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Nimasa, Cabotage Law and Its Compliance Strategy

Nimasa, Cabotage Law and Its Compliance Strategy

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When the Coastal and Inland Shipping, otherwise known as Cabotage Act was conceptualised in 2003, stakeholders in the maritime industry were agog that the regulation would herald a new dawn in the domestic shipping business and particularly empower indigenous operators to own ships and operate without intimidation from their foreign counterpart, but 16 years after, the implementation has become a herculean task for the regulator.

Several enlightenment, orientation, persuasion and threats appears to have fallen off the ears of the violators of the act, while the domestic shipping operators continued to groan under an unpalatable operating environment dominated by foreign shipping firms.

Irked by the number of irregularities in the sector, the Nigerian Maritime Administration and Safety Agency (NIMASA), recently declared its intention to move against violators of the Cabotage Act 2003.

Consequently, it took the bold step last month when MT Navigator Capricorn, a Liberian-registered Liquefied Petroleum Gas (LPG) vessel on lease to the Nigerian Liquefied Natural Gas (NLNG) Limited sailed against the law and was detained by NIMASA.

The incident apparently did not sneak up on the vessel as NIMASA claimed that it had been forewarned. The vessel has since been released after about 10 days detention. But as the dust settles, the lesson for stakeholders cannot be lost. NIMASA has launched a decisive move to enforce the revised guidelines on the implementation of the Cabotage Act.

The Coastal and Inland Shipping (Cabotage) Act 2003, which came into force in 2004, aims “primarily to reserve the commercial transportation of goods and services within Nigerian coastal and inland waters to vessels flying the Nigerian flag, owned and crewed by Nigerian citizens, and built in Nigeria.”

In 2004, the Federal Ministry of Transportation issued a set of guidelines to stakeholders to facilitate compliance with the provisions of the Act. The guidelines proved to be a useful tool for the operation and implementation of the Cabotage Act. But NIMASA, the industry watchdog experienced some challenges in the application of the Act.

This prompted the production of the revised guidelines on implementation of Coastal and Inland Shipping (Cabotage) Act, 2003, following interfaces with stakeholders, to clarify and simplify the Act’s enforcement and monitoring processes.

In August last year, as a follow up to the revised guidelines, NIMASA introduced the cabotage compliance strategy to ease implementation of the Cabotage Act. The Agency last month commenced a clampdown on vessels that did not conform to the Cabotage compliance strategy.

Director-General, NIMASA, Dakuku Peterside, who announced the clampdown, also said the Agency would no longer encourage the application of waivers under the Cabotage Act, particularly in relation to the oil firms, saying such waivers have adverse consequences on the maritime sector and the economy.

Dakuku said at a meeting with the Oil Producers Trade Sector (OPTS) in October last year in Lagos, “Our laws forbid foreign vessels operating in our territorial waters, save for compliance with the Cabotage Act. There shall be no sacred cow when we commence clampdown on erring vessels.

“We want to increase the number of Nigerians who participate in the marine aspect of your business and we are working closely with the Nigerian Content Development and Monitoring Board (NCDMB) to have a joint categorisation of vessels operating under the Cabotage Act in order to ensure the full implementation of the Act.”

Meanwhile, some Nigerian operators have lamented that Nigeria, being an oil-exporting nation has not employed any of its ships in exporting her crude oil to other countries.

President, Ship owners Association of Nigeria, and Chief Executive Officer, Starz Investments Limited, Greg Ogbeifun, had recently enjoined the Federal Government and the Nigerian National Petroleum Corporation (NNPC) to support indigenous operators with crude oil lifting contracts in order to sustain local participation in the industry.

Charterers of foreign vessels have not claimed ignorance of the provisions of the cabotage law as it affects foreign vessels. What often seems to be their excuse, according to informed sources within the industry, is that the technical and safety standards for the operation of some of the vessels are so high that it is hard to get Nigerians with the required knowhow to man the vessels.

While most stakeholders agree on the need to maintain high standards so that Nigerian-flagged vessels can compete favourably with others abroad, what seems to be the point of divergence is how to get the persons with the needed competences. There is always a high temptation to choose the convenient way out, which is employing expatriates to man the ships.

However, NIMASA has been at the forefront of advocate for a long-term economically beneficial solution of training Nigerians to man the Cabotage vessels.

The Agency has trained more than 2, 000 Nigerians under the Nigeria Seafarers Development Programme and it has pursued the issue of sea-time training for the graduates through full sponsorship of their placement on ships, in partnership with some international institutions that have access to ocean going training vessels.

Already, about 200 cadets have done their on-board sea time training under the first phase of the NIMASA fully-sponsored sea time training programme, facilitated alongside the Arab Academy of Science, Technology and Marine Transportation in Alexandria, Egypt.

Onboard training for another 89 cadets was facilitated by the South Tyneside College, UK, making a total of 239 cadets in the first phase of the programme.

The number of Nigerian seafarers placed onboard vessels last year was about 2,337, representing a 58.9 per cent increase in the number of seafarers employed compared to the previous year’s figure. This has meant significant job opportunities and economic empowerment for the citizens.

NIMASA has also been dealing with the issue of certification for Nigerian seafarers under its Survey, Inspection and Certification Transformation Programme.

Under the programme, Certificate of Competency (CoC) examinations have been conducted at the Maritime Academy of Nigeria (MAN), Oron, leading to the issuance of different categories of CoCs to successful candidates. In 2017 alone, NIMASA issued 3,752 certificates to successful seafarers, representing a 149 per cent increase from the 2016 figures.

The agency has made significant progress in the manning aspect of the Cabotage law implementation, with MAN producing the required middle level manpower for the maritime industry and NSDP supplying the high-end manpower requirements.

Most vessels trading within the country’s coastal waters now have at least 70 per cent Nigerian content in terms of manning.

In addition, the Agency is collaborating with the Nigerian Content Development and Monitoring Board to do a five-year skills demand programme, which would give the Agency deeper insight into the manpower needs of the industry.

The ship ownership, registration, and flagging aspects of the Cabotage law have received a boost, with an increase in the number of wholly Nigerian owned vessels on the Cabotage register.

The 2018 half year result showed that 125 vessels were registered, representing a 33 per cent increase when compared with the 94 registered in the corresponding period in 2017. Currently, there are more than 200 vessels captured in the Cabotage register.

In ship building, many vessels have not been built in the country because of the shortage of steel and aluminum, but NIMASA has launched an audit of shipyards in the country, in conjunction with Nigerian Content Development and Monitoring Board, to see how they can be assisted to improve capacity. The aim is to ensure that most of the vessels in Nigeria are built in the country.

To further develop local capacity under the cabotage regime, the agency is working on a downward review of freight rates and championing of a change of Terms of Trade for the affreightment of Nigerian crude oil, from Free on Board (FOB) to Cost Insurance and Freight (CIF).

Under FOB trade terms, Nigeria practically loses control over the distribution of its crude oil with respect to carriage, insurance and other ancillary services. But under the CIF arrangement, the tide would change in favour of indigenous operators.

In this regard, NIMASA says it has engaged the Nigerian National Petroleum Corporation (NNPC) and other relevant government agencies, and the engagements are yielding good fruit.

The Agency is also engaged in efforts to provide funding for indigenous operators under the cabotage regime.

Besides the Cabotage Vessel Financing Fund (CVFF), which is provided for in the Cabotage Act 2003, NIMASA has engaged the Central Bank of Nigeria (CBN) to negotiate a special single digit interest facility for indigenous ship owners to help them acquire needed assets.

The delay in disbursing the CVFF has become a source of worry for local ship owners.

The President, Nigerian Shipowners Association (NISA), Aminu Umar said the CVFF, which is derived from two per cent of the contracts awarded under the cabotage regime, was designed to enable indigenous shipping companies acquire adequate tonnage to be able to participate in coastal currently dominated by foreign ships.

He enjoined the agency to disburse the fund in order to enhance the capacity of indigenous operators.

President of Certified Institute of Shipping (CIS), Vicky Haastrup, also advised the Federal Government to disburse the CVFF, assuring that it would be better managed by the ship owners.

Haastrup said that as practical hands, the ship owners, through their association, could do better with the fund.

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