How CBN Policy Inhibits Cabotage Trade, Local Content Act: Nigeria Loses 1.5 Trillion Naira Annually

Findings have revealed that the Central Bank of Nigeria (CBN) fiscal policy on petroleum import trade is a major factor inhibiting the success of the twin Federal Government Legislations meant to boast the participation of Nigerians in maritime and offshore businesses.

Investigations have show that the economy loses over $10 billion (#1.5trillion) annually to foreigners through the ineffective implementation of the coastal and inland shipping (Cabotage) Act 2003 and the  Nigerian Content Development (NCD) Act, 2010, particularly from the CBN’s policy which bars vessels laden with petroleum products from dropping anchor within Nigerian territorial waters.

This policy made by CBN in 1993 through its foreign exchange department, which has been said to be inimical to local content legislations has denied Nigerians and public institutions huge revenue accruable to them.

However, it was conceived then to stop capital flight from importers of petroleum products who usually would demand payment on Bill of Lading made in foreign exchange in port of Lagos, a development which became a strain on Naira with the tumbling effect in the forex market.

Following this policy, all mother vessels with petroleum products now berth in port of Lome, Togo, while Nigerians use daughter vessels to bring products to Lagos and Port Harcourt ports, thereby increasing the landing cost of the products which are Premium Motor spirit (PMS) and Automotive Gas Oil (AGO).

According to Barr. Temi Omatseye, former Director General of Nigerian Maritime Administration and Safety Agency (NIMASA) and a presidential aspirant for Nigeria Ship-owners Association (NISA), “If someone says that he wants to carry PMS from Lagos to Port Harcourt, it is fake; no PMS comes to Lagos or Port Harcourt anymore. All PMS go to Lome directly. The only vessel that they do STS from Lagos now is DPK (kerosene) which is the Nigerian National Petroleum Corporation (NNPC) product. So, as a ship-owner, you see the trend, the only cargo you can pick up is possibly refinery products from Port Harcourt or Warri refinery. There is no STS operation in Port Harcourt or Calabar.”

On why CBN came up with such obnoxious directive, Omatseye said “It was lack of understanding. Over time they said they would correct it but it has taken over 10 years without success. They just killed the whole industry with one memo. These are the things we planned to correct under the new leadership led by me.”

As a result of the policy NIMASA is losing 3 percent surcharge on import from the mother vessel; Nigerian Ports Authority (NPA) is denied port dues payable on the vessel; NIMASA is not able to enforce the provision of the Cabotage law in respect of STS transport offshore Nigeria waters.

According to Capt. Dada Labinjo who is also a presidential aspirant for NISA election, Nigeria is losing millions of dollars that accrue from the associated Cabotage trade in the business, saying that a mother vessel needs a tug boat, bunker, food, fresh water, engineering services, surveyors, insurance, medical services, legal services. All these are money. To rent a fender for the mother vessel daily is N1 million and when you multiply that by one year you have N360 million for one vessel only. We can reverse this trend when I become the president of NISA.”

NCD Act 2010 provides for the increase of local content in the servicing of Nigeria’s oil and gas industry; while the Cabotage Act 2003 provides exclusive right to Nigerians in coastal waters. Both laws came years after the CBN fiscal policy but the Federal Government has failed to repeal the policy that renders the Legislations ineffective and skew business opportunities in favour of Lome, Togo, Nigeria’s neighboring country.