous challenges.
“Nigeria really hasn’t managed its closed registry optimally. We very little or no vessels on the international waters flying the nation’s flag and the Nigerian registry has a lot of gaps to address in a bid to make the country attractive for vessel registration. Some of the vessels owned by Nigerians are flagged outside the country. This includes the NLNG vessels that are flagged outside Nigeria because the Nigerian flag isn’t attractive,” Akinsoji said.
According to him, NIMASA should be more concerned about addressing all the loopholes in the existing closed registry to get indigenous ship owners and NLNG register their vessels in Nigeria.
He recalled that there was a time the nation had several vessels registered in the Nigerian ship register during the era of the Nigerian National Shipping Line (NNSL), adding that; “if the nation addresses all the existing problems, we can attain that level and sustain it. Nigeria has cargoes that would attract foreign ships, but the flag administration has a lot to do. Dangote Group carries out a lot of import but patronizes foreign ships. How do we manage an international or open ship registry which is more complicated, when we don’t have the structure to support closed registry?”
Akinsoji’s views on developing the existing ship register were also corroborated by the immediate-past Continental President of African Women in Maritime (WIMAFRICA), Barr. (Mrs.) Jean-Chiazor Anishere (SAN).
“I will suggest that Nigeria expands and improves on the existing ship register than open a new one. Whatever lapses that have been observed can be improved upon,” Anishere said.
On his part, Chief Executive Officer, Ocean Energy Limited, Capt. Taiwo Akinpelumi posited that Nigeria’s move to establish an international ship register has merits and demerits.
According to Akinpelumi, the major demerit of attaining an international ship register would lower the standard of the flag state.
“Having an international ship register would mean that all forms of vessels would be allowed. There would be relaxed regulations that would lead to a drop in standards by the flag administration which is NIMASA,” he said.
Akinpelumi, however, expressed optimism that if well managed the current ship register could also address some of the challenges which have led to the call for an international ship register. Nevertheless, he agreed that an international register would guarantee more fiscal earnings for the country and more employment opportunities for seafarers.
“There is an ongoing debate on how flag of convenience has dropped the standards of shipping around the world. Flag of registry and flag of convenience have been having this debate over the years,” he added.
Contrary to Capt. Akinpelumi’s postulation, Panama’s flag standard hasn’t dropped as a result of its international ship register. The performance of the Panamanian fleet at the end of July 2021 stood at 96.68% compliance in relation to the various Memoranda of Understanding as the country remains on the White Lists of the Paris MoU and Tokyo MoU.
As Nigeria explores the best strategy to enhance its ship register and considers an international one, some questions have to be answered. How many ships are currently on Nigeria’s ship register? What kind of vessels are they and what’s the blueprint to encourage more registrations? Have the menace of multiple taxation, corruption and bureaucracy been addressed? Why are NLNG vessels flagged abroad?
Looking at the nations that have second or international ship register; what are they doing in order to expand and grow tonnage? Can Nigeria look at their successes to create an alternative or instigate a paradigm shift to grow tonnage?