A study of the cabotage policy in Nigeria from the prisms of ship acquisition and shipbuilding

It is trite that shipping is pivotal to the economic development of Nigeria. Aside from significantly contributing to the country’s revenue, shipping is an indispensable aspect of the oil and gas sector, the bastion of Nigeria’s economic,
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           1 3 WMU Journal of Maritime Affairs  The international Journal forprofessionals in maritimeadministration, industry and education ISSN 1651-436XVolume 17Number 1 WMU J Marit Affairs (2018) 17:91-117DOI 10.1007/s13437-017-0131-2  study of the cabotage policy in Nigeriarom the prisms of ship acquisition and shipbuilding  Kalu Kingsley Anele           1 3 Your article is protected by copyright andall rights are held exclusively by WorldMaritime University. This e-offprint is forpersonal use only and shall not be self-archived in electronic repositories. If you wishto self-archive your article, please use theaccepted manuscript version for posting onyour own website. You may further depositthe accepted manuscript version in anyrepository, provided it is only made publiclyavailable 12 months after official publicationor later and provided acknowledgement isgiven to the srcinal source of publicationand a link is inserted to the published articleon Springer's website. The link must beaccompanied by the following text: "The finalpublication is available at”.  ARTICLE A study of the cabotage policy in Nigeria from the prismsof ship acquisition and shipbuilding Kalu Kingsley Anele 1 Received: 14 February 2017 /Accepted: 13 November 2017 /Published online: 19 December 2017 # World Maritime University 2017 Abstract  It is trite that shipping is pivotal to the economic development of Nigeria.Aside from significantly contributing to the country ’ s revenue, shipping is an indispens-able aspect of the oil and gas sector, the bastion of Nigeria  ’ s economic, sociopolitical,and infrastructural development. Thus, active participation of Nigerians in the shippingsubsector, as well as other sectors, is unassailable and imperative, culminating in theintroduction of cabotage in Nigeria. The kernel of this paper is to critically analyse thecabotage regime in Nigeria from the lenses of ship acquisition and shipbuilding with a view to enhancing indigenous participation in coastal and inland waterway transport inthe country. The author argues that inadequate funding and absence of investment arecentral in hampering ship acquisition and the development of shipbuilding capability,thereby undermining cabotage in Nigeria. This paper further asserts that the extant cabotagelegalregimeinNigeriaisfundamentallyflawedduetotheexistenceofwaiverswithout safeguards to protect indigenous ship operators. Moreover, the waiver regimedoes not encourage technology transfer. The paper concludes by reiterating that ade-quate funds and investments inhuman and shippinginfrastructural development and theamendmentoftheCabotageActtoreflecttheremovalofsurchargesandtheinclusionof transfer of technology and other safeguards to the waivers are imperative in ensuring a  proper and effective cabotage regime in Nigeria. Keywords  CabotageAct2003.Shipbuilding.Shipacquisition. NIMASA.Indigenousshipoperators.Shipping.CVFF.Waiver .Petroleumsector  1 Introduction Statistically,  “  Nigeria is the largest economy in Africa with US$478 billion and is oneof the fastest growing economies in the world with a long-term average growth of  WMU J Marit Affairs (2018) 17:91  –  117 *  Kalu Kingsley 1  Nigerian Institute of Advanced Legal Studies, University of Lagos Campus, Lagos, Nigeria   7.7%. As the world ’ s 7th most populous country, Nigeria is home to about 177 million people and is Africa  ’ s largest market, ”  1 with a population that is conspicuously young,growing, resilient, and vibrant. And according to data from OPEC, 2 the value of  petroleum export by Nigeria in 2015 is US$41,818 million  3 . Consequent upon that,the shipping industry plays a pivotal role in the economic development of Nigeria.Referring to the significant impact of shipping in Nigeria, Nwokedi and Igboanusi writethat   “… the maritime transport subsector of Nigeria, has over the years played key rolein the economic development of the nation through the lubrication of import and export trade, and facilitation of exploration and exploitation of natural resources locatedoffshore ”  4 . More so, cabotage is the vehicle through which Nigerian ship operatorsengage in shipping activities in the country. Accordingly, it is apt to argue that thecabotage regime introduces a platform where Nigerians could actively participate in thethriving petroleum sector, the bastion of the country ’ s economy.The introduction of cabotage in Nigeria is to significantly utilise the legallyentrenched and lucrative shipping opportunities as a result of the riparian nature of the country ’ s geography, characterised by coastal and inland waterways 5 , coupled withthe increase in the movement of people, goods, and services due to oil exploration inthe country. In addition, Nigeria is an import-dependent country and shipping is pivotalin this regard. Cabotage therefore introduces a market reservation in coastal shipping,especially  “ in respect of the local carriage of goods, the coastal transport of men andmaterials, the supply of offshore vessels of differing operational and market roledescription, the supply of all manner of shipping services between all Nigeriancoastwise and offshore locations for Nigerian operators ”  6 . In view of the importanceof shipping in the economic and sociopolitical development of Nigeria, including itssovereignty, qualitative and exhaustive policy formulation to stimulate indigenous shipowners and its implementation are imperatively introduced in the country.In light of the foregoing, due to the need to develop domestic shipping in Nigeria through empowering indigenous ship operators to participate as well as acquire thecapability to handle and manage all aspects of coastal and inland waterway transport,the Coastal and Inland Shipping (Cabotage) Act was enacted in May 2003 (CabotageAct). Despite the existence of the cabotage policy as enshrined in the Cabotage Act, inaddition to the provision of vessel purchase fund, the development of indigenousshipping has not significantly improved (see Table 1 below). More so, the expectedfleet expansion has not necessarily been achieved 7 , while the attendant development of  1 “  Nigeria: looking beyond oil, ”  PWC/LCCI, March 2016, 7 < > accessed 18 November 2016. 2 OPEC means  “ Organisation of the Petroleum Exporting Countries. ” 3 “ OPEC Annual Statistics Bulletin, 2016, ” Online AnnualStatisticalBulletin2016,17 < web/static_files_project/media/downloads/publications/ASB2016.pdf > accessed 18 November 2016. 4 Theophilus Nwokedi and Chinemerem C. Igboanusi,  “ Cabotage implementation in Nigeria: analysis for improving coastal shipping business opportunities for local and joint venture operators, ”  (2015) 3 (1)Researchjournali ’ s Journal of Management, 1, 2. 5 V.O.S. Okeke and E.T. Aniche,  “ An evaluation of the effectiveness of the Cabotage Act 2003 on Nigerianmaritime administration, ”  (2012) 2 (1) Sacha Journal of Policy and Strategic Studies, 12, 13. 6 Lazarus Okoroji and Wilfred I. Ukpere,  “ A strategic reposition of the maritime industry for economicrecovery and sustainability: the Cabotage Act, ”  (2011) 5 (14) African Journal of Business Management, 5658,5658. 7 Ganiyu B. Bello-Olowookere,  “ The effects of cabotage regime on indigenous shipping in Nigeria, ”  (2011)World Maritime Dissertations, Paper 176, 3.92 K. K. Anele  the shipbuilding subsector has not taken place. Against this backdrop, this paper examines the policy implications of the Cabotage Act in the development of indigenousshipping in Nigeria and argues that lack of funds and investments culminates in dearthof personnel and shipping infrastructure and the lax conditions for obtaining waiver under the Act inhibit local ship operators from participating in coastal and inlandwaterway transport in Nigeria.To achieve the above objectives, this paper is divided into six parts. Part one is theintroduction, while part two critically examines the development of the cabotage policyand the introduction of the Cabotage Act in Nigeria. Part two assesses the role of cabotage, its impact on indigenous participation in the coastal and inland waterwaytransport, and the policy implications it has in Nigeria. The author argues that thoughthe introduction of the cabotage regime is laudable, the provision of waivers in theCabotage Act without adequate safeguards to protect indigenous ship operators as wellas mandating the transfer of technology to Nigerian ship operators undermines theessence of cabotage in Nigeria. The author also observes that the absence of synergy between cabotage and the local content policy, since the main objective of both policiesis to stimulate, empower, as well as sustain indigenous participation in shipping, whichis central to the petroleum industry, weakens the cabotage regime in Nigeria. Part threeexplores ship acquisition and shipbuilding and observes that although governments canfinance shipping through funds or grants, local and international commercial banks andother financial institutions play a key role in funding ship acquisition and shipbuilding.Beyond the implications of inadequate funds and lack of investments in Nigeria, theauthor observes that there is a causal relationship between the waivers and the lack of shipping infrastructure in the country. Besides, there is little or no human resourcedevelopment in the areas of shipbuilding engineers, naval architect, technicians, and Table 1  Fleet size, ownership status, and annual total hire in US dollar of vessels chartered for coastalshipping in Nigeria by NNPC, a  PPMC,  b and DPR  c from 2004 to 2013 d S/No. Year Total number of vessels Local (Nigeria) Foreign Hire (US dollar)1 2004 35 8 27 34,918,149.492 2005 21 4 17 28,174,555.613 2006 25 7 18 20,141,632.614 2007 30 9 21 56,497,555.705 2008 30 10 20 68,548,971.076 2009 40 13 27 61,158,180.617 2010 58 15 43 121,6141,364.088 2011 71 20 51 131,463,562.159 2012 81 26 55 140,326,549.0110 2013 84 28 56 143,328,264.90 a   NNPC means Nigerian National Petroleum Corporation.  b PPMC means Pipelines and Product Marketing Company. c DPR means Department of Petroleum Resources. d Table culled from T. Nwokedi and C. C. Igboanusi, above note 4, 7.A study of the cabotage policy in Nigeria from the prisms of ship... 93
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