St Clements University

“THE IMPACT OF CABOTAGE ACT ON ENTREPRENEURIAL OPPORTUNITIES AND NIGERIA’S ECONOMIC GROWTH”

AUGUSTINE NWEZE PhD

(MATRICULATION NUMBER: 8225)

BEING A DISSERTATION SUBMITTED IN PARTIAL FULFILMENT OF THE REQUIREMENTS FOR THE AWARD OF THE DOCTOR OF PHILOSOPHY OF MANAGEMENT (IN ENTREPRENUERSHIP) OF THE ST. CLEMENTS UNIVERSITY

JULY 2006.

APPROVAL PAGE

This is to certify that this research project was carried out under our strict supervision and has been approved for submission to the Department in partial fulfillment of the requirements for the award of the Doctor of Philosophy of St. Clements University.

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Project Supervisor Academic Adviser

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Administrator
St. Clements University

DEDICATION

I dedicate this project to God Almighty, who is the foundation of all knowledge; for His loving kindness to me throughout my academic pursuit; for His divine providence, inspiration, financial and other provisions.

ACKNOWLEDGEMENT

My late father had a dream for me to be educated at the highest level in a reputable university in Europe or America. Though an illiterate, my father left an instruction with my late elder brother that in case he did not survive the civil war that he (my elder brother) must endeavor to send me to Cambridge for my university education. Unfortunately he died when I was just in primary school and could not live to see his dream come true.

My immediate elder brother, Christopher, whom my late father instructed to ensure this dream was realized picked up from where my father stopped. Again death called on April 5, 2006, when I was putting finishing touches to this dissertation and took Christopher’s life too.

This dissertation marks the end of a rigorous and long academic pursuit, the realization of a dream, and the beginning of a new and exciting career in academics.

There are several people, without their help, this investigation would not have been possible and they are hereby acknowledged.

My sincere and profound gratitude goes to my academic adviser, Prof. David Iornem, whom I have learned a great deal since our first meeting in Kaduna in 1986, both on personal and academic levels.

I am highly indebted to Prof. Pat Utomi who supervised and helped a great deal to shape the ideas contained in this dissertation. Prof. Utomi also encouraged me to investigate this topic at a corporate retreat event held for the management staff of National Maritime Authority (NMA) in Ibadan. He was the one who told me and encouraged me to further my academics. He guided me all the way from the questionnaire design stage to the actual writing of this dissertation. I am grateful to him for also taking time off his ever busy schedules to review the first drafts.

From Chief Chris Asoluka, a Maritime Lawyer and Consultant, I learned a lot about the maritime industry. He not only granted me interviews but also gave me materials on the subject or referred me to where I could get them. To him I owe a lot of gratitude for his advice right from the start, and also for being such an invaluable resource.

I commend with gratitude the assistance given to me by the following people: Momoh-Jimah Oyarekhua, a maritime entrepreneur, Ray Ugochukwu, Joseph Akpa, A. C. Kambia, Eric Ighalo, Emmanuel Offei, Nicholas and Eno Ekperi, Taiwo Akerele and my able Chauffeur, Ogbonnaya Agwu who couriered the manuscript to and from the computer typing center.

I am equally grateful to the following National Maritime Authority (NMA) staff for granting me interviews (audience): Adejare Shobayo, Director of Research, Vidon Jaule, Former Commercial Director, Hajia Tumaka, Corporate Affairs, Irene McFoy, and Mr. Igbecha both of Cabotage department, and other NMA staff I may not mention their names due to lack of space. Many thanks to all those who took sometime off their busy schedules to respond to the survey questionnaires.

I say great thank you to my colleagues at the Lagos Business School, Pan African University for their support and encouragement. Special mention must be made of Solomon Avbioroko for being a good friend and a strategic ally and also for his wise counsel, Dr. Obinna Muogboh for his encouragement, Prof. John Elegido and Dr. Doyin Salami for indirectly goading and challenging me to further pursue my academics, and not forgetting the amiable Prof. Albert Alos, Vice Chancellor, Pan African University. To all of you I am very grateful.

I am very grateful to true members of my extended family especially my father’s children who believed in me both living and those who died during my academic journey. They include: Chaka, Francis, Queen, Joseph (Pa Joe), Christopher (diseased), Odi (diseased), Ada, Lawrence (teacher), Sylvester, Aja (Bamoko), Chinweuba, Elizabeth, Oyiri (Eunice), Ogonna, Engr. Odi Jr., Glory, Uzo, Maria, Enyi, Oyiri (Aniezi), Cecilia, Nnenna.

I am deeply grateful to my late father, who had the dream of educating me to the highest level. Many thanks also to my mother, Mary Una Nweze and my younger sister, Queen Nweze-Eliogu who supported me all through the journey. Queen was always encouraging me to hang in there during my difficult moments. She was always proud to have me as her brother. My mother taught me to seek first my education and every other things will fall in place.

Finally, my special gratitude to my lovely wife, Barrister Gloria Austin Nweze, and my wonderful children: Peniel, Beulah and Hallel. They all burned the midnight candles with me. I am very grateful to them for creating the right atmosphere for me to concentrate, especially when writing this dissertation. I also want to thank them for their love which made it possible for me to strive to be a better person always.

May God Almighty richly bless and reward all of you in your endeavors.

ABSTRACT

It is imperatively impossible never to explore the avenues that exert impact on the citizenry of Nigeria vis-a-vis an improvement on the national per capita income, hence, improved national income and standard of living. Cabotage as coastwise and/or inland water trade has tremendous impact on the nation’s economy and of which, the study is aimed at exploring the impact on the Nigerian Entrepreneur through cargo reservation, transportation and haulage of wet and dry cargo within and outside the Nigeria waterways. The study will invariably evoke, recreate and set in motion the profound implementation of the cabotage so as to exhibit its true impact as expected

Cabotage Act has a lot of business opportunities of which among others are:
– To radically enhance indigenous capital formation in maritime business;
– To transfer technology and technical skill, to Nigerians;
– To drastically improve the maritime industry practitioners’ management skills;
– To create more jobs for Nigerians in the industry;
– To improve our national finances, especially as regards to foreign exchange conservation, and;
– To enable Nigerians and government to have greater control over our national maritime security.

It is the equal responsibility of the private, local, state and national stakeholders to shape the strategies and actions necessary to develop the desired state of the Nigerian Cabotage.

The cabotage that will host potentials, which will be technological advanced, safe, secure, efficient, effective, accessible, globally competitive, dynamic, affordable and environmentally a responsible system.

TABLE OF CONTENTS

S/NO PARTICULARS PAGE
1. Title Page
2. Approval Page ii
3. Dedication iii
4. Acknowledgement iv
5. Abstract viii
6. List of Tables xxi
7. List of Figures or Illustrations xxiv
8. List of Appendices xxv

CHAPTER ONE
1.0 Nigeria Maritime: The challenge of Economic
Growth in Nigeria - Introduction 1
The Nigerian Economy 1
The challenges 5
The Economy 10
Inflation Rate 10
Fiscal Operation 11
Government economic drive 11
Gross Domestic Product (GDP) 12
National Economic Empowerment and
Development strategy (NEEDS) 14
Macroeconomic and Structural Policy (2006-2007: providing an enabling environment for
economic growth 18
Utomi’s Economic Growth Drivers Framework 26
Policy choices 26
Institutions 29
Human capital 30
Entrepreneurship 32
Culture 35
Leadership 37
The Maritime Industry in Nigeria 39
1.0.1 Nigeria Maritime Cabotage 42
1.0.2 Cabotage Regime in Nigeria 43
1.0.3 The Relevance of Cabotage Law in
Maritime Industry 45
1.1 Background to the study 49
1.2 Statement of General Problem 51
1.3 Rationale for the study 52
1.4 Significance of study 53
1.5 Scope of the study 54

CHAPTER TWO
2.0 Introduction 55
2.1.0 The Nigerian Maritime Cabotage 60
2.1.1 The Maritime Cabotage Laws 65
2.1.1a Cabotage Laws in other countries 67
2.1.i United States of America (USA) 67
2.1.ii Greece 72
2.1.iii Denmark 73
2.1.iv India 73
2.1.v Philippines 74
2.1.vi Australia 74
2.1.vii Malaysia 76
2.1.viii Brazil 77
2.1.1b The Evolution of Nigeria Seaports 78
2.1.1c The Nigerian Maritime Sector Reforms 81
2.1.1ci The Ports Sector Reform 81
2.1.1cii The Dock Labour Reform 84
2.1.1ciii Port Concession – As a Reform 85
2.1.1civ Reform of the Nigeria Customs Service 88
2.1.1cv The Establishment of Inland Container
Depots in Nigeria 91
2.1.1d The challenges of Maritime sector Reform 95
2.1.1di Port Sector Reforms 96
2.1.1dii Dock Labour Reform 96
2.1.1diii Port Concession 97
2.1.1div The Nigeria Customs Service Reforms 98
2.1.1dv Dry Port or ICD as a Complement
to Port Reform 99
2.1.2 The Entrepreneur 100
2.1.2a The function of Nigerian Entrepreneur 101
2.1.2ai Seeking of Business opportunities 101
2.1.2aii Risk Bearer 102
2.1.2aiii Funds Provider 102
2.1.2aiv Co-coordinator of other factors of production 103
2.1.2av Creativeness 103
2.1.2avi Employer of Labour 104
2.1.2avii Innovativeness 104
2.1.2aviii Goal Setting 105
2.1.2aix Business Administrator 106
2.1.2ax Decision Maker 107
2.1.2axi Risk Taker 108
2.1.2axii A Trainer 111
2.1.2axiii Dedication 111
2.1.2axiv Hardworking 112
2.1.2axv Focused 113
2.1.2b Characteristics of Nigeria Entrepreneur 114
2.1.2c Problems Militating Against Nigerian
Entrepreneurial Growth 120
2. 1.2ci Lack of Capital 120
2.1.2cii Lack of Infrastructure 120
2.1.2ciii Lack of Qualified Managerial Manpower 123
2.1.2civ Lack of Access to Long-Term Loan Facility 124
2.1.2cv Lack of proper Awareness of would be potential
Entrepreneurs in Cabotage Trade 126
2.1.2cvi Lack of Technological Knowledge 127
2.1.2cvii Government Patronage and
Sponsorship/Establishment of a
Cabotage Bank 128
2.1.2cviii Lack of proper Training and Retraining of
Nigerian Entrepreneurs 130
2.1.2cix Lack of Research for Development 132
2.1.2cx Political Instability of the Nation 133
2.1.2d Ways to combat the problems of Nigerian
Entrepreneurs 134
2.1.2di The Infrastructure 134
2.1.2dii Capital 135
2.1.2diii Access to Long-Term Loans 137
2.2 Opportunities of Nigeria Entrepreneurs from
Cabotage Business 138
2.3 Form of Cabotage support programmes 144
2.4 Rationale for Cabotage support programmes 145
2.4.1 Impact of Cabotage Support Programme on
Domestic Waterborne Transportation 147
2.42. Uses of Cabotage Policy in Enhancing Cargo
support for Indigenous carriers 148
2.4.2i Exclusion of Foreign Carriers from
Domestic Shipping 148
2.4.2ii Extension of Area covered by Cabotage
Policy from Territorial Sea to the
Exclusive Economic Zone 149
2.4.2iii Extension of Cabotage law to
Non-transportation off-shore
Commercial Activities 151
2.4.2ai External Threats to usage of Cabotage for cargo
support and Indigenous vessels expansion and
Acquisition programmes: Regional Cabotage 151

2.4.2ii Hasten West African Regional, Economic and
Political Integration and Co-operation 153
2.4.2b Bilateral and Multilateral Agreements 155
2.4.2c World Trade Organization (WTO) 156
2.4.2d Economic Projects 159
2.4.2e Free Marketism 159
2.4.2f Competitive Forces 160
2.4.3 Cabotage and Indigenous Maritime
Capacity Enhancement Rationale 164
2.5 Impact of Cabotage Business on the Nation’s
Economy 165
2.6 The Challenges of the Cabotage Policy 178
2.6.1 Challenges 179
2.7 Cabotage Implementation 189
2.8 Fleet Expansion 200
2.8.1 Number and Types of ship 206
2.8.2 Merchant Fleet Product- mix (Non – Oil Sector) 207
2.8.3 Demand on Ship Size Ranges 209
2.9 Projected Merchant Demand by year 2010
(Non – Oil Sector) 210
2.9.1 Projected Merchant Fleet Demand
(Tanker Sub-Market) 212
2.9.2 Industrial Vessels 217
2.9.3 Services / Supply Vessels 217
2.9.4 Maritime Expansion Financing Needs 218
2.9.4i Maritime Parastatals under FMOT 219
2.9.4ii Cargo Sufficiency in Nigeria 221
2.9.4iii Nigerian Coastal Trade 223
2.9.4iv Inland Transport 224
2.9.4v Shipyards 225
2.9.4vi Ports /Terminals 226
2.9.4vii Scope of Fleet / Maritime Infrastructure
Expansion 228
2.9.4viii Size of Funds and Duration 234
2.9.5 Review and Assessment of Past and Current
Situation on Ship/Shipbuilding fund 235
2.9.5i Comparative Fleet Expansion Scheme 236
2.9.5ii The Suspended SASBF 237
2.10 Structure and Sources of Shipping
Investment Finance 241
2.10.1i Global Trends 241
2.10.1ii Structure of Fleet Expansion 243
2.10.1iii Sources of Finance 244
2.10.1iv Fiscal and Financial Supports 246
2.10.1va Ship Financing in Nigeria 249
2.10.1vb Market Risk 250
2.10.1vc Physical Risk 250
2.10.1vd Debtor Risk 250
2.10.1ve Currency Risk 250
2.10.1vf Interest Rate Risk 250
2.10.1vg Country Risk 251
2.10.1vh Managerial Risk 251
2.11 Capacity of Shipping and Dockyards in Nigeria 253
2.11.1 Availability of Cargo; Domestic Tanker Traffic
Returns From 1977 to 2001 257
2.11.2 Domestic Waterborne Petroleum Products 260
2.11.3 Domestic Waterborne Transportation
of Gas (LNG) 264
2.12. The National Shipping Policy Act 267
2.12.1 Statutory Objectives of NMA or Cargo
Support and Indigenous Vessels
Expansion and Acquisition 269
2.12.2 The Role of NMA in Respect of Cabotage
under the Coastal and Inland Shipping
(Cabotage) Bill 2001 282
2.12.3 Lack of Proper Legal Framework for
Cabotage Policy 288
2.12.3a Merchant Shipping Act 288
2.12.3b National Shipping Policy Act 292
2.12.3c Admiralty Jurisdiction Decree 1991 294
2.12.3d Carriage of Goods by Sea Act Cap.44 Law of the
Federation, 1990 (COGSA) 295
2.12.3e Navigable Waterways (Declaration)
Act Cap.287 295
2.12.3f The National Inland Waterways Authority
Decree 1997 296
2.13.0 Cargo Support Status – Introduction 300
2.13.1 The Conceptual Framework 305
2.13.2 Aims of Shipping Policies 306
2.13.3 Comparative Review of Demand – side Policies
of State Cargo Support Programme 308
2.13.3a The EU Countries 309
2.13.3b Asian Countries 309
2.13.3c The United States of America 310

2.13.4 Structural and Technological Changes in
Maritime Transport 314
2.13.4a Liner Shipping 316
2.13.4b Bulk Shipping 317
2.13.5 Scope of the Nigerian Maritime Transportation
System 318
2.13.5a Cargo Ship Traffic in Nigeria 319
2.13.5b Nigerian Foreign Trade 322
2.13.5c Carriage of Nigerian Crude Oil 323
2.13.5d Coastal Trade – Sub – Regional
Coastal Trade 324
2.13.5e The Nigerian Public Sector Cargo 326
2.13.5f Off-shore Oil and Gas Services
Potentials / Local Contents 329
2.13.5g Nigeria’s Vessels Capacity 330
2.14.0 The Nigerian Spirited Idea to Expand
Maritime Activities 335
2.14.1 Impediments to Maritime Financing in Nigeria 339
2.14.1i Policy Failure 339
2.14.1ia Maritime Policy in Nigeria 340
2.14.1ii The Trouble Spots in Maritime Industry 341
2.14.1b Transport Policy for Nigeria 344
2.14.1c Monetary, Fiscal and Financial Polices 346

2.14.2i Enhancing Local Content in Marine and
Shipping Services 348
2.14.2ii Observations / Recommendations 353
2.14.2iii Practical Examples of Countries that Promote
Local Content in Oil and Gas 358

2.14.3 What are the four Main Requirements to be fulfilled
by a Shipping Company in order to have its Vessel
Registered for participation in Nigerian Cabotage
Trade? 363
2.15.0 Concessions 363
2.15.1 Port Concession is another form of Colonialism 366

2.15.2 Port Concession will lead to Hike in Charges
and Cost Inflation 370
2.15.2a Sacked Workers 373
2.15.3 Basic Legal Requirements 375
2.15.4 Obstacles to Private Sector Growth 375
2.15.5 Easing the Obstacles 376
2.16.0 For Cabotage to work 377
2.17.0 The need for a Maritime Research and
Learning Centre 380
2.17.1 Justification for the Maritime Research
and Learning Centre 387
2.17.2 Aims and Objectives 329
2.17.3 Scope and Coverage 389
2.17.4 Infrastructure and Facilities Required 393

CHAPTER THREE
3.0 Research Methodology – Introduction 394
3.0a Research Methods or Approaches 397
3.0b Justifications for the Approaches 397
3.0bi Primary Data 398
3.0bia Questionnaires 398
3.0bib Observations 398
3.0bii Secondary Data 399
3.0c Instruments or Tools used 399
3.0d Research population and Sample Size 399
3.0e Sampling Procedures Employed 400

3.0f Justification for sample selection
procedure / sample size 401
3.0g Statistical Techniques used in Analyzing the Data 402

CHAPTER FOUR
4.0 Data Presentation and Analysis – Introduction 403
4.1 Analysis of Biographic Data of Respondents
Section A: 403
4.2 Analysis of Data According to Research
Questions – Section B: 407
Hypothesis I 407
Hypothesis II 408
Hypothesis III 410
Hypothesis IV 411 Hypothesis V 412
Hypothesis VI 413
Hypothesis VII 414

CHAPTER FIVE
5.0 Discussion of the Results – Introduction 416
5.1 Findings 417
5.2 Proof of Hypothesis 418
CHAPTER SIX
6.0 Summary of Findings, Conclusions and
Recommendations 420
6.1 Findings 421
6.2 Conclusions 424
6.3 Recommendations 426
7.1 Appendices 429
8.0 Bibliography 495
LIST OF TABLES
TABLES PAGE
2.8a. Representative vessel Types 204
2.8b Merchant Fleet Product Mix 208
2.9a Projected Merchant Fleet Demand 2010 211
2.9b Typical Seaman’s Monthly Wages 213
2.9c Projected Ship Demand for Cargo Throughout
All Nigeria Ports (1996 – 1999) 215
2.9d Projected Merchant Fleet Demand, Year 2010
(Oil Sector) 216
2.9.4iia Cargo Throughput at Nigeria Seaports 221
2.9.4iib Nigeria Sub-Regional Trade 222
9.2.9.4iic Number and NRT of Tankers that Entered Nigeria
Terminals, 1996 – 1999 223
2.9.4iva Vessels Employed in the Nigerian Inland
Waterways 225
2.13.5ai Cargo Throughput in Nigerian Ports
(Excluding Crude Oil Terminals) by Foreign and
Domestic Traffic (Tonnes) 1996 – 1999) 320
2.13.5aii Cargo Throughput in Nigerian Ports/Oil
Terminals 1996 – 1999 (Tonnes) 321
2.13.5ci Contribution of Crude Oil to Nigeria’s
Total Trade, 1996 - 1999 323
2.13.5di Nigerian Sub-Regional Trade 325
2.13.5ei Nigeria Public and Private Sector Cargo
Distribution by Tonnage: 1996 – 1999 (Estimated) 329
2.13.5fi Type and size of vessels Employed in the
Nigerian Offshore Oil/Gas Support Service 330
2.13.5gi Number and Deadweight of Merchants Ships
Owned by Nigerian Shipping Company 1987-91 332
2.13.5gii Number and Deadweight of Merchant Ships
Owned by Nigerian Shipping Companies 1992-97 333

2.13.5hi Numbers and Types of Nigerian Registered
Vessels, 2000 334
2.13.5hiv Number and NRT of Vessels that Entered
Nigerian Ports/Oil Terminals 335
4.1a Distribution of the Respondents by Sex 404
4.1b Distribution of the Respondents by Marital Status 404
4.1c Distribution of the Respondents by Age Brackets 405
4.1d Distribution of the Respondents by Qualification 405
4.1e Distribution of the Respondents by Income 406
4.1f Distribution of Respondents by Rank 406
4.2 Analysis of Data according to Research 407
4.2a Maritime Cabotage has positive Impacts on the
Entrepreneurial Growth of Nigerians hence the
Nations Economy 407
4.2b The Cabotage Law will Attract New Business to the
Maritime Sector 409
4.2c The Benefits of Cabotage Law 410
4.2d Whether the Respondents Fully Understand the
aim, objectives and purposes of the Cabotage Law 411
4.2e Whether or not their Companies will Participate
in the Cabotage Trade 412
4.2f What role is the NMA to Play in the Cabotage 413
4.2g Can Cargo Reservation Development Ensure
Maritime Capacity Building in Nigeria. 415

LIST OF FIGURES OR ILLUSTRATIONS

FIGURES
1.0a GDP Growth 13
1.0b The Leadership Process 38
2.9.4A Maritime Parastatals under FMOT 220
2.13.5x Percentage Participation in Nigerian Foreign
Trade by Flag Vessels and Foreign Vessels 322
2.13.5ey Composition of Nigerian Public Sector Cargo 328
2.17. ga Organizational Structure and Framework NMA 393
4.2.1. The Analysis of Hypothesis 1 408 4.2.2 The Analysis of Hypothesis II 409
4.2.3 The Analysis of Hypothesis III 410
4.2.4 The Analysis of Hypothesis iv 412
4.2.5 Representation of Hypothesis V on Pie Chart 413
4.2.6 Representation of Hypothesis vi on Pie Chart 414

LIST OF APPENDICES

Page
1. Questionnaire for survey 429
2. Survey Questionnaire 431
3. Coastal and Inland Shipping (Cabotage) Bill, 2003 434
4. Supplement to official Gazette Extraordinary
No. 26, Vol74, May 11, 1987 – Part A. National
Shipping Policy Decree 1987 453
5. National Maritime Authority 455

CHAPTER ONE

NIGERIA MARITIME:

THE CHALLENGE OF ECONOMIC GROWTH IN NIGERIA

1.0 Introduction
Nigeria’s economic problems are very many, and the maritime sector is one of them. As a result the policy makers decided to find solutions to the magnitude of economic problems using the Cabotage Act of May, 2004 to stimulate economic growth through entrepreneurship.
The question therefore is: with the existing weak institutions in Nigeria, will the Cabotage Act stimulate the intended economic growth through entrepreneurship?
The Nigerian Economy
Nigeria is a country of about 126 million people and has the second largest economy in sub-Sahara Africa. The Gross Domestic Income of the economy is about US$38.7 billion. Though the Nigerian economy is mono-cultural, heavily dependent on oil, about 60 percent of the population depends on agriculture for their livelihood. Petroleum production accounts for 25 percent of GDP, 90 percent of foreign exchange receipts and about 70 percent of government revenue. Daily production of crude oil is put at 2.4 million barrels and estimated reserves of crude expected to reach 36 billion barrels and a production capacity of 4.0 million barrels per day by the year 2007. 90 percent of these estimates are in fields yet to be developed. Gas, another strategic resource, hitherto being flared, has an estimated reserve of 166 trillion standard cubic feet with projected revenue of between US$5-6 billion annually within the next few years.
Industrial capacity hovers around 48 percent. In addition to vast arable land, the country is endowed with huge solid mineral resources such as bitumen, gold, diamond, tin, bauxite, columbite etc. Tourism, especially eco-tourism, still remains largely underdeveloped. It has a vibrant trainable workforce necessary for a growing economy, with huge opportunities for expansion in the service sector.
Successive Nigerian governments have had to grapple with the mono-cultural nature of the economy by attempting to diversify its revenue base through various measures including, but not limited to the Structural Adjustment Programme [SAP] in the 1980s and early 90s. Prior to the introduction of SAP in 1986, the country has adopted series of periodic Development Plans, which had provided the macro-economic framework for government-led productive and social activities in the economy. The country operated a “mixed economy” in which the government rather than market forces played a dominant role, while the nascent private sector was largely dependent on the State. With SAP, the government began to reduce its role in the economy by moving towards a market-driven, private-sector-led growth and development.
Despite this commitment, government remained the prime mover of the economy, which over the years exposed its inability to deliver on these fronts. The country’s infrastructure such as transport, telecommunication, health, education and energy, for instance, attracted little attention of government with dire long-term consequences. The potential for trade promotion expected of SAP also fail to materialize due to severe structural and other constraints.
When this administration came to power in May 1999, it inherited a virtually collapsed economy. Infrastructure suffered total neglect with declining investment in rehabilitation. Many industries folded up and those in existence operated at less than 35 percent of installed capacity. Unemployment and inflation were at an all-time high. All levels of the country’s educational system were faced with crisis of monumental proportions. The energy sector, central to industrial production and development, was in dire need of restructuring and investment. Corruption was all pervasive, and the country’s image was battered at home and abroad, a situation made worse by the unpatriotic activities of a tiny segment of the Nigerian population aided by their foreign collaborators in perpetrating financial and other transnational crimes such as the Advance Fee Fraud popularly known as the 419 scam. External debt stood at US$32 billion almost the size of the country’s GDP, without a clear strategy for a sustainable long-term management.
The new administration responded to these economic challenges by adopting various measures to address the structural rigidities in the economy and to lay the foundation for a sustainable growth and development in the short and medium terms. These measures included the following:
‧ Poverty Alleviation Programme aimed at job creation;
‧ Completion of the Liquefied Natural Gas Project to diversify the economy;
‧ Dogged pursuit of food self-sufficiency through various measures such as the provision of fertilizers, rehabilitation of irrigation projects and food storage facilities, agricultural guarantee insurance scheme; etc;
‧ Deregulation of the downstream oil sector;
‧ Increased government investment in the rehabilitation of infrastructure such as energy, transport and telecommunication;
‧ Financing of Small and Medium Scale Industries through the establishment of the Bank of Industry and the Small and Medium Scale Industrial Development Agency;
‧ Improvement of the security situation through the strengthening of the police and other security agencies in terms of size, funding, training and provision of equipment; and
‧ Divestiture of government interest in public enterprises and major companies through privatization.
The response of the economy to these measures was mixed. Indeed, government underestimated the enormity of the problems in term of the real extent of neglect and decay of the past. In order to revitalize the economy and ensure a more positive response to the measures already adopted, government realized that a more proactive approach was an imperative necessity. This led to the creation of a strong economic team composed of respected Nigerian economists to ensure proper coordination and implementation of government economic measures (A paper presented by Z. J. Gana at the Roundtable on Nigeria, Department of Foreign Affairs and International Trade, Ottawa, Canada, 5 February2004).
The Challenges: Epilogue

The Nigerian economy has not grown much in the past 20 years or more. Poverty is therefore pervasive. There is an urgent need to understand the dynamics of growth especially in a global economic environment that has supported growth in other regions, particularly Asia.

The challenge is that much of policy advocacy that goes on is not anchored in objective verifiable evidence. Such evidence if gathered and placed and positioned as a basis for debate or discussion would enable identification of policy options and discrimination or choice between these options. It would also build stakeholders consensus on rules which will facilitate the emergence of institutions that support growth and stability.

In the last two decades there has been a global trend in favour of enhancing private sector economic capacity. Private sector players do tend, in poor country situations to make decisions that produce incomplete value chains and economic performance below the potential of the economies.

An imperative of improving the competitive ability of firms operating in these environments such as Nigeria is therefore providing the companies with data gathering and analytical capacity.

Nigeria lost decades of development due to negative –to-slow growth and has been one of the weakest economy in the world on per-capital basis especially for the period 1981 – 2000. The GDP grew by an average of 2.8 percent in the 1990’s. The per capital income growth rate within this period was zero. The average growth rate for the period 1999 – 2003 was about 3.6 percent. Per capital growth rate within this period was 0.8 percent per annum. This is far lower than the 4.2 percent per capita growth rate needed to reduce poverty significantly (NEEDS, 2003, P19).
When compared with other countries of Africa and Asia, especially Indonesia which is comparable to Nigeria in most respects, Nigeria’s level of economic development over the decades becomes more disappointing. With a GDP of 845 billion in 2001, and a per capita income of $300, Nigeria has become one of the poorest countries in the world. In the year 2000, Nigeria had earned approximately $300 billion from oil export since the mid 1970’s. Its per capita income was 20 percent lower than the 1975 level, and the country has become so heavily indebted that it has remained difficult servicing the existing debt. Both external and domestic debts amount to about 70 percent of GDP (NEEDS Document, 2003, P19).
There is great spatial and sectoral unawareness in terms of the share of GDP and growth performance across regions and geopolitical zones of the country. The real sector is still dominated by the primary production sector – agriculture (41 percent) which is predominantly peasantry with low and declining productivity, and crude oil (13 percent) while the secondary sector especially manufacturing has been stagnating (about 5 – 7 percent of GDP) thereby making Nigeria one of the lowest industrialized countries in Africa. The services sector has been the fastest growing since independence.
At about 5.3 percent annual growth rate, urbanization rate is one of the fastest in the world and with a stagnant secondary sector, the urban unemployment is acute with the attendant high level of crimes and socio-political tensions. As at March 1999, 23.2 percent of the rural labor forces were unemployed while 12.4 percent of the dwellers were without jobs. In March 2003, rural unemployment rate had dropped to 12.3 percent and urban rate to 7.4 percent (giving a composite unemployment rate of 10.8 percent). These are large numbers giving that the labor force is about 61 million in Nigeria.
Broad microeconomics aggregates-growth, terms of trade, real exchange rate, government revenue and spending, etc have proved, over the 1975 – 2000 period, to be some of the most volatile in comparison to over 100 developing countries. Over the last three decades, high macro volatility has become a key determinant as well as consequences of the poor economic management. Overall, the economy has been characterized by low savings-investment equilibrium (at less than 20 percent) and low growth trap. The economy remains at very low levels of industrialization and exporting, with an average annual investment rate of about 30 percent of GDP required to unleash a poverty-reducing growth rate of at least 7- 8 percent per annum.
Lack of high persistence has been a defining feature of the economy such that in over 40 years, it has never had a growth rate of 7 percent or more for more than three consecutive years. Nigeria is not only poor; it also experiences some forms of de-capitalization (human and financial). Because of perceptions of risk and high cost of doing business, private agents have chosen to keep the bulk of their assets abroad (with independent estimates of stock of capital flight abroad quite significant), and over two million Nigerians (mostly highly educated) have migrated to Europe and the U.S. (brain drain). Most of the FDIs into the country go into the oil and extractive sectors. Only since 1999 have FDI in the non-oil sectors begun to rise significantly. The economic structure remains highly undiversified. Oil exports account for 95 percent of total exports, and manufacturing sector accounts for less than 1 percent. Nigeria has also lost international market shares even in its traditional (agricultural) exports since the 1970s.
Macro policy has been highly circumscribed by the highly inefficient but highly volatile and unsustainable public sector spending, and atypical high volatility of major macroeconomic aggregates. Fiscal decentralization has proved an enduring challenge to effective microeconomic stabilization and efficient public finance management in Nigeria. There is also the lack of policy coherence between the states and the federal government, and even among the various agencies of the federal government. The traditional instruments of economic management, the National Plan and Budgeting process had been rendered ineffective.
Government finances at all levels of government are not in good shape with domestic debt increasing by over 200 percent between 1999 and 2002 (to about US$9 billion), and an external debt burden, which the government is barely able to service about 50 percent of the contractual service obligations. Government finance is also characterized by pension crisis, arrears of salaries of civil servants, huge debts to government contractors and suppliers of goods and services, a boom and burst cycle of revenue and expenditure, misallocation and mismanagement of resources, etc. at the state government level, a major crisis is looming but goes largely unnoticed. In many states, debts are accumulating at unsustainable levels and weak institutions and economic governance are very acute.
The very low productivity/uncompetitiveness of the private sector and the lack of diversification of the economy are due mainly to the hostile business environment. The constraints to business include infrastructure deficiencies, poor security of lives and property, corruption and rent – seeking, low access and high cost of finance, weak institutions, ill-defined property rights and enforcement of contracts, and unstable macro economic policies especially fiscal and trade policy. Although these conditions have begun to improve since 1999, these are significant obstacles to be addressed.
Nigeria faces the challenges of meeting the Millennium Development Goals. Available statistics from the 1996 survey indicates that poverty is deep and pervasive with an estimated 70 percent of the population living in poverty. Poverty in Nigeria has great regional, sectoral and gender disparities. Other social indicators are also under stress ---income inequality in Nigeria is very high; unemployment is threatening social cohesion, security and democracy; and the imminent HIV/AIDS epidemic is a potent time bomb waiting to explode and with potential dire consequences for productivity in the economy. Further, there are persisting cases of social exclusion and discrimination against women and this hampers their ability to fully contribute their potentials to the development of the economy.
Despite efforts to promote private sector – led, competitive market economy frame work, there is still the fundamental challenge of transition from statism and rent seeking in an economy dominated by the public sector. The deep vested interests which profit from the system have proved resilient. The perception of an over – bloated and inefficient public service has become one of the key problems. Another is the evidence of weak institutions and persistent implementation failures (NEEDS, 2004, PP20 – 21).
The Economy: 2005 – 2006
Within the period under review, there is slight improvement in the economy. Measured in terms of real GDP at constant price (1990 = 100), the economy grew by 5 percent. The real output also increased by 6.1 percent surpassing the targeted 5 percent in the NEEDS. The economic components that contributed to this growth includes agriculture, mining (crude oil), communications, utilities, services and building and construction (Baiye, 2005, P23)
Inflation Rate
The inflation rate, as measured by the change in the composite consumer price index (May 2003 = 100) on a year – on – year basis for the period ended December, 2004, was 10 percent compared with 23.8 percent in 2003. On a 12 – monthly moving average rate basis, the inflation rate for the year was 15 percent compared with 14 percent in 2003.
The factors that contributed to this growth included the lingering effect of excess liquidity during the first half of 2004 and the sharp increase in the pump price of petrol. In the second half, the decline in inflation rate was attributable to the tight fiscal and monetary policy of the government and the growth experienced in non – oil GDP, particularly food crops (Baiye, 2005, PP23 - 24).
Fiscal Operation
The fiscal operation of the Federal Government resulted in an estimated overall national deficit of N 142 billion or 1.7 percent of GDP compared with the N 202 billion deficit or 2.8 percent of GDP in 2003. The national deficit was as a result of the observance, by the three, tiers of government, of the fiscal rule on oil benchmark price which resulted in a US$5.9 billion savings. The deficit was financed entirely from domestic sources.
The retained revenue of the Federal Government was N 1,230.7 billion, representing an increase of 20.7 percent over the level in 2003. The aggregate expenditure of the Federal Government rose by 12.3 percent to N 1,377.3 from 2003 level. This increased expenditure level was a reflection of the domestic debt services payments, which exceeded the budget, as well as non – debt expenditure (Baiye, 2005, P24).
Government’s Economic Drive
A measured renewal of confidence in the Nigerian economy has been brought about by the current economic drive of the Federal Government. What this has translated into is the increased inflation of direct foreign investment in the different sectors of the economy. This, coupled with the enhanced receipts from the export crude oil within the period in view, has boosted the external sector. One major factor that contributed to this development is the government’s unchanged market oriented policy stance.
The government has vigorously presented free enterprise and private sector participation in the various economic enterprise by eliminating most of the laws inhibiting free enterprise. A close attention to excellent service delivery by the public sector in tandem with the profit driven private enterprise is top in priority of the government. This resulted in the formation of SERVICOM by the government to promote effective service delivery. By this all public sector must play their part in meeting all social obligations to clients. In other words, the government is turning attention to quality of service it delivers to the citizens (Baiye, 2005, P26).
Gross Domestic Product (GDP)
In 2003, the Nigerian GDP grew to 10.23 percent but dropped to 6.10 percent in 2004.At this performance rate, the population growth rate for the same period (year) was 2.8 percent. Mining (crude oil), industry, agriculture, utilities, communications, building, construction and services contributed to this growth. This was more than the targeted 5.0 percent in 2004.
The capacity utilization of industries in 2004 stood at 45 percent as against 46 percent recorded in 2003. The agricultural sector which comprised of crops, livestock, forestry and fishery accounted for only 34.8 percent of the total GDP, while the industrial sector which comprised of crude petroleum, mining and quarrying, and manufacturing accounted for 37.5 percent. The financial services sector recorded a fall of 19.28 percent.
The factor responsible for the performance of the agricultural sector was government support and favorable weather condition. Other factors include increased production of crude oil, increased global demand for oil driven mainly by speculations, Middle East crisis and the booming Chinese economy. The year-on-year inflation rate dropped to 10 percent from 23.8 percent in 2003.
The manufacturing capacity utilization rose to 41.3 percent in 2002 from 139.6 percent in 2001.

Figure1.0a: GDP Growth

Source: Baiye 2005/2006, p28

National Economic Empowerment and Development Strategy (NEEDS)

To avert the recursive nature of the Nigerian economy with the attendant Dutch disease, the Federal government come with the needs document. NEEDS is Nigeria’s medium terms poverty reduction strategy process {2003-2007} which derives from the long-term goals of poverty reduction, wealth creation, employment generation and value ex – orientation (Baiye, 2005 – 2006, P84).

It is a comprehensive and coherent economic reform agenda and a sectoral response to the challenge of restructuring the economy. The aims and objections of the economic program are to reduce poverty, generate employment, create wealth, reform the public sector, improve
budget discipline, and lay the foundation for a private sector – led (Z. J. Gana: A paper presented at the Round Table on Nigeria, Ottawa, Canada, February 5, 2004).

The NEEDS program involves a nationally coordinated framework of action in close partnership with the state and Local Governments (with their State Economic Empowerment Development Strategy, SEEDS) and other stakeholders to strengthen previous achievements and build a solid foundation for the attainment of Nigeria’s long – term vision of becoming the largest and strongest African economy and a key player in the world economy (Baiye, 2005 – 2006 P84).
For Nigeria to embark on sustainable growth and development, the programme aims at a GDP growth rate of 7 percent per annum even though the economy is currently growing at 3.5 percent compared with a population growth rate of 2.8 percent. To meet some of the specific targets set out in the UN Millennium Development Goals and to reverse the worsening level of poverty, the country needs a minimum of 5 percent GDP growth rate and an annual investment of 30 percent of GDP as against the current level of 18 percent. The country’s external reserves fluctuate between US$7 and US$10 billion in the last four years of the administration covering over six months of imports. Exports of non-oil products including gas and solid minerals as well as domestic taxes have also started to pick up in recent years, thereby reducing the overall share of oil to government revenue (Z.J. Gana, 2004).
Needs and Economic Priorities
The NEEDS revolves around fundamental pillars, which are expected to complement continuing policy reforms in the following areas:
‧ Establishment of macro-economic stability with low inflation, low interest rates and low unemployment;
‧ Acceleration of the Privatization Programme;
‧ Transparency and accountability including due process and the reform of procurement practices;
‧ Governance and institutional reforms including anti-corruption, war against financial and transnational crimes and local government reforms;
‧ Public sector reforms (Public expenditure - to reduce budget deficit now at 4.7 percent to no more than 2.5 percent of GDP, Pension reforms, budget preparation and taxes);
‧ Rehabilitation of decrepit infrastructure especially energy, telecommunication, transport, etc;
‧ Promotion of foreign investment;
‧ Education reform including university autonomy and Universal Basic Education programme (UBE); and
‧ Substantial reduction of the country’s external debt, increase in net resource flows from Overseas Development Assistance (ODA) and the return of public assets stashed abroad.
For the successful implementation of NEEDS, government has identified six key areas to energize the economy. These are oil, gas, agriculture, solid minerals, manufacturing and tourism development. The tariff structure has also been reformed while the ports are also undergoing fundamental restructuring with the planned introduction of destination inspection for imported goods and the Automatic System of Customs Data (ASYCUDA) (Z.J. Gana, 2004).
Key Strategies
The strategic goal of reforming government and institutions is to restructure and strengthen them to deliver effective services to citizens (Baiye 2005/2006, P84). Therefore, the direction of the government is in the provision of basic services so as to eliminate waste and inefficiency and at the same time free up resources for investment in other areas like infrastructure.

Institutional reforms on the other hand involves fighting corruption, promotion of the rule of law, strict enforcement of contract using fiscal policy framework that can be sustained, and ensuring a higher degree of transparency.

The NEEDS document recognizes the fact that the private sector is the engine of growth. It is the private sector that will create wealth and provide or generate employment for the citizens. While the government is the facilitator and regulator, the private sector’s role is that of the executor

The key elements of the NEEDS program is sectoral development of agriculture, health, education, small and medium, enterprise (S M E), etc. This is achieved by embarking on deregulation, privatization, liberalization program, and development of infrastructure. What NEEDS aim to achieve in the agricultural sector is to promote the emergence of both medium and large commercial farms and plantations. Another key area is in the establishment of an industrial conglomerate that will compete favorably in the global marketplace.

From the fore going, the key message of NEEDS in terms of value re – orientation is that “it is no longer business as usual.” Through elements such as the privatization, anti – corruption measures, fight against Advanced Fee Found, it is expected that professionalism, efficiency and selfless services will be re – instated in a subsequently right-sized public sector. This element will enhance the drive towards transparency in public and private sector financial transaction while punishing consumption and rent – seeking (Baiye 2005/2006, P85).

MACROECONOMIC AND STRUCTURAL POLICY (2006 - 2007): PROVIDING AN ENABLING ENVIRONMENT FOR ECONOMIC GROWTH
The main motivations for the federal government’s structural reforms program is the need to entrench macroeconomic stability, improve the business environment, strengthen public financial management, promote private investment, and create jobs in other sectors of the economy apart from oil.

The tax system reform, liberalization of the trade policy, promotion of the privatization, reduction of consumption and improvement of infrastructure are the key elements of the reform agenda of the government.

Tax Reform
The tax reform system and administration is being overhauled and the Federal Inland Revenue Service (FIRS) restructured. The aim of the reform is to improve revenue collection and tax service delivery as well as broaden the tax base and any distortions that may exist.

A bill before the National Assembly when passed will give the FIRS human resource autonomy and funding based on the amount collected from non – oil revenue. Their draft legislation also strengthens inter – agency coordination for oil revenue collection, simplifies and harmonizes tax procedures, and strengthens FIRS auditing powers.

Privatization
Some of the key elements in the Federal Government’s privatization program include the privatization of the Nigerian telecommunications (NITEL) and former National Electric Power authority (NEPA) now unbundled and re – christened Power Holding Company of Nigeria (PHCN). The reform of the power sector is important since power is key to the economic growth and development of Nigeria. The major challenge in the privatization process of the governments is the slow pace.

Listed herewith are the enterprises for privatization and/or concessioning:

NITEL/MTEL: Repackaged and sold to transnational cooperation of Nigeria Plc (Transcorp) for $750 million being 75 percent equity. A negotiated sales strategy was adopted by Bureau of public Enterprise (BPE) because of the failure of the previous attempts.

PHCN: was unbundled into 18 companies and a regulatory commission was set up. It is expected that three of the companies will be privatized by first quarter of 2007.

Other government owned establishment to be privatized between 2006 and 2007 include the Port Harcourt refinery, eleven oil services companies, 49 percent government share of Transcorp Hilton Hotel through limited public offering), Le meridian-Sofitel Hotels, Central Railways Corporation and Abuja Airport are to be concessioned.

Other Structural Reforms
‧ Following a study on the impact of the tariff reform on the economy, the 50 percent tariff state will be reviewed by end of 2007. the government will also reduce or eliminate the limit of banned items having adopted the five – band customs tariff in October 2005 under the common External Tariffs (CET) of Economic community of West African States ( ECOWAS ).
‧ The Nigerian Customs Services Reform will be accelerated, and the number of days it takes to clear goods from the ports reduced by half using the fast track window.
‧ A tagging and tracking system for monitoring and evaluating spending of debt relief savings in MDG – related sectors is expected to be implemented by the government by August 2006.
‧ A quarterly report of MDG – related sectors spending to be produced by the government. These include Health, Agriculture, power, Water and Roads.
‧ Payments of contractors owed up to N 100 million will be completed in December 2006. Bonds issued to cover contractors owed over N100 million.
‧ A database of pension arrears and qualification of the amount of arrears available and the 2005 areas paid off.
‧ With a view to improving the quality of the portfolio, cost – benefit analysis of the 20 largest projects have been undertaken.
‧ The public pronouncement bill has been passed by the Senate and is awaiting the passage of the House of Representatives. The work of the Due Process Office is expected to continue in ensuring transparency and best practices in public procurement.
‧ The downstream oil sector has almost been deregulated and subsidies removed.
‧ Microfinance policy launched by the Central Bank of Nigeria (CBN) in 2005, and community banks required to recapitalize to N 20 million from the initial N 5 million within a period of 18 months.
‧ A Comprehensive Civil Service reform undertaken
‧ The National Bureau of Statistics (NBS) and the Central Bank of Nigeria (CBN), in order to strengthen macroeconomics statistics, collaborated to carry out a survey toward developing a quarterly GDP database.
‧ December 2006 is the dateline for the completion of the insurance sector consolidation.

Reform Challenge
The major challenge facing the government is the sustainability of the reform program and in particular how to transmit the benefits of the reforms to ordinary Nigerian citizens. To this end, the government is interested in emphasizing in those areas of economic activity that will make it possible for the benefits of the economic reforms to reach the Nigerians Public in different levels in line with MDG targets. These include reducing poverty, wealth creation, employment generation, education, good health delivery and infrastructure. These are also part of the NEEDS program. Achieving the above requires heavy investment in physical and human infrastructure, such as education and health, productive activities, and more vigorous pursuit of indigenous participation agenda.

A key risk is that the political landscape and commitment may be altered after the elections in 2007. It is expected that the institutional/structural and economic reforms will continue at all levels of government. Nigeria also faces significant challenges in accelerating growth, reducing poverty and meeting the Millennium Development goals (MDGs). The good news is that Nigeria’s reforms efforts and development challenges enjoy the support of the international community.

A case in point is that the World Bank’s Country Partnership Strategy has stepped up financial and technical assistance. They will work with the Federal Government in four areas:
� Financing investments in infrastructure (power, gas and transport)
� Financial and technical support to improve accountability and transparency, and fight corruption
� Technical assistance and advisory services towards investment climate and policies to stimulate private sector led growth.
� Support to national initiatives for human development, particularly those aimed at fighting HIV / AIDS, strengthening the health system, and supporting the knowledge economy.

Structural Issues
In 2005, agriculture outperformed oil in its contribution to the GDP. While oil account for only 25 percent of GDP, 85 percent of government revenue and more than 90 percent of export earnings, agriculture on the other hand accounted for 40 percent of GDP. Though agriculture was down from 60 percent which was what it used to be in the 1960s but it has grown from 6.5 percent over 2002 figures. This growth was attributed to good weather and some reforms in the sector. Part of the government reform program was to grow the non – oil sector, which could explain the growth in agriculture.

Another factor that contributed to the overall improvement in agriculture in the past few years was the trade liberalization policy of the government which estimated the growth of agricultural commodities exports. A number of factors govern agricultural production and prices. These factors include among others weather, government action through strategies that affect macroprices and resource use, the producers in their allocative and investment decisions and consumer in their preferences and purchasing power.

The distribution sector accounted for 20 percent of non – oil sector GDP which is a reasonably good performance. The manufacturing sector has not had a good performance. The sector accounts only for 4.0 - 5.0 percent of GDP. The manufacturing sector’s poor performance could be attributed to poor infrastructure (especially power) and weak business environment in areas varying from poor access to credit facilities, excessive bureaucracy, a weak legal system and above all consumption. All these have contributed in making Nigeria less competitive.

In the World Bank’s 2005 global competitive index, Nigerian ranks 88th out of 117 countries, and also came 8th out of 19 sub – Sahara African countries ranked on the index. The various structural reform program of the government in the area of bank consolidation, privatization, deregulation and effort to improve infrastructure are all geared toward supporting the development of the non – oil sector, generating employment and contributing to higher growth. It is expected that the growth in the non – oil sector will be sustained barring poor weather conditions and the economy will begin to benefit from some of the reforms and increase investment.

In addition, government is also focusing on increased investment and output in the oil sector. Further rounds of licensing of production share contracts (CPSCs) for offshore oil production were undertaken in 2000 and 2005 respectively. The schemes allows international oil companies (IOCs) to take risk of exploration, make investments upfront, and recoup their costs and then share whatever be the profit with the government at the ratio of 70 : 30 in favor of the IOCs. Though production and export will be boosted by this a arrangement but it will not impact on government revenues given the lengthy period of cost recovery. It is also very likely that the PCS model will govern a large portion of the future deep – water offshore projects because of NNPC’s funding constraints and technical expertise issues.

The government has the aim to raise revenues to 4.0 billion barrels by the year 2010, thereby increasing installed capacity to 4.5 billion barrels. This will enable Nigeria increase its share of the overall OPEC quota. A US$ 40 billion investment is required to achieve this target.

Nigeria is placed among the top ten gas reserves in the world with a total reserve of 187 trillion cubit feet at the end of 2004. A rapid expansion is expected owing to regulations requiring elimination of gas flaring by 2008. This will make it necessary to convert gas into liquid from for export as well as for domestic utilization.

By 2010 the total revenue from LNG exports is expected to rise to an estimated US$9 billion from the 2004 figure of US$3 billion. It is also expected that gas production will double, even as NNPC and its Joint Vehicle Company (JVC) partner are developing many gas – powered independent power providers (IPPs) to be able to meet the government’s target of producing 10,000 MW of power production by 2007.

It is quite clear from the foregoing that the hydrocarbon sector will remain dominant in terms of export and government revenue. And as such the economy will remain vulnerable to the topsy turvy of oil prices movement in the medium term. The Nigerian export base will be further diversified by the anticipated development of gas liquefaction and gas exports. This notwithstanding, it will not end Nigeria’s dependence on extractive industries for foreign exchange generation and government avenues (H2 2006 ARM GAA Report, as in BusinessDay Newspaper, September 11, 2006).

UTOMI’S ECONOMIC GROWTH DRIVERS FRAMEWORK
Economic growth in the work of prof. Pat Utomi is a function of six variables which he described as the growth driven framework. These variables tend to explain why some nations stagnated while others have continued to grow their way out of poverty. There are also six sets of interdependent variables which intersect with one another and shape the environment of business, determining thereby the strategy choices of firms and performance outcomes that make up the wealth of nations. These variables are Policy Choices, Institutions, Human Capital, Entrepreneurship, Culture and Leadership.

Policy Choices
Paul Collier and the group of academics who see the statistics orientation of African leaders as the source of policies that have taken away individual incentives and produced slow growth, if not stagnation. The intellectual view that dominated the early years of Nigerian independence was the mixed economy model. This model is that in which the state was active in commercial sectors and in “facilitating” the import substitution industrialization strategy and indigenization of the economy.

The military that had taken over the reign of power in Nigeria by January 1996 had little time for the intellectual left. Policy therefore began to withdraw from the broad open intellectual engagement, except for these academics sucked in by the corporatist state and very often destroyed by it. Then there were the urban biased elite-centered set of policies that saw marketing boards redistributes wealth from cash crops of the rural areas to administrative elite. This was worsened by dramatic leap in oil prices in 1973 following the Yom Kippur Arab – Israeli war. Just as oil was becoming very significant revenue source in Nigeria.

Policies became more statist and significantly insensitive to the impact of appreciating exchange rates for the performance of other sectors. The farmers, unable to survive on Naira value of the exports abandoned their farms. Nigeria was soon to become a monoculture economy. The other trouble with oil was made manifest as oil prices were noteworthy unstable and external shocks from oil prices savings would soon be a dominant feature of Nigeria’s economy. Dutch disease would therefore enter the lexicon of everyday Nigeria as governments saw budgets balloon in the face of high oil prices today and crash tomorrow. This led the Nigerian economy to a structural logjam and needed reforms.

Policy reforms have, however, failed to bring the promised investment and growth. This is clear because experience from elsewhere shows that policy choice is necessary but not sufficient for economic growth. Institutions, Human Capital, Entrepreneurship, Culture and Leadership need be considered also. Structural adjustment program (SAP) was introduced, but these policy changes have not moved the people away from poverty on the extreme poor – high networth continuum.

Even though agriculture hosts a majority of the population as a place of employment, its contribution to GDP was only 34 percent in 2005. Tinkering with policies that abolished the Marketing Boards that had symbolized the extraction of profit with little invested back was a major plank of the reform initiative at the time of SAP. Exchange rate policy shift from the fixed to a two tier market determined rates was part of the package to return agriculture to a path of reckoning.

The new exchange rate mechanism, a precursor to the goal of free market determined exchange rate involved significant devaluation of the Nigerian currency, the Naira. The immediate effect of this is that it made the export of agricultural produce, which overvalued exchange rates had made unappealing in the past years, more attractive and this resulted to the abandonment of cocoa farm.

The policy choice process offered Nigeria a two tier foreign exchange market at the outset. With weak monitoring capacity, there was a wide side arbitrage and a mad rush of people with excess money to obtain banking licenses which were equivalent to license to print money for the unscrupulous. The basic law of demand and supply meant that the value of the Naira continued to be south bound.

In order to stop the tide of the depreciating Naira, the government introduced other policies like Central Bank requiring commercial banks to acquire stabilization securities which forced money out of the banking system without notice in order to bring down money supply and make Naira chasing foreign currencies scarce. Policy choice does matter but it matters in context of other variables. Failure to pay enough attention to that will only produce recursive outcomes.

Institutions
Institutions are about containing uncertainty and bringing predictability to action. They are the guardians of the will of society to place limits to acceptable behavior. By putting cost to behavior that society has come to accept, either because the powerful have convinced others it is in their best interest or because practice and convention have led society to a consensus that the object behavior is in the common interest, institutions reinforce the consensus.

In many developing countries the institutions are weak and under them because many rules have not become settled habits. Rules related to modern economic transactions have not become settled habits in many transition economies because these rules are often new and alien as most new economic practices are imported as part of the race for modernity. Since these new ways hardly build on traditional habits for similar activities, the tendency is for deflection from these new norms in places where capacity of the new institutions for enforcement of the new rules is quite low. Institutions are critical to investments on which growth depends. Institutional weakness, on the other hand, is also a bane of development. Institutions can also be a source of threats and opportunities and competitive strategy demands an alignment of the strengths and weaknesses of the organization with trends in the evolution of institutions to protect it’s weakness from being vulnerable to the institutions and to use its strength to make institutions work in favor of the firm.

As the effectiveness of institutions can affect most of the five forces of industry structure analysis, like the other environment mega factors, government and business associations, environment analysis would be incomplete without thinking of institutions.

How did the West grow rich and what are the lessons from how institutions evolve, how capital became available for building the wealth of nations? Hernando de Soto demonstrated that the major stumbling block that keeps the rest of the world from benefiting from capitalism is its inability to produce capital. Capital is the force that raises the productivity of labor and creates the wealth of nations.

Human Capital
Human Capital development is concerned with the skills, know – how, and know – why of persons, their managed capacity and their state of health so they can give enough to increase productivity. Unfortunately, contemporary Nigerian experience has witnessed a combination of decline in the quality of education through poor funding and not well thought – through egalitarian policies regarding contribution of beneficiaries to funding higher educations, declining enrolment in schools; and declining health care.

With HIV/AIDS pandemic and the stranglehold malaria still has on quality of life, especially with its toll on infant mortality, the challenge of human capital needs to be tackled in a more committed way to make progress. The challenge of human capital development in poor nations has been a major source of reduced competitiveness in a global economy in which countries position themselves to attract a share of investment flows, tourism and technology. In countries like Nigeria the rot in both tertiary education and healthcare has attracted some very provocative and some quite sober statements.

Human Capital is at the heart of the modern competitiveness economy and that the path of building a stock of human capital to out-perform others in both the investment in education and healthcare, and how a country manages the development of those investments. Many nations are poor either because they invest inadequately, or manage poorly that which is invested.

The UNDP Human Development Index provides a fair sense of the relationship between provision for healthcare and human material progress. Where it is possible for some countries that have a marginally higher per person index, it is the norm that most countries that invest significantly in the well – being and education of their people tend to be the more prosperous countries.

The National Health Plan document released by Nigeria’s Federal Ministry of Health proposed that: “the goal of the National Health Policy shall be to establish a comprehensive healthcare system based on primary healthcare that is promotive of protective, preventive, restorative and rehabilitative, to every citizen of the country within the available resources so that individuals and communities are assured of productivity, social well – being and enjoyment of living.” Unfortunately, the current situation is worse than when that statement was made about 20 years earlier.

The failure of education and absence of commitment to better healthcare management can be a major reason for poverty of nations because it translates to low human capital in the age of the knowledge worker when competitive advantage of nations derive significantly from the state of their human capital.

Entrepreneurship

Entrepreneurship can be described as that process of creating value where non existed and thereby reducing the gap between the level of satisfaction men enjoy with their lives and where they desire to be. Entrepreneurship is a master key to economic growth and development and reduction of poverty in the poor countries of the world, as it is about an understanding of how forces within and outside the narrow economic system produce a dynamic in which creative ideas in builders of enterprise sometime with access to capital, to yield a quantum leap in value creation.

Entrepreneurship is about creating value that did not exist, which bridges the dissatisfaction gap that exist between where people are in their needs state and where they desire to be on the hierarchy of needs. Understanding the phenomenon that enterprise is essentially the soul of human material progress, and how it is impacted by policy choices, institutional arrangements, human capital availability and the dominant values (culture) which are shaped significantly by leadership, is really understanding why nations are poor.

Why is high value enterprise opportunity not so easily pursued by a lot of people who want to make a lot of money? Outcomes are so had to predict in ideas that lead to big discontinuous changes that advance value to the customer that many walk past the opportunity without seeing it. A good measure for value is, therefore, the amount of uncertainty in the possibilities of commercialization of the new enterprise that shifts satisfaction. It is the quantum of value creation that distinguishes the businessman from the entrepreneur. Nigeria is a country of many businessmen but few entrepreneurs.

Between the businessmen and the entrepreneurs is a continuum from risk at one end (the businessman) to uncertainty at the other end (the entrepreneur). The policy choice, institutional arrangement, etc. tend to indicate which end people locate. The question why are these few entrepreneurs in countries that need more of them so that discontinuous change that yield value innovations will come in quick enough bursts to alter the welfare profiles of a broad part of the population? To answer this requires a little exploration of the evidence how the West grew rich, how Asia catching up, and what role entrepreneurship has played in the diverging performance of these economies.

A reason for the growth of the West, which comes from sociology, and the values of society, is the ethic that supported hard work and innovations. In the case of South East Asia it is the emigrant economistic ethic. The emigrant population, not distracted by politics and competing sources of prestige, enhances his personal welfare very quickly and contributes to the economic growth of the society.

The entrepreneurial process: The discipline to actualize the entrepreneurial process thereby creating value where none existed, in a manner that would be sustained for a significant period of time is subject to the effect and trends in society. The process usually involves opportunity conception, commercialization of the venture and institutionalization of the ventures.

Opportunity conception involves visioning the world affected by the venture idea and constructing backwards, a sense of execution that will accomplish the envisioned. This visioning for the opportunity that creates value is driven by the entrepreneur’s view of identifying how change will take place and profiting from it. Peter Drucker put it this way in his book on innovation and entrepreneurship: “Entrepreneurs see change as the norm and as healthy. Usually they do not bring about the change themselves. But the entrepreneur always reaches for change, responds to it and exploits it as an opportunity.”

Drucker further offered seven services of innovative opportunity which include: the unexpected, incongruities, process need, industry and market structure, demographics, changes in perception and new knowledge.

When the vision is validated by being written down, and reviewed, or thought through where the process is not formalized, the next phase of the process will involve commercialization of the venture. From evaluating the idea to developing a formal business plan and assembling the resources; financial, human, technological, etc, that is required to actualize the value proposition, the process of commercializing of a venture requires vigor and perseverance. When deferred gratification is not much rooted in the culture, the tendency will be for people to detect venture types that require commitment and much patience in favor of the quick economic rent that is expropriated for wasteful communication, usually of products not produced in the country, thus taking away the many multiplier effects of the economy of the derived rent.

The commercialized venture would, if it is to be sustained, be institutionalized. The process of transition from the hub – wheel – spoke kind of structure centered around the entrepreneur to a hierarchy of standard operating procedures is also much affected by common forms of organization and state of the management philosophy as it is by culture. Many entrepreneurs in poor countries do not professionalize and institutionalize early enough. The effect is that when the entrepreneur has a cold, the business sneezes.

Value created by these ventures tend to be lost to society on their demise by this failure to institutionalize the venture, and develop the value chain for new ladders of opportunity that allows the venture either to make incremental continuous changes as in circular flow of income or indeed to make discontinuous leaps in value creation.

Culture
Values affect risk – taking behavior, how people are managed, the context of trust and the cost of doing business and the work ethic. The relevance of culture in economic growth was best captured by Lawrence E. Harrison and Samuel P. Huntington in their volume “Culture Matters”. In Nigeria, attitude toward venturing vary across a spectrum from fatalistic disposition in which all is literally left in God’s hand, in fundamentalist Islam, to prosperity – preaching Pentecostals. Of greater significance for the effect of culture on economic performance are issues of corruption and rent – seeking behavior in patrimonial state and orientations toward the dignity of the human person. There is also the cultural dimension of reverence for age which invariably calls on the more competent to yield to the older in leadership situations with obvious consequences for performance. These values no doubt affect how policy choices are made. The female child, for example, is educated, and institutions respected, and new venture opportunities captured.

What is of great value here is that the recognition of culture’s place in development has grown. But in Nigeria, unfortunately, the importance of culture for development tended to be overlooked. Daniel Patrick Moynihan puts it succinctly. “The central conservative truth is that it is culture, not politics that determines the success of a society. The central liberal truth is that politics can change culture and save it from itself”. There are some aspects of culture that affect performance but which formal rules may not necessarily influence. Whereas the work ethic may be so strongly rooted in the sense of self worth of a group, another may actually believe that to try and get more credit than your neighbor is a sign of ill will. In many ways, our notion of culture is an application of ideas of corporate culture as shared values at the level of the nation – state.

Leadership:
Leadership is the core of the of the growth drivers from work. In many ways it can be a subject of culture because the key role of leaders is to transform culture in a way that ensures the progress of the society. Transforming leadership, the quality required to change the way of a culture, is not a leadership orientation most people who have captured power in countries like Nigeria are gifted with. According to John Maxwell, leadership is influence. How do some people influence others such that all are willing to pool energies and work together in a goal – directed manner in which out-comes far exceeds the sum total of their individual capabilities?

Influencing others in a goal – directed way usually comes either from naked exercise of power or through a quest to accomplish shared goals in trusting relationships in which the needs of the followership drive the visionary who direct society’s energy to change, or overcome consequences of change. James Macgregor Burns in his book “Leadership” captured the characteristics of leadership in his definition thus:
Leadership over human beings is exercised when persons with certain motives and purposes mobilize, in competition or conflict with others, institutional, political, psychological and other resources so as to arouse, engage and satisfy the motive of followers. This is done in order to realize goals mutually held by both leaders and followers.

There are, in essence, three factors that determine leadership effectiveness in the kind of challenges posed by the need to transform culture to a level of higher productivity, output increase, and consequently improved quality of life for the citizen. Where leadership object is dominated in the form of transactions between leaders and the led; trading off support, for example, with the promise of improved provision of pipe borne water, we have transactional leadership. The point about transactional leadership is that the parties, or bargainers, have no enduring purpose. Often power becomes, unwittingly, a substitute for purpose.

Transformational leadership in contrast has to do with a shared purpose and grand vision which unites the leaders and followers so that they become mutual support for a common purpose. The leadership process includes preparation, visioning, and execution. Each has several elements as illustrated in figure 2 below (Utomi, 2006, Page 87 – 130)

Figure 1.0b: The leadership process
* Preparation * Visioning * Execution

Source: Reprinted with permission from Center for Applied Economics
“Why Nations are Poor” by Pat Utomi.

The Maritime Industry in Nigeria
When the word Maritime is mentioned, what really and readily come to minds are ships and movements of cargo. These, no doubt, make up the hardware of the Maritime industry. But a “ship” does not refer to beasts and meter vessels alone. It is interesting to note that drilling rigs, offshore platforms, buoys and other offshore including mobile units are deemed to be ships under maritime Law. Revolving around this hardware is a wide range of services which make-up the software of the industry. These include Manning services, port services, Pilotage and towage, dredging, Stevedoring services, bunkering and freshwater and other victuals services and of course agency services. It is also a known fact that, Maritime transportation on its own is a major earner any day. (Omsa, 2005 pg. 14)

The Maritime Sector of any economy is like an orbit around which the economic being of the country revolves or rotates. Even the land locked countries can not progress too far in their developmental programmes without having some collaborative understanding and co-operation with countries having seaport access. This scenario is understandable against the backdrop of the fact that over 90 percent of International Trade is done by sea or carried by ships.

The number of world fleets today stands at about 46,000 Cargo carrying vessels with varying sizes and cargo carrying capacities. It is believed that on daily basis, these ships move millions of tons of cargoes comprising goods and commodities, fuel, crude oil, raw materials, machinery and equipment, foodstuffs, medicaments, etc, around the world.

The situation is not different in Nigeria, as a member of international community. It is estimated that well over 90 percent of her visible international trade is sea borne. Nigeria as a nation that heavily depends on exports of crude oil for her foreign exchange earnings and importation of various goods including raw materials for industries can not but pay serious attention to her maritime sector. This, most probably, must have been one of the reasons why the Federal Government is paying particular attention to the reforms carried out at the nation’s Maritime Sector.

The National Maritime Authority (NMA) is virtually an important agency of Government charged with the overseeing of the vast maritime activities in the country. Nigeria is naturally located in the important international trade routes, and is divinely blessed with much viable maritime environment. The vast resources of this environment have serious impact on the nation’s economy.

In 1974, UNCTAD Code of conduct for cargo sharing known as UNCTAD 40, 40, 20 was adopted. The Nigerian Shippers Council was subsequently established by decree 13 of 1978, and charged with the responsibility of organizing shipping activities in Nigeria. However, the National Maritime Authority (NMA) was established by decree 10 of 1987 to implement the Nation’s shipping policy in line with the UNCTAD communities. Hence, the nation was ready for full participation in merchant shipping line activities. The Nigerian National Shipping Line (NNSL) was incorporated to enable the country to participate fully in the Nation’s Maritime Trade. As at 1987 the NNSL could boast of a fleet of 27 vessels. Sadly enough, NNSL now stands liquidated.

National Unity Line (NUL) replaced the NNSL. It began with one vessel. It also suffered similar fate as NNSL. It is believed that, as at the last count, there were a total of 122 registered shipping companies in Nigeria. All these mostly depend on chartered vessels to carry their own share of cargo. (Heritage Business to Business Magazine, vol. 1 N0. 1, June/July 2004, P.10).

Nigeria is richly endowed with maritime potentials which Britain, the colonial masters discovered, amply exploited and utilized to further their trade between their colonies in West Africa and Britain. With her vast coastline, marine, economic and human resources, Nigeria was seen by the British at that time as a potential leading maritime nation in West Africa. True to this “prediction” Nigeria at independence, realizing the imperatives of economic and political independence as a young nation quickly proceeded to establish the Nigerian National Shipping Line (NNSL) among other dimensions. Again along with other newly independent African countries, Nigeria joined the International Maritime Organization (IMO). By the 1990s many of these Independent African countries, including Nigeria had formed a substantial membership of IMO. As these countries began to expand their national fleets and improve their maritime activities, they were confronted with the twin problems of shortage of funds and experienced maritime professionals or experts. On the issue of trained professional, IMO was able to assist these nations through its technical co-operation programmes. IMO had also gone ahead to assist through provision of fellowships, research and specialist training grants for nationals of the member states.

Despite these bold initial efforts on the part of Nigeria to develop her maritime sector, at independence, she is yet to become a leading maritime power in Africa as earlier “predicted” or forecast by the colonial masters. Worst still, even as at this moment, Nigeria is not among the first 20 maritime nations of the world; nor is she able to build her locally made ocean liner, in spite of being proud owner of a world class dockyard which is about the best in Africa. As if that was not bad enough, Nigeria lost all her fleets of 32 ocean going ships in quick succession, having been sold as a result of liquidation of the NNSL due to gross mismanagement, professional incompetence, political naivety and unbridled corruption.

1.0.1 Nigeria Maritime Cabotage
Cabotage is an area of maritime industry which most nations reserve for their citizens because of its economic and defense implications. There is only a pathetic presence of Nigerians in cabotage business within the Nigerian coast waters. “Cabotage” is a nautical term from the Spanish, denoting strictly, navigation from cape to cape along the coast without going out into the open sea.

In international law, cabotage is “identified with coastal trade so that it means navigating and traveling along the coast between the ports thereof” (Cf. Black’s Law Dictionary 6th Edition page 202.) Also the papers titled, “Advocacy paper for the promulgation of Nigerian Maritime Cabotage Law part II: present and potential problems of cabotage and Recommended solutions.” Pages 42 – 57 and 213 – 224 of the “Supporting Documents for the making of A Maritime Cabotage Law in Nigeria” presented at the public hearing on Cabotage Bill, in April, 2001 at the House committee on Transport, National Assembly Complex, Abuja). It is also a term carried from the French word “Caboter” meaning “to sail along the coast”. However, cabotage has come to be known as “coastal trade” or “coasting trade” or “coastwise shipping”; meaning the carriage of goods and persons by ships between ports on or along the same coast or between ports within the same country and the exclusive rights of a country to operate sea traffic within its coast or to operate air traffic within its territory (As in Asoluka 2003, pp. 69-70).

1.0.2 Cabotage Regime in Nigeria
It is quite unlikely that discussions on maritime restructuring and reform will be complete without mentioning the cabotage Act which was enacted in this country in 2003. The main import or objective of the Act is to empower Nigerians, especially the entrepreneurs who are engaged in maritime enterprises. The limit of the Act is restricted to maritime services that are or can be carried out within the country’s coastal and inland waters.

The main components of the Act, without going into its legal technicalities are that, all economic activities within Nigeria’s coastal and inland waters must be indigenized or reserved for Nigerians. Since most of these activities hinge on shipping services and related matters, it is implied that for Nigerians to participate in these coastal trades they must own ships which must be Nigerian built, owned, registered and crewed. All over the years eligible Nigerians had been shortchanged or excluded from participation for lack of cabotage Law. With active connivance of Nigerian collaborators, foreigners have been feeding fat on these trades, to the exclusion of otherwise eligible Nigerians.

Historically, it is on record that France had enacted cabotage law since about 16th century by reserving all navigational activities within the ports along her coast, exclusively for French vessels. Although many changes have taken place over the years, France had made sure that the main meat or thrust of the cabotage law still remains till date. About fifty or so countries around the world have cabotage laws which are designed to achieve similar aim, i.e protect their citizens against competition by foreigners in the area of shipping. The most popular of cabotage laws around the world today is the America’s Jones Act which is strictly enforced to protect her citizens in the affected areas.

So many people may wonder if the Nigerian cabotage law is not in conflict with our international maritime law, our country’s membership of WTO and the universal principle of free trade. The possible answer to this is that with about 50 countries already practicing cabotage law in their respective countries, including USA and France, without being challenged or charged to the world court for any breach, suggests that there is nothing illegal or unethical about it.

Going through the cabotage Act, one cannot but wonder if Nigeria has the capacity to fully implement it, most especially when we talk about ship owning, building and manning. Perhaps, the government is not unmindful of these difficulties hence it settles for what can be described as a liberal cabotage policy which permits the use of waiver in areas where the country is deficient or lacks adequate capacity. The Minister of Transport has power to grant waiver where applicable.

1.0.3 The Relevance of Cabotage Law in the Maritime Industry.
The viability of any industry is determined by the level of need, demand and market for the services it provides. The demand and availability of market creates the opportunities. The cabotage under the auspices of maritime industry can boast of these and more. There is huge market for prospective investors in the maritime industry which, if fully exploited, has the ability to surpass current earnings in the oil industry.

Relevance to trade and industry: - Trade is the engine of development of any nation. A nation’s balance of trade affects her gross domestic product and the expansion of basic manpower and technological development. Trading in today’s economy is mostly carried out on water and ships are the connecting vehicle. No form of transport equals the ship in the enormous quantity and volume of goods traded between nations. Shipping remains the impetus by which a vigorous export promotion policy can be mounted and sustained. But there isn’t enough ships to carry the world’s goods and sustain commerce.

Statistics from Royal Register of Shipping shows that since 1975, there has been a continuous rise in the world surplus tonnage due to shortage of merchant ships. Between 1975 and 1985 the world surplus tonnage increased from 86.0 million deadweight reaching a peak of 195.8 million deadweight in 1983 before declining to 161.8 million deadweight in 1985. In relative terms, the share of surplus tonnage in total world merchant fleet increased from 8.4 percent in 1975 to a peak of 28.5 percent in 1983.

Although, there is no current comprehensive data showing the percentage tonnage surplus as at today, it is believed, the figure would have risen to about 40 percent. And the main reason why this figure would have continued to rise is the decline in the volume of ship acquisition and ship building. It was gathered from the same source that the volume of active merchant fleet in the world was at its peak in 1978 when it recorded a volume of 632.7. The volume dropped in 1979 to 587.7 and by 1985 it had dropped to a volume of 503.0.

It is doubtful if Nigeria’s merchant fleet accounts for 3 percent of the world merchant fleet. As a matter of fact, it was not until the 3rd National Development plan (1975 – 1980) that the Nigeria National Shipping Line Limited (NNSL) placed order for 19 multipurpose general cargo vessels at a total cost of N200 million. The vessels which were financed exclusively from our petro – naira revenue were built in Yugoslavia and Korea. No other shipping company in the country apart from African Ocean Lines Limited placed orders for and took delivery of any vessel from any shipyard in the world until 1987. Today, the story of NNSL is known to all. Neither company nor vessels are traceable. The NNSL palaver depleted Nigeria’s available and active merchant fleet. By the researchers reckoning, there cannot be more than 20 active Nigerian registered vessels handling Nigeria’s external trade. It is estimated that 300 vessels are required to meet Nigeria’s tonnage.

It is evident that ship acquisition and ship building is big business. Our financial experts will readily assert that they do not have the financial strength for such gigantic projects. It is hoped that this complaint will be put to rest in the course of this dissertation. It is also good to quickly draw attention to the current auction of GSM licenses for mobile phones in the communications industry. At the time of conducting this research, the bid has risen to US$285m. From where are these funds coming? The world is moving towards privatization, concessions and competitiveness. A lot depends on the policy thrust of the Federal Government. It suffices to say that serious plans should be made for the acquisition of the required tonnage and its placement on the Nigerian Register of ships. It is also important for the Federal Government to make monetary, credit and fiscal policies that would make ship acquisition more attractive. The ultimate objective is the emergence of Nigeria as a regional hub for a whole range of shipping services including ship construction, repairs and dry-docking.

The Relevance to transportation and communication is not left out. Nigerians are highly mobile. With all the energy and drive at the disposal of her citizenry, this is hardly surprising. But very little opportunity is taken of this. Any ship building company in Nigeria can rake in fabulous profits if it dares to explore the potentials available in passenger and commuter ferries, leisure crafts, cruising yachts, offshore support vessels, fishing vessels, barges and coastal trade and transportation needs. It is cheaper to build these smaller vessels than seagoing vessels.

There are also diverse opportunities to be explored in inter-coastal passenger and cargo liner services within the West and Central African Sub region. It is estimated that Nigeria generates about 70% of the total volume of cargo traffic in the West and Central African Regions which should be carried by Nigerian shipping companies. (Omsa, 2005)

1.1 Background to the Study:
Cabotage is a legislative tool restricting access or reserving maritime or aviation trade within a country’s territorial jurisdiction to the local capacities. The Nigerian Maritime and Cabotage was introduced by the Nigerian Government following calls by prominent maritime specialists and operators on the need for government to make concerned effort towards harnessing the indigenous maritime capacity and utilizing the abundant opportunities in the sector for the benefit of the Nigerian people in order to reverse the trend where it still has its maritime trade both territorial and extra territorial dominated by foreign operators.

The government’s intention in introducing the cabotage regime is to encourage the development of the maritime industry by an interventionist scheme aimed at boosting the growth of the local capacity in the face of choking external competition and domination.

Cabotage is a practice worldwide that is over 60 years old, a contemporary economic approach which justifies intervention of this nature to induce some determined result (as against the classical economic approach of free market forces), as an acceptable tool to achieving some set economic goals, especially where competition is unfair and dominance is prevalent. It has been observed that this practice worldwide both in maritime and aviation has been induced by diverse factors including reserving all, or part of the national market opportunity to national flag ships or aircrafts either for political, economic or security reasons. Other reasons for this protective policy practiced around the world are to develop indigenous human and capital capacity. These are some of the major aims of the Nigerian maritime cabotage.

And as for the scope of the cabotage Act, the Coastal and Inland Shipping (cabotage) Act, 2003 covers the carriage of goods and passengers by vessels and any other mode of transportation, mineral, other natural resources, and any marine transportation or activity of commercial nature within Nigeria’s territorial waters as prescribed by the Exclusive Economic Zone Act CAP 116, laws of the Federation Republic of Nigeria, 1990. The Act seeks to restrict the use of foreign vessels in domestic coastal trade and consequently enhance the development of indigenous tonnage.

It is now two and half years since the enactment or one and half years of implementation of the cabotage policy. Nigerian’s are yet to notice significant change. The cabotage trade is still dominated by foreigners. From the perspective of the target group i.e. Nigerian Shipping Companies, the question remains: to what extent has cabotage delivered its intended opportunities? Considering that out of 320 or more private members’ bills introduced in the House of Representatives between 1999 and 2003, only ten crossed the Legislative Rubicon to become laws: why is it that the same forces have not succeeded in ensuring a mere robust and determined implementation of the cabotage policy? What factors are responsible for the very slow take-off of the programme? What are the problems? Are they associated with the very nature of the politics of shipping development, the process or policy, or a combination of these forces? What are the impacts of the cabotage laws or of what benefit is the cabotage to the Nigerian entrepreneur? These and more are some of the issues to be analyzed by the researcher in the course of writing the dissertation.

1.2 Statement of General Problem:
A maritime cabotage law is a legislation empowering navigation and trading within a country’s coasts or from port to port within a nation to be reserved exclusively for and carried on by its national flagships and nationals. It is purely for the regulation of domestic shipping. In this regard, it includes navigation and trading in the nation’s inland waterways. The maritime cabotage law may be in a single shipping legislation, or in a combination of two or more shipping legislation of a country.

There is another type of maritime cabotage which is often referred to as short sea shipping or regional shipping which is concerned with the transportation of goods and or passengers between ports of a given group of countries within a specific economic groupings (eg Mercosur, and the EU) by way of coastal ships, ferry services and/or port services such as tugs, dredges, maintenance and repair of craft, pilotage launches, bunkering and supply of vessels etc. Cabotage policies are applied in such regions or sub-regions, instead of an individual country, and as a result of inter-governmental agreements in order to favour local or regional employment and to control regional and /or sub-regional coastal trade (Maritime Resources Development Issues and Challenges; 2003, P.70).

This dissertation is aimed at having a comprehensive report which critically examines the issues concerning cabotage services, as regards to its impact on the Nigerian entrepreneurial opportunities for growth. Are there any benefits accruable to the Nigerian economy from the Nigerian Maritime cabotage? What are those benefits and how do they help in boosting the Nigerian entrepreneurs? These findings and more will be revealed and recommendations thereto, made, in order to enhance the formulation of sound scientific and economic solutions to issues and policies in these areas. The research work is expected to assist the NMA, the entrepreneurs, and other governmental agencies and other stakeholders in carrying out their statutory functions including its promotional and regulatory roles and measures, designed to facilitate the development stance and the growth of the nation’s maritime industry.

1.3 Rationale for the Study:
The broad rationale that informed the conduct of this q dissertation can be seen as stated below:-
a. To identify the Nigerian maritime cabotage as it exists under the Nigerian Maritime Authority (NMA).
b. To identify the various opportunities accrued to the Nigeria entrepreneurs from the cabotage.
c. To identify the prevailing problems that hampers the economic viability of the maritime cabotage services in Nigeria.
d. To identify the potentialities of the cabotage to the Nation’s economy.
e. To suggest some re-organizational structures / Reforms, and the modules that will enhance the feasibility of NMA vis-a-vis the Nigeria maritime cabotage.
f. To identify the impediments of the Nigeria entrepreneur in regards to the cabotage business.
g. To profile solutions to Nigeria entrepreneurs in relationship to their problems in the cabotage business.

1.4 Significance of Study.
The findings of this dissertation will likely set in motion further research studies into the Nigerian maritime cabotage and its impact on the nation’s economy and /or as an interventionist in the boosting of the Nigerian entrepreneurial activities. In fact, it is expected that with the passage of the cabotage Act by the National Assembly, a new world of opportunities for business ventures in the maritime cabotage sector have emerged. As the backbone of entrepreneurial set up, new opportunities are always being sought, discovered, grasped and acted upon to the benefit of the consumer and the entrepreneur. To this end, the maritime experts, regulators and entrepreneurs alike, have to rob minds together to provide insights into how to utilize the opportunities in the maritime industry. The potential entrants into the maritime business should see these as good business opportunities to be utilized in order to create job opportunities, training for seafarers, provision of / building of ships and other ocean going vessels to be used, which will have to bear on the nation’s economy and to improve the well-being of the Nigerian entrepreneur. It is also believed that the study will stimulate and provide the needed impetus into the economic growth of the nation’s maritime industry, hence the standard of living in general.

1.5 Scope of the Study:
The scope of this research study will be limited to the impact of Nigeria maritime cabotage on the nation’s economy and entrepreneurial opportunities. This dissertation may be limited to maritime cabotage, which is also known as domestic waterborne transportation. The researcher also wishes to reiterate here that, there is limitation in the area of data collection, some useful data required are treated as confidential and permission has to be sought before they are released. Even the parties for oral interviews, permission has to be sought before interviews were granted. Time factor is another noticeable constraint.

However, it might be noted that frantic efforts were made to ensure that useful information were eventually collected to enhance an objective conclusion of this study.

CHAPTER TWO

LITERATURE REVIEW

2.0 Introduction
Cabotage, which is meant navigation along the coasts, is the major concern of this dissertation. It is an area of the maritime industry which most countries reserve for their citizens because of its economic and defense implications. But here in Nigeria, it is only pathetic few that are in cabotage business with the coastal waters. The researcher also wishes to point out some shortcomings in the National Shipping Policy Act and recommend a number of measures, which may include NMA’s continued support for cabotage, that the cabotage policy should require participating vessels to be built (where possible), owned and manned by Nigerians, that the volume of cargo should decide the type of vessels to be acquired, that all relevant laws be harmonized and that the Nigeria LNG Amendment Act be further amended in favour of Nigerian participation in the shipping of gas.

Since the national tonnage has drastically reduced (Nigeria is not even ranked among the first 35 countries with the highest tonnages in the world), and Nigerian ship owners and shipping companies are not only unable to compete with the highly subsidized foreign vessels in international sea-borne trade but have also been facing difficulties in being allowed to carry Nigeria wet cargo which constitutes about 80 percent of the domestic cargo from port to port in Nigeria. It has become necessary for the National Maritime Authority (NMA) to see ways of making necessary positive changes in the overall interest of the maritime industry (Nigerian Maritime Resources Development: Issues and Challenges. Vol.1; PP. 66-67). It is arguably true that without cargo, there is nothing for ships to transport, whereas the running costs of the ships accumulate daily and investors will be discouraged from putting their money into hardware shipping as opposed to the software aspect of shipping. It has often been argued that because of the capital intensive and competitive nature of owning and running vessels and its long-term nature of returns, it is more profitable to go into the software aspect of shipping than the hardware aspect. A well-articulated and implemented cabotage policy would therefore induce sufficiency of cargo for carriage by indigenous shipping companies and ship owners as well as capacity building and increased tonnage due to acquisition of needed bottom to carry the increased cargo.

More so, trade liberalization and the channeling of money toward non-oil sectors has prompted the government to rethink the country’s transportation chain. “Port infrastructure is being upgraded. Safety of sea is being improved, private participation in port activities is being encouraged and shipping technology is being enhanced. One can say that we are prepared for the liberalization of the economy,” says Rear Admiral Festus Porbeni, the then minister of transport.

Being a coastal nation, there exist sizeable offshore exploration and production activities in the oil and gas sector. The oil firms that participate in offshore exploration and drilling require a lot of logistics support both for equipment, supplies and personnel. These are usually handled using marine vessels of various descriptions and sizes.
Given the recent upsurge in communal violence and environmental activism, there is a tendency for new developments to be concentrated in offshore locations, and thus an increase in the demand for marine logistics solutions.

Now that the cabotage regime is in place, it is believed that all such businesses are by law, reserved for Nigerian vessels and their Nigerian owners, thereby increasing the business potentials of local marine equipment operators, hence the Nigerian marine entrepreneurs.

It can also be seen that with the licensing of more oil fields and proposed LNG plants in various parts of the country, more opportunities are opened for Nigerian entrepreneurs to boost their growth economically. But given the high capital requirements of entering the marine transportation and logistics business, few people and firms will be in a position to harness the potentials presented by the increase in business prospects.

Nigeria therefore needs a versatile land and water transportation scheme which will serve as a catalyst for Nigeria’s industrial revolution. The inland waterways are being dredged to ensure year-round navigability. River ports along the way are being developed. But if cocoa production (160,000 tons forecast for the subsequent years’ harvests) continues its upward movement both in prices and volume, traders will need to supply their buyers before competitors like Cote d’ Ivoire get there.

Commerce is also being projected to increase by 20 percent among members of the Economic Community of West African States (ECOWAS). Nigerian manufactured goods and mineral exports like bitumen will need to travel seamlessly from factories and tar sand sites down to the country’s six seaports. From there, it is just a stone throw away to West Africa and Atlantic Europe, time-wise of course. But after years of military rule, these changes will bring the country out of its psychological self-exile. “We are committed to breaking the jinx of isolation from the developed world”, says Porbeni.

It is also assumed that the image makeover which the Obasanjo government has given Nigeria will help the country to capitalize on West Africa’s largest naval infrastructure. With an eye on developing a system to support the expanded productive base, the country’s seaports have been at the vanguard of reform. Port facilities that stood idle have been privatized and a number of Federal agencies involved in cargo processing have been reduced to four: the Nigerian Customs Service, the Ports Police, the Nigeria Immigration Service, and Authorized Agents. The capital budget of 1999 also foresaw $8.5 million of investments into access roads like the Port Harcourt refinery road in the oil-producing Delta Region. The National Railway Corporation (NRC) underwent its own rehabilitation program in 1997 when a Chinese Civil Engineering team updated 2,278 km of tracks and re-equipped it with locomotives, wagons, and freight cars. Completion of the Itakpe Warri Ore line was prioritized in the National Rolling plans, 1999-2001 budgets. The railroad system was also allotted approximately $16.7 million for the installation of a digital microwave signaling system at its telecommunications stations. If these upgrades in the inland transportation system are coupled with projects like the mega port in Onne, Rivers State, known as the Federal Ocean Terminal, the advent of democracy will indeed have given the country a face-lift. “We will win the confidence of the international community. Foreign investors have been assured of concessions and a favourable investment climate,” says Porbeni.

“Here, the internationalist comes in,” reiterated John Egesi, former Director General of the National Maritime Authority (NMA), a graduate in nautical science. “Without them we won’t be able to cope. The whole idea is to gradually start to let trade in until we grow stronger. Then the need for intervention will lessen and we will be able to walk, talk and run like other people.” The NMA was created by a decree in 1987 and ten years later was grossing $52 million from the Federation’s coffers. It serves as the overseer of shipping policy and with the country’s new opening to world trade also supervising the proper commercialization of the sector. Egesi, by then defined the parastatal company as the mother of the future shipping industry in Nigeria.

Ultimately directed at fostering economic ties among members of the ECOWAS Sub-region, the NMA assists local companies in expanding their fleet. It also ensures that Nigeria flag vessels carry at least 40% of the total trade to and from Nigeria, referred to in short as the “40:40:20” cargo sharing rule. “But the real definition of the maritime sector is not just the “40:40:20” rule,” says Egesi. “Shipping is not a welfare state. The important idea behind shipping policy is to prepare Nigeria for a Laissez-faire stage in maritime activity so that local shippers can become proper competitors.” So in order to compete at sea, Nigeria has to meet safety standards dictated from abroad. The recent merger of the NMA with both the Maritime Inspectorate Division (MID) and the Government Inspector of ships (GIS) will hopefully harmonize safety regulations. All laws relating to maritime safety will now be executed by the NMA. The implementation of these laws in turn grants credibility to a country’s ports and vessels. The safety of a ship is expensive. But this is what we call affordable safety. “Without keeping certain standards we cannot have a good flag state,” said Egesi. A national coast guard regiment is being constituted for search and rescue operations as well as for anti piracy action. (Omsa, 2005, PP.9-11)

2.1.0 The Nigeria Maritime Cabotage
“Cabotage” is a nautical term from the Spanish, denoting strictly, navigation from cape to cape along the coast without going out into the open sea. In International Law cabotage is “identified with coastal trade so that it means navigating and traveling along the coast between the ports thereof” (Cf. Black’s Law Dictionary 6th edition page 202. also the papers titled, “Advocacy paper for the promulgation of a Nigerian maritime cabotage Law part 2: present and potential problems of cabotage and Recommended Solutions. “Pages 42-57 and 2,3-224 of the “supporting Documents for the making of a maritime cabotage Law in Nigeria” presented at the public hearing on the cabotage Bill in April, 2001 at the House Committee on Transport, National Assembly Complex Abuja). It is also a term coined from the French word “Caboter”, meaning “to sail along a coast.” However, cabotage has come to be known as “coastal trade” or “Coasting trade” or “Coastwise shipping” meaning the carriage of goods and persons by ships between ports on or along the same coast or between ports within the same country and the exclusive rights of a country to operate sea traffic within its coasts or to operate air traffic, road traffic or rail traffic within its territory (Chris Asoluka, 2003, PP.69-70). This dissertation is centered on maritime cabotage, which is also known as domestic waterborne transportation.

It is therefore quite unlikely that discussions on maritime restructuring and reforms will be complete without mentioning the cabotage Act which was enacted in Nigeria in 2003. The main objectives of the Act were to empower Nigerians, especially those who engaged in the maritime enterprises. The limit of the Act is restricted to maritime services that are or can be carried out without the country’s coastal and inland waters.

The major components of the Act without going into its legal technicalities are that all economic activities within Nigeria’s coastal and inland waters must be indigenized or reserved for Nigerians. Since most of these activities hinge on shipping services and related matters, it is implied that, for Nigerians to participate in these coastal trades they must own ships which must be Nigerian built (if possible), owned, registered and crewed. All over the years, eligible Nigerians have been shortchanged or excluded from participation for lack of cabotage law, with active connivance of Nigerian collaborators. Foreigners have been feeding fat on these trades to the exclusion of otherwise eligible Nigerians.

Historically, it is on record that France had enacted cabotage law since about 16th century by reserving all navigational activities within the ports along her coast exclusively for French vessels. Although many changes have taken place over the years, France has made sure that the main meat or thrust of the cabotage law remains till date. About fifty or more countries around the world have cabotage law which are designed to achieve similar aim i.e. protect their citizens against competition by foreigners in the area of shipping. The most popular of cabotage laws around the world today is the America’s Jones Act which is strictly enforced to protect her citizens in the affected areas. (DR. (Alh) W.A. Kareem, 2005, PP. 22-23).

Some people may wonder if the Nigerian cabotage law is not in conflict with our international maritime law, our country’s membership of WTO and the universal principle of free trade. The possible answer to this is that with about 50 countries already practicing cabotage law in their respective countries, including USA and France, without being challenged or charged to the world court for breach; suggest that there is nothing illegal or unethical about it. So, going through the cabotage Act, one cannot but wonder if Nigeria has the capacity to fully implement it, most especially when we talk about ship owning, building and manning. Perhaps, the Government is not unmindful of these difficulties hence it settles for what can be described as a liberal cabotage policy which permits the use of waiver in areas where the country is deficient or lacks adequate capacity.

Nigeria’s cabotage Act is a piece of legislation which, if well implemented, can transform the fortunes of Nigeria. Apart from empowering Nigerians, as active participants in the coastal trades, cabotage will provide many jobs, alleviate poverty and open training opportunities and facilities for the Nigerian maritime cadets and seafarers.

The challenges of making cabotage in Nigeria work effectively are quite enormous but not insurmountable. For example, Nigeria today lacks a national fleet or national carriers. Were any of these in place, it would have been possible to use it to train Nigerian Cadets, Marine Engineers, and Electrical Engineers etc and employ those who have been trained but now jobless. This would also have helped in supplying crew to cabotage vessels. It is sad to reiterate here that, Nigeria is probably the only country in the world without her own fleet. We all know why it is so. In the spirit of deregulation, privatization, Build, Operate, Transfer (BOT), Port concession reform etc it is inappropriate to expect the Government to begin establishing a national fleet etc. Even if it did, the civil servants would run it aground once again. What could be suggested is probably NMA and NPA joining with private sector organizations which would have 60-70 percent equity share, leaving about 30 percent for NMA and NPA. Jointly, they would form a company to own a national fleet to be managed by purely professionals, both local and foreign. Besides, now that Niger Dock Company is under private management, it should be challenged to take advantages offered by the cabotage regime to build vessels, tug boats, cruise boats, barges, etc which can be deployed to serve our coastal water trade and businesses. If need be, the company can invite other investors and competent foreign and local professional or technical services.

Another challenge which implementation of Nigerian cabotage law faces is in the area of providing funds to acquire new ships and other marine equipments which by nature are quite expensive. Until the recent bank recapitalization, there was hardly any Nigerian bank that could fund new ship acquisition. This is simply because banks’ capital base was very low. Besides, ship loan repayment usually takes long time which is unmatched with short-term deposits of the Nigerian banks. Also, for the same reason of low capital base, many Nigerian banks cannot access foreign loans with low interest and long repayment period.

Added to all the above mentioned problems is the issue of granting waivers which is vested in the Hon. Minister of Transport. In view of the nation’s glaring inadequacies in the areas of owning, crewing and managing cabotage vessels hundred percent, it becomes important to grant waiver in needed critical areas of need so as not to cripple the nation’s economy. The greatest challenge here is how to balance national interest and the imperative of keeping the maritime services in our coastal waters going uninterrupted. The Minister’s patriotic and sound judgment in these matters are important (DR. (Alh) W.A. Kareem Ibid)

2.1.1 The Marine Cabotage Laws.
A marine cabotage law is a legislation empowering navigation and trading within a country’s coasts or from port to port within a nation to be reserved exclusively for and carried on by its national flagships and nationals. It is purely for the legislation of domestic shipping as opposed to international shipping. In this regard, it includes navigation and trading in the nation’s inland waterways. The marine cabotage law may be in a single shipping legislation or in a combination of two or more shipping legislations of a country.

There is another type of maritime cabotage which is often referred to as Short Sea Shipping or Regional Shipping which is concerned with the transportation of goods/passengers between ports of a given group of countries within a specific economic grouping (eg. Mercosur, and the EU) by way of coastal ships, ferry services and/or port services such as tugs, dredgers, maintenance and repair of craft pilotage launches, bunkering and supply of vessels etc. Cabotage policies are applied in such regions or sub-regions instead of an individual country, and as a result of intergovernmental agreements in order to favour local or regional employment and to control regional and/or sub-regional coastal trade.

It is understood that many countries especially in Europe, North and South America including the US and Canada and South East Asia have already adopted one cabotage law or the other in order to attract the benefits derivable from cabotage policy. However, this dissertation may not reveal any country in the West African sub region that has promulgated and is implementing a maritime cabotage regime; apart from Nigeria, Greece and the United States of America have “strict” Cabotage Laws whereas India, the Philippines, Malaysia, Australia and Brazil, among others have liberalized cabotage laws.

As legislation, it is purely for the regulation of domestic shipping as opposed to international shipping. In this regard, it includes navigation and trading in the nation’s inland waterways. There are basically two types of cabotage regimes - strict and liberal cabotage laws. The adoption and application of any of these types by nations are determined by national economic and shipping interests, the socio-political, and other local conditions. In a “strict” maritime cabotage legal regime, three elements of restrictions apply. These are the domestic shipping trade which is restricted to ships built, owned, crewed and operated solely by citizens. The object of strict cabotage policy is to exclude foreign-built, foreign-owned, foreign-crewed and operated vessels. Details of the laws are as per annexure attached.

2.1.1a Cabotage Laws in other Countries
As it is now, there are strict cabotage laws and relaxed or modified or liberalized cabotage laws which are being applied by different nations as dictated by their national and commercial shipping interests and local situations. In a “strict” maritime cabotage legal regime, three elements of restriction are that domestic shipping trade is restricted to ships built, owned, crewed and operated solely by citizens of the country applying the cabotage policy to the exclusion of foreign-built, foreign-owned or foreign-crewed and operated vessels. Maritime cabotage laws are said to be relaxed, modified or liberalized if those three elements are not strictly enforced or there are some levels of foreign participation either in the ownership or building of the ships used and nationality of the operators involved, or foreign-registered ships’ involvement, in a nation’s coastal shipping.

(i) United States of America (USA)
In the USA, a “strict” cabotage policy is implemented by virtue of a communication of some of its shipping laws including “The Jones Act” (Cf. section 27 of US Merchant Marine Act of 1920 public law 66-261, also known as “The Jones Act”), (Asoluka, 2003. p. 71). It was passed for the promotion, protection and maintenance of a US domestic merchant marine under and by virtue of which Jones Act, all waterborne goods between US ports are carried in US flagged ships, built in the USA, owned by US citizens and crewed wholly by US citizens. The other legislation is the 1886 US passenger services Act which states that no foreign vessel shall transport passengers between ports or places in the US and imposes a penalty of US $200 for each passenger so transported and landed. Under the US Coastwise Trade Vessel Requirement (46 U.S.C 3704 (2000), a vessel which does not have a segregated ballast tank, a crude oil washing system or an inert gas system, may not engage in coastwise trade. Any vessel not wholly owned by a person who is a citizen of the US and not having in force a certificate of documentation issued under section 12106 of title 46, US code, is barred from towing any vessel other than a vessel in distress, from any port or place in the US to another port or place within the US and no foreign vessel is entitled to engage in salvaging operations on the Atlantic or pacific coast of the US or its territorial waters unless inter-alia satisfactory investigation shows there is no suitable vessel wholly owned by a US citizen available to affect the operations in that locality (e.g. use of foreign vessels in the United State Ports (46 APP. U.S.C. 316 (2000).

In fact, before the Jones Act (an Act so called after its sponsor from the state of Washington, Senator Wesley I. Jones), the US had forbidden foreign ships from trading within its coast since 1817. The US merchant marine Act of 1936 also allows the government to bar foreign vessels that have been built cheaply by means of subsidy if they operate in the US domestic trade.

In the US, the Maritime Administration (MARAD) actively promotes and develops the US domestic merchant marine in support of the Department of Transport’s Strategic goal of “Advancing America’s economic growth and competitiveness domestically and internationally through efficient and flexible transportation.

The strictness of the US cabotage regime can not, however, be said to be absolute in view of some exceptions and relaxations now being granted its application in certain cases by some US legislations. For example, in 1999, a Federal Law was promulgated to allow a person to operate a foreign-built cruise in the US coastwise trade only if the person had entered into a binding agreement for the delivery of two US-built cruise ships thereby making it possible for temporary employment in US domestic waters of a foreign-built vessel whilst new US built cruise are being built. Upon the fulfillment of the requirements of the Puerto Rico Passenger ship Act (Cf. Public Law 98-563 (46 App. U. S. C. 289C (2002)) passengers may be transported on passenger vessels not qualified to engage in the coastwise trade, between ports in Puerto Rico and other ports in the US, directly or by way of a foreign port, notwithstanding the provisions of any other law.

A foreign registered vessel may operate within the US waters on an emergency or temporary basis for the purpose of recovering, transporting and unloading in US port, oil discharged as a result of an oil spill under certain conditions (Use of foreign Registry Oil Spill Response Vessels, section 1117 of public law 104-324 of 19th October, 1996). Moreover, notwithstanding the Jones Act and other US cabotage laws, a certificate of documentation with a coastwise endorsement may be issued by the Secretary for Transportation to a foreign vessel to transport liquefied natural gas or liquefied petroleum
gas to Puerto Rico from other ports of the US under certain conditions (Cf. Vessels to Transport LNG to Puerto Rico section 1120 (f) of public law 104-324, approved on 19th October 1996), whereas some US legislations allow annual permits to be granted to Canadian vessels to run passenger services from port to port in the US until such a time as passenger service may be established on those routes by US vessels. (Cf. Miscellaneous Provisions: 46 APP. U.S.C. 289A (2000), 46 APP. U.S.C. 289B (2000)) (As in Asoluka, 2003, pp.72-73).

So with the above and other shipping laws, the movement of goods and passengers within the US territorial waters and coastwise trade are in the hands of US citizens and US ships, except where there is an absence of such service by US vessels, or in respect of emergency on certain situations where it concerns Canada or Puerto Rico. The laws are deliberate US protectionist policies put in place in order to safeguard its domestic maritime industry from foreign participation, control or domination at the expense of its nationals and its domestic shipping industry. Now, domestic waterborne transportation contributes US $7.7 billion annually to the US gross domestic product in form of freight revenue (Cf. Miscellaneous Provisions: 46 APP. U.S.C. 289A (2000), 46 APP. U.S.C. 298B (2000) (As in Asoluka; 2003).

It is believed that, up till today, and notwithstanding globalization and anti-trust (i.e. competitive) initiatives and promotion of, and by the US, and the US backed World Trade Organization, there is immense support in the US from its policy/law makers and key figures from the protection and retention of its strict cabotage laws without any reforms or relaxation whatsoever. As a case in point, between 1995 and 1998, there were pressures especially by the Jones Act Reform Coalition on the US Government to repeal or at least modify the Jones Act or reduce its effect through new laws that would permit freedom of transport, but at the public hearing and, based on the outcome of the debate, the efforts failed woefully and, because the proponents of the retention of its strict cabotage regime succeeded, the status quo remained. The Maritime Cabotage Task Force (MCTF) had also been formed in the US in 1995 by a group of companies in the US to work for the retention of its strict cabotage laws and protect US ships carrying on domestic commerce. The MCTF has also played a major role in defeating recent efforts to relax the US cabotage laws. On a statement made on 22nd May, 2000, former US Vice President, Albert Gore Jr. said, “The Jones Act was the foundation of the maritime industry and an essential fabric of US economic and national security.” Similarly, the US President, George W. Bush supported the Jones Act because he saw the Act’s contributions to the growth of the US domestic fleet, economy, defense and international trade (Asoluka 2003, P.73).

In a similar vein, ex-president Clinton also supported the Jones Act. Moreover, the 105th US congress adjourned in October, 1998 after giving strong support to the Jones Act with the House’s Concurrent Resolution 65. Although the senate and House committees as well as some subcommittees hearings and there were hot debates on bills that would have weakened or abolished the US cabotage laws, after oral, and written testimonies from the Maritime Cabotage Task Force, no law was passed at the committee stage relaxing the US cabotage laws. A vote of confidence was thus given to re-affirm the cabotage laws.

It is therefore not surprising to see that in 1999, the US participated in a trade policy review conducted under the auspices of the WTO covering a lot of US trade measures and practices including maritime transportation. MARAD (Cf. MARAD 1999; US Department of Transportation Maritime Administration, Publication of May, 2000 Pg.38) helped to prepare responses and positions on US maritime programmes and policies including cabotage and cargo preference. (Asoluka 2003, pp.73-74)

(ii) Greece
Greece has a restricted cabotage principle in which Greek passengers and cargo cabotage are reserved for Greek vessels. This is pursuant to Article 165 and 166 code of Public Maritime Law CPML) 187/93, although the legislation is now partly adapted to Regulation 3577/92 of EU on liberalized cabotage for the EU. Other EU vessels are now allowed in non-strategic mainland trades with vessels over 650 GT and waivers can be granted on the condition of reciprocity. As for the crew, 100 percent of the shares of the vessels must be owned by Greek nationals or by Greek entities, more than half of whose capital is held by Greek nationals. In its judgment of 27th November, 1997, case C-62/96, the court of Justice of the EU criticized Greece for the failure to fulfill its obligations on account of its Articles of CPML, which provided for such measures.

(iii) Denmark
Although Denmark abolished the reservation of cabotage trades with vessels less than 500 GRT to national carriers in 1994 and permitted foreign vessels to participate in its domestic shipping, (Cf. Danish Decree 658/94), passenger vessels still remain excluded from Danish cabotage and captains of the cabotage vessels must be Danish nationals and vessels owned by Danish or EU persons or concerned companies must be managed from Denmark.

(iv) India
As a result of relaxing its cabotage laws in 1992, India allowed for five years foreign shipping times only to consolidate export containers at an Indian port and trans-ship them to a foreign port and to run feeder services to reach import containers at various ports but has since the expiry of the five years period not extending this provisions. Whilst foreign shipping lines have been lobbying for total freedom to operate coastal services in Indian on the basis that it will help Indian ports and its international trade, Indian shipping companies are opposed to further relaxation of its cabotage laws because their ships and ports did not benefit from the 1992 relaxation of its cabotage laws. The Indian Union Government then considered a suggestion to allow foreign companies to operate exclusive shipping services along Indian coasts without limitations but its Directorate General of shipping had to meet with foreign ship owners, shippers and chairman of ports trusts for the resolution of the matter.

(v) The Philippines.
In the Philippines, the cabotage laws (section 1009 of the Tariff and customs code of the Philippines) (as in Asoluka 2003, P.75) allow for clearance of foreign vessels after procurement of special permits to and from coastwise ports under certain conditions to take cargo and passengers at any port to foreign ports. A Memorandum of Agreement was drafted by a Technical Working Group made up of some organs in the implementation of the said section 1009.

(vi) Australia
In Australia, cabotage is based on the Navigation Act of 1972, customs requirements and immigration laws, and 90 percent of its coastal trade is by Australia-crewed ships, and all vessels operating along its coasts are licensed or permitted under certain conditions. In 1996, the Government of John Howard set up the shipping Reform Committee to advice it on options for the wind back and removal of its cabotage laws. After the report, the Government among other things liberalized the license permit system enabling greater participation by foreign vessels in coastal waters and established “company employment” in the stead of the “engagement system” for dock workers.

There is a general impression that Australian cabotage laws allow only Australian-flagged and crewed ships on its domestic shipping and that where there are no Australian ships available, foreign vessels are granted single voyage permits. The maritime Union of Australia usually argued that shippers are manipulating the system by waiting until an Australian manned vessel sails out and then rush to the government for a permit to contract a foreign flagged ship with third world low-paid crew and substandard ships to participate in its coastal shipping, thereby putting off work for Australian ships and seafarers. The maritime Union of Australia is also still strongly opposing the John Howard-led shipping policies because the relaxation of Australian cabotage laws will among other things lead to a loss of jobs for Australian Seafarers, coastal and environmental problems, oil spillage, substandard ships of flag of convenience shipping, and threats to road transportation. The Union consequently took the matter to court.

It is however interesting to note that in a paper released with the approval of the Australian Transport and Regional Services Minister, Mr. John Anderson on 24th November, 2000, it is said that the Australian legislation on cabotage, “provides shippers with access to the movement of coastal cargo irrespective of a vessel’s flag, nationality of the operator and nationality of crew.”

(vii) Malaysia
Malaysia is another country whose relaxed cabotage laws permit foreign registered vessels to be temporarily licensed by the Domestic Shipping Licensing Board (DSLB). Established under section 65B of the Malaysian Merchant Shipping Ordinance, 1952, the Malaysian laws regulating domestic shipping are the merchant shipping Ordinance and its 1977 and 1984 amendments. However, in 1994, certain amendments were made to the ordinances which subsequently were included in the merchant shipping Act (Amendment) 1994 to carry on coastwise trading where the Malaysian ship owners Association (MASA) continue in writing that there are no available Malaysian vessels to carry the cargo concerned. Available data show that this is most pronounced in the domestic carriage of chemical and oil. The DSLB regulates and controls the licensing of ships engaged in domestic shipping and issues three types of licenses, namely, unconditional licenses, conditional licenses and temporary licenses under stipulated conditions to be met and based on applications by the parties concerned. The first two licenses are issued to only Malaysian-owned companies; whilst temporary licenses are issued to foreign vessels to meet shortfalls in local tonnage (Asoluka 2003, P.77).

The Malaysian cabotage policy was liberalized between Penang and Port Klang and between Johor/Kuantan and Port Klang to allow foreign operators carry cargo in transshipments as part of the international leg of their container transportation. This was strategically aimed at port Klang’s competition with Singapore and meeting national aim of making Port Klang a loading centre. However, there are complaints by the Malaysian Ship owners Association (MASA) concerning circumvention and manipulation of the cabotage system by Malaysian shippers, who falsely mislead the DSLB and cut as “fronts” for foreigners (Ibid).

(viii) Brazil
In Brazil, while goods alone and later goods and passengers in cabotage trade were for only Brazilian vessels (Cf.. Brazilian Constitutions of 1946 and 1988 respectively), foreign vessels were in August 1995 Federal law 9,432/97 allowed for cabotage shipping, only if they are chartered by Brazilian shipping companies through bareboat, time and voyage charters. However, as a result of the 7th constitutional Amendment in August, 1995, foreign cruise vessels were allowed to use coastal and inland routes thereby opening its
7,480 kilometre coastline to luxury transatlantic liners (Cf. a paper titled, “Current cabotage issues in Brazil” by Alexandra Catanante delivered at the IBA conference in Cancun, Mexico in November, 2001, (as in Asoluka, 2003 pg.77).

In a nutshell, the type of maritime cabotage law promulgated by each country is dependent on the national, strategic and commercial interests of the country and the economic need for the Government to guide and to protect an “infant” domestic shipping industry from foreign competition so as to give it enough room, capacity and control to become as sufficiently economically viable as to be able to withstand foreign competition.

2.1.1b The Evolution of Nigeria Seaports

A port as a melting pot is a nodal point where several maritime activities in the intermodal transport chains are interfaced. In other words, port is a conveying point for break-bulk, transshipment, storage, bulking, repackaging, dispersed operations, warehousing, various administrative activities, boarding, discharging and delivery of cargo (Paper presented by Dr. (Alh.) W.A. Kareem MD/CEO K. Marine and Business Network Limited, at a conference organize by LBS, PAN African University in December 2005). The traditional roles of the port are gradually moving away from break-bulk and mere-land/sea interfaced to those of integrated platform and logistics, which facilitate international trade and services.

As it can be seen, meaningful international trade of any significance can not take place without the seaport. This is equally true of the Nigerian situation. Historically, Nigeria’s involvement in international trade can be traced to the activities of the Portuguese traders led by Prince Henry the Navigator who landed at the Bight of Benin in 1472. This was followed about the end of the 17th century with the arrival of the British, French and other Portuguese merchants who established trading relationships with the natives of the Niger Delta. These foreign traders employed their vessels to convey various items of merchandise which they exchanged for local products such as pepper, Ivory, palm oil, to mention but a few.

This trading relationship between the foreign traders and the locals gave rise to the establishment of ports at Forcados, Bonny, Akassa, Brass, Calabar and Opobo. By the 19th Century, the number of ports in use in the order of patronage and importance included Warri, Burutu, Sapele, Bonny, Degema, Calabar, Brass, Lagos, Akassa, Bakama and Buguma.

Initially, the Lagos port was not as busy as the others because of lack of business and the shallow Lagos bar which did not permit bigger vessels to come in. This situation later changed, however, with escalation of the Yoruba wars which brought about large number of slaves to be shipped to the West Indies through Lagos port. By 1862, not less than 58 British and 41 other foreign vessels had entered Lagos port. In 1893 the port received 235 and 211 British and other foreign ships respectively. In 1907, the Lagos bar was dredged from 9 to 14 feet to allow for bigger vessels to move along the coast (Ibid.)

With the abolition of the slave trade otherwise known as human cargo, creation of new nation state and political independence trading by barter and dealing in human cargo or slave cargo gave way to modern methods of international trade of today. People now trade across the world and settle themselves through monetary instruments such as letters of credit, deferred payments, cheques, credit cards, money transfers, etc.

As might have been noticed, port development in Nigeria is an age long phenomenon, and the process was fraught with various problems. For instance, the initial attempts to provide berthing facilities to ocean going vessels met with obstacles as considerable Littoral drift along the coast and the constantly shifting of the bar channels at the Lagos Lagoon entrance, made ship entry difficult. However, the first major breakthrough came in 1906 when dredges were employed to work on the bar.

In the same year, consignments of stones were railed from Abeokuta to Lagos for the construction of the first East Mole. With the improved drafts at the bar entrance a first mail boat/ship called M/S “Akoko” with a draft of 5.64 metres entered the Lagos Harbour on 1st February 1914. Two months later, vessels started to use the facilities provided at the customs wharfs on Lagos Island along Marina. Although decision to develop Apapa port was reached in 1913, work did not commerce on the first four long water berths of 548.64 metres long until 1921. In 1948 an additional 762 metres of berthage were built as a continuation down stream to the first four berths. Similarly, about 41 hectres of reclamation behind the wharfs were formed to accommodate transit sheds, warehouse and marshalling yards.

It was about the first quarter of the 19th century that work on the Port-Harcourt wharves which Lord Lugard commissioned actually commenced. With the completion of the railway line to Enugu in 1916, 6 berths for colliers was built at Port-Harcourt for loading of coal as an export cargo. The first major extension work to the Port Harcourt port comprising four berths of 1,920 feet long was carried out in 1954 at the cost of ￡4million (Ibid).

2.1.1c The Nigerian Maritime Sector Reform.
The major planks or components of the Nigerian Maritime sector reform would centre on the ports, Stevedoring practices or port labour, customs procedures, the establishment of Inland Container Depots and the cabotage, to name but some few salient points only.
(i) The Ports Sector Reform: - As has been observed, one can recall the ages of most of the Nigerian ports and their being established and managed by Government or public sector. Some of them built between 84 and 51 years ago i.e. Lagos and Port Harcourt ports respectively, had not undergone any major reconstruction or structural repairs to date. This could possibly explain in part why some of these ports fail to perform optimally today. For instance, during the period of their construction, slave cargo, bulk and conventional general cargo as opposed to containerized goods, formed the major types of cargo for which the ports were planned or designed. Ever since, and in view of revolution brought about with introduction of containerization, ships design and cargo configuration have all changed. What Nigeria has been trying to do was to adopt the old ports to suit the handling of modern ships and cargo. This approach could only succeed for a while not forever. This partly accounts for the gross inefficiency which we all now observe with our ports. It may be amazing to learn that the Tin Can Island Port (TCIP) which has often been described as a modern port was commissioned in 1977 i.e. 28 years ago. Of course when compared with the Lagos or Port Harcourt ports, TCIP is a modern port indeed.

In fact, what informed Government’s decision and desire to embark upon port reform in Nigeria is the dismal failure of our ports and their operational managers to perform most efficiently and cost effectively. At a time, the government was squandering billions of tax-payers’ money to support and salvage the non-performing public utility called Nigerian ports. Successive Governments continued to pump huge amount of money which their collaborators siphoned away in the name of dubious contracts to supply cargo discharging plants, fire fighting equipments and communication or security gadgets; most of which were never supplied, or even if supplied not functional.

That was the situation before the current Government took over in 1999. Having decided not to continue with unholy acts or sins of the past administrations, by throwing money into a bottomless pit called ports, the Obasanjo administration courageously decided to embark on the new port reforms. Some of the reasons given for the port reform agenda of the Government are:

(1) Unduly long turn around time in our ports.
(2) Insecurity of cargo at the ports
(3) Strangulating and uncontrollable activities of dockworkers.
(4) Forceful imposition of excessive labour on ships.
(5) Unbiquitous presence of multiple agencies in the ports.
(6) High level of corruption in the ports
(7) Excessive and uncompetitive charges.

The main objectives of Government port reform measure can therefore be summarized to include the desire to achieve fast cargo clearance, quick turn-around time for ships, removal of multiple agencies from the ports, facilitation of trade and making Nigerian ports competitively attractive to shipowners, investors and port users generally. These objectives can be summarized thus:-

1. To increase efficiency of our ports operations.
2. To reduce cost of port services or cargo.
3. To discourage diversion of ships and cargoes meant to Nigeria to
neighbouring countries.
4. To stop spending public funds on the non-performing ports, instead such funds should be channeled to the construction of roads, schools, hospitals, etc.
5. To boost economic activities, accelerate the country’s development and generate employment opportunities.
6. To make the Nigerian ports the hub of international freight traffic and trade in the West African sub-region.

It is further understood that, the port sector reform agenda of the Government involves institutional restructuring of NPA including adoption of Landlord port concept, decentralization of existing NPA through creation of two zones, with each being headed by an executive director; active participation of private sector investors who are to inject new funds with which to run the ports efficiently (Kareem, 2005 P.12.)

(ii) The Dock Labour Reform:-
In view of the chaotic situation which the dock labour system of the old past typified or represented, the present administration decided to reform it. Without this reform, it was considered that the overall port reform would be jeopardized. It is an open secret that Nigeria’s dock workers in the eyes of shipowners and agents patronizing our ports were lazy, unproductive and wild. They were unlike those in Ghana, Cotonou and other West African Ports. Nigerian dockworkers were in the habit of threatening and delaying ships unjustly, apart from being expensive. It was to address these issues and other related matters that the Joint Maritime Industrial Council (JOMALIC) was established to bring sanity into the country’s dock labour industry. The re-organization that took place involved registration of dockworkers employers and of dockworkers; improved workers’ pay and welfare; abolished practices of labour overbooking with a view to cheating the system. The organization also stopped the use of middlemen and supervisors who often collected money on behalf of some workers which was never paid to the bonafide dockworkers.

With this reform, sanity has gradually returned to the stevedoring industry in Nigeria. This will definitely be improved upon in the next concessioning regime where the labour employment, welfare, pay and supervision, will be under the control of concessionaires. This would no doubt improve labour productivity in our ports as well as bringing about better industrial relation between both labour and employers (Ibid).

(iii) Port Concession – As a Reform:-
Various past governments in Nigeria had tried to reduce their stronghold and grip on the running of ports for a number of reasons. Some of them had realized that Government was not the best business manager. In many public enterprises such as NEPA, NPA, and other Public Utilities, the primary objective of Government was not to make profit, but just to ensure provision of the so-called “essential” services; hence colossal funds had to be sunk into these enterprises without good results.

On realizing their failure to run public enterprises profitably and efficiently some past governments had tried to privatize, commercialize and deregulate these enterprises. For instance, at one time, NPA was directed to adopt commercialization and privatization for some of its services. The exercise failed woefully because the civil service environment and regulations within which NPA must operate did not allow for radical change expected of private sector enterprises. For example, NPA was and is still being seen as an extension of the ministry of Transport, so much so that NPA could hardly take any major decision affecting its operation without approval of the Minister of Transport.

Due to all the forgoing constraints, running the NPA was becoming very expensive, inefficient and uncompetitive. This situation led to ship and cargo diversion to Cotonou, Togo etc. Again not a few of the nation’s port infrastructure and facilities are aging, and call for rehabilitation or total replacement, which the government lacks the funds to do so. These and other considerations informed the Government’s final decision to embark on port concession. In arriving at this decision, Government feels that the word “concession” should be more appealing or friendly to Nigerians, especially the labour, than the words “privatization”, “commercialization” and “deregulation” all of which are capable of being misunderstood. Even with the word “concession” the labour has gone to town to announce and accuse the Government of selling the ports for a peanut ((Alh) Kareem, 2005. P.15).

The above scenario then calls for the true meaning or definition of port concession as it applies to Nigeria. Simply put, port concession implies the leasing of Nigerian ports and their facilities to private port operators called concessionaires for agreed fees and definite periods, ranging between 10 and 25 years. While the lease agreement subsists, concessionaires will run the allocated ports, berths or terminals; maintain the facilities, provide cargo – handling plants and equipments, discharge, loading and delivering cargoes, and pay the agreed lease fees to Government. (Ibid)

From now on and until the expiration of concession period, the concessionaires are allowed to run their facilities unfettered, duely protected under the law. Instead of committing huge public funds to the maintenance of ports or facilities, Government will earn revenue from the ports concession which will be channeled to the provision of social amenities for Nigerians i.e, schools, hospitals, road, employment etc (Ibid).

There are other numerous benefits which will accrue to the nation by way of well – managed ports, berth or other port facilities. These include increased cargo throughput and ship calls in our ports, efficient services to importers and exporters, shippers, industries, provision of employment opportunities, increased revenue by way of customs duty, port charges and statutory taxes. Port concession will also bring about injection of new funds, expertise and professionalism into the management of our ports and port related facilities.

It is equally envisaged that with the port concession, better planning would be witnessed in our ports thus avoiding possible congestion and preventing diversion of ships and cargoes to neighbouring ports.

The point that needs to be emphasized here is that port concession is not outright wholesale of the ports, as already explained, some people have been peddling the rumour in some quarters. Concession here means, having a leasing arrangement which is meant to benefit Nigeria and Nigerians.

Concessionaires that have so far emerged include both Nigerians and foreigners. Besides, Nigeria is not the only country in the world where port concession and privatization have taken place. The United Kingdom, Malaysia, Chile, Thailand, Columbia are far examples of countries that have privatized or concessioned their ports. Going by their post privatization and concession performance records, they are all very successful. Therefore, we have no reason to doubt the fact that Nigeria’s case will not be different (Dr (Alh) Kareem, 2005, P.16).

(iv) Reform of the Nigeria Custom Service:-
Part of the general maritime sector reforms extended to the Nigeria Customs Service as a matter of course. The reason for this is not far fetched. No matter how successful the port reform measures may be, unless the customs is equally reformed, these port reform measures may not impact positively on the economy as a whole. For instance, if ships came and discharge within a few hours and leave; NPA sorts out the cargo or containers speedily in readiness for customs examination and eventual delivery to consignees; unless the customs processes cargo documents, conduct cargo examination and finally release the cargo, it would still remain in the port despite the NPA and shipping companies excellent performance. Needless of taking about other vices for which some of our customs men are notorious.

The Government, having appreciated this fact directed that customs reform should form part of the general maritime sector reform. Truly, our customs men and women are working under very difficult conditions – poor remuneration, lack of modern office equipments, vehicles, and suitable office accommodation etc. Under this condition, it would be difficult to get the best output from any worker, customs men and women including the police. Some junior customs men often claim that they buy their uniforms, shoes etc on their own, if official supplies are not forth coming. With the reform measures going on within the Nigeria Customs Service today, the story will be different. (DR. (Alh.) W. A. Kareem, 2005, P.17).

Government has approved that a portion of revenue collected be given to customs as an incentive to motivate them. This money is to be shared among the officers and men of the organization of ASYCUDA, which is also undergoing upgrading, the customs is substituting computer for manual work they used to do mechanically. Furthermore, customs have been provided with other working tools apart from computers. They have patrol vehicles, boats, communication gadgets, arms and ammunitions to combat smuggling activities. Time and money are being expended to train and retrain all categories of customs staff with a view to improving their efficiency and changing their orientation or attitude to work. Annual seminars, workshops, radio and TV, programmes are undertaken by the customs to enlighten importers, exporters and other members of the public about the trade facilitation role of the Nigeria Customs Service. Also as part of its reform measures, customs have replaced what it used to call “LONG ROOM” for the processing of cargo documents with Customs Processing Centre (CPC) which is much faster and computer based, using ASYCUDA system.

While it is difficult to give a clean bill of health to the customs as at yet, a lot of improvements have been noticed in its activities. For example, it has recently sent out circulars to all its formations to create a fast track clearance arrangement, especially for manufacturing industrial companies and other importers with heavy consignments. By this arrangement, regular heavy importers, with outstanding clean records are allowed to remove their containers from the port immediately they are discharged from the ships and carry them to their warehouses under bond or to any approved customs bonded warehouses where such goods will be examined and released. This is done to decongest the ports. What remains now if for the genuine manufacturers and industrialists, especially members of the OPS to respond to this measure, which is aimed at helping them? (DR. (Alh.) W. A. Kareem)( Ibid).

(v) The Establishment of Inland Container Depots in Nigeria:-
In an attempt to carry further its maritime sector reform, in order to enhance productivity hence profitability, the Federal Government of Nigeria gave its approval for the establishment of Inland Container Depots which are also referred to as Inland ports. Just like the case of port concession, ICDs are to be established on Build, Operate and Transfer (BOT) basis. In this case, the private sector investor who is interested would provide all the funds for the handing and running of the port or depot. He will run it for a period of 25 years in the first instance, but with the option of renewing his interest for another 25 years which makes the total period allowed to be 50 years. The logic in this arrangement is that, the investor will have ample time to recoup his investment and make reasonable profits.

At the expiration of this lease period, the port will revert to the government as the ultimate owner, without having to pay any money to the original investor. Furthermore, to guarantee private investment in the ICDs, Federal Government or any of its agencies are precluded from having any shares. What is allowed however is that the host Government where the ICDs is located is allowed to hold maximum shares of not more than 20 percent. The host Government, on behalf of the Federal Government, is also obliged to acquire about 50 hectres of suitable land free of cost to the investor, for the project (Ibid).

Inland Container Depot or Dry port is like a seaport in all respects except that it is not located near the sea or ocean – hence the name dry port. It has all the features of a seaport such as customs facilities for cargo documentation, processing, examination and release. Shipping companies, freight forwarders and other port personnel are present there.

As a working definition one can adopt the one given by the UN (1982) as; “A dry port or Inland port is an inland terminal to which shipping companies issue their own bill of lading for import and export cargoes, assuming full responsibility of costs and conditions.” This definition permits the establishment or location of a dry port within a country with seaports or in a land-locked country. The only condition is that, there must be a rail or road link that will connect the seaport to the dry port for the purpose of movement of cargoes. The idea of Inland port is to bring port services to importers, shippers and other stakeholders at points nearest to them without having to go to the seaport for the same services. Manufacturers and industrialists do not have to go to the seaports for their raw materials; spare parts for their machinery etc. Similarly, their finished products targeted at the international export market will be accepted at the dry port, thus saving the exporters the trouble of traveling to the seaports (Ibid).

The way goods meant for the dry port will be handled is that, when such goods arrive at the seaport they will either be railed or transported by road to the dry port under customs bond and security escort. It is at the dry port that all documentations will take place, including customs examination, final release and delivery. No customs documentation will be done at the seaport. The containers manifested for ICD will arrive there with container security seal intact.

The establishment of an Inland port has a number of advantages, amongst which are:-
(a) Decongestion of seaport since goods destined for the dry port will be moved immediately on arrival.

(b) Reduction of costs through elimination of unnecessary delays, rent and demurrage payment at the seaport which will make the landing costs cheaper. This will enable the entrepreneur to sell the goods cheaper and quicker with a higher turnover.

(c) Ease of cargo clearance at the dry ports. All officials for cargo examination release and delivery are contiguously located, thus reducing transaction time and money – which is another plus to the Nigerian entrepreneur.

(d) Easy access or reception of cargo by importers, industrialists, manufacturers who would have otherwise headed for the seaport for the same purpose.

(e) Elimination of warehouse costs at the seaports, as importers are not responsible for the cargo costs until it arrives at the dry port.
(f) Corruption and other malpractices which are common the seaports are not likely to be permitted at the dry ports, being a private sector run enterprise.

(g) Promotion of export cargo through the use of empty containers that would have been returned to the dry port after consignees have received their goods.

(h) Generation of employment for the people who are located around the inland port e.g. Entrepreneurs, transporters, freight forwarders etc.

(i) Promotion of entrepreneurial growth and industrial development–the entrepreneur and industries/manufacturing companies which receive their goods and raw materials in time at reduced costs would be in a position to produce and sell more, (most likely at reduced prices for better turnover). They may import goods and raw materials as regularly as they need without having to think of the headache at the seaport.

(J) Dry ports would promote non-oil export and enhance earnings, hence the improvement on the nation’s economy.

(k) Inland ports will improve revenue of government through customs duty, levies, income taxes etc.

Ideally inland ports have become a global phenomenon which can be hardly ignored. That Nigeria has joined this global train is commendable. As at date approvals and operating licences have been granted to 4 dry ports located at Oyo, Bauchi, Abia and Kano States, each at different stages of development (Dr. (Alh) Kareem, 2005, PP.19-22).

2.1.1d The Challenges of Maritime Sector Reform.
The present administration which conceived and midwived the various reforms in the maritime sector deserves commendations for its courage, vision and determination. Faced with daunting challenges inherent in these reform measures many Governments with less courage or vision or zeal would have chickened out. Nonetheless in order to overhaul the entire maritime sector and prepare it for reliably consistent efficiency, the reform would have gone one or two steps further. A case in point: the freight forwarding practice in this country requires closer examination and reform. The same is true of shipping companies, issue of seafarers and even the entire haulage system as it relates to the port business.

Again, may be, the government does not want to face all these reforms simultaneously. We agree that a gradual approach to these issues may be sensible. The important thing however is for the Government not to forget that there is an unfinished job to be done in order to put Nigeria’s maritime sector on a very strong footing (Kareem; 2005 P.25).

Without having any doubt, the challenges in the reformation of the Nigerian maritime sector are gargantuan and daunting, partly because of the human factor element involved. To attempt to accord a fair treatment to the various challenges that confront the Nigerian maritime sector reform today will require at least a full thesis. Be that as it may, some brief comments on these challenges could be mentioned even if only in passing. These may include but not limited to the followings:-

(i) Port Sector Reforms:-
These reforms, as good and well-desired as they may be efforts must be made by all and sundry, most especially the Federal Government, to see them through. Besides we must all see to it that the reforms are sustained. They must not be allowed to suffer policy reversal or policy inconsistency. All eyes of the world are on Nigeria and we must not let ourselves down by tinkering with the reforms in any negative way.

(ii) Dock Labour Reform:-
With deregulation of the port labour reform both the Nigerian Ports Authority and Joint Maritime Labour Industrial Council (JOMALIC) should avoid interference with the labour matters. The appoitment, replacement and termination of labour should be the full responsibility of their new employers i.e. port concessionaires. But for purposes of security, concession areas should pick their stevedoring contractors and dock labour from the lists of those who have been duly registered by JOMALIC.

Ministry of Transport or any Government agency should not compel concessionaires to appoint any particular contractor or dockworker. In order to get them purged of their previous bad habits and attitudes, concessionaires may do well to give orientation training to the new sets of contractors and labour in their employment. All these are targeted at improved labour productivity and maintenance of cordial industrial relations.

(iii) Port Concession:-
The success of port concession will be judged against ability of concessionaires to discharge and load cargoes expeditiously; berth and sail ships promptly; bring Nigeria bound ships and cargoes usually diverted to neighbouring ports back to Nigerian ports. For all these to happen, our ports must have adequate cargo – handling plants and equipment; they must create adequate warehouses, stacking areas, berthing facilities and charge competitively friendly cargo charges. It may be a good idea for each concessionaire to have empty containers stacks as distinct from laden ones to facilitate easy port operations. There must be free flow of goods from the port to bonded warehouses, inland container depots or dry ports. Trailer packs should be located outside the port area from where vehicles whose turn it is to load will be invited or called in by the use of radio, telephone or GSM communication. Soliciting of cargo by truck owners inside the port should be discouraged. Same may be done for empty containers which will be brought to the port only when they are ready to be shipped or loaded.

(iv) The Nigeria Customs Service Reforms:-
The customs should accelerate and modernize its computerization process – ASYCUDA. For it to be in line with what is recommended by the World Bank and other international bodies, NCS ASYCUDA project should be upgraded to step II i.e. ASYCUDA plus, plus with what this may mean. Furthermore, customs must purge itself of corruption and cultivate the culture of efficient service delivery, probity and trade facilitation. To promote an all – round efficiency, customs must interconnect with NPA, shipping companies, freight forwarders, terminal operators, dry port operators, freight forwarders and other important shareholders such as Manufacturers Association of Nigeria (MAN), NACCIMA etc, it is important for NCS to decentralize its computer processing centre (CPC), or computer processing Unit (CPU). A separate CPU or CPC may be created for export cargo. The fast track cargo clearance system for manufacturers, industrialists and heavy importers recently introduced by the customs must be sustained. This system allows goods for this category of heavy importers to be transported straight to their bonded warehouses under escort, immediately these goods are discharged from ships. Customs examination and release will take place at the importers’ premises. This accelerates delivery, avoids delay and prevents port congestion.

In the same vain, once cargo is released by an authorized officer, no other officer should stop such cargo unless there is an important reason to do so. And finally, Government warehouse for overtime cargo should be located outside the port areas in view of large space usually consumed by overtime cargo while lying in the ports for years.

(v) Dry Port or ICD as a Complement to Port Reform:-
As already explained, dry port or ICD is an extension of the seaport. Some of the cargoes discharged at the seaport are immediately transferred to the dry port which is usually located at a point very close to the importers or consignees. This dispersal of goods helps to decongest the seaport and facilitates port efficiency. Inland container depot also acts as a buffer for the seaport as empty containers may be held back at the ICD to load export cargo for shipment at the seaport.

Amongst the greatest challenges of the ICD is to continue to support the port. This consists the ability of Nigerian Railway Corporation to interface between the ICDs and the ports. Considering the poor state of railways in Nigeria, not a few people are wondering if the Nigerian Railway Corporation will not fail the nation in this crucial assignment.

As to be expected, some industries with bias for import business will develop around ICDs to lower their production cost and maximize their returns. Sustainability of such industries will largely depend on the continued existence of the ICDs. This is yet another challenge not only for the ICD operators but also the Government as well. Moreover, being a product of BOT which is a new method of project financing in Nigeria, all hands must be on deck to ensure the success of ICDs here. If they fail, either as a result of policy reversal or any other reason, no investor, whether foreign or local will be encouraged in future to embrace BOT arrangement. Therefore, we fervently pray for the success of ICD project and BOT financing arrangement in Nigeria (Dr. (Alh) Kareem, 2005, PP.2).

2.1.2 The Nigeria Entrpreneur.
An entrepreneur is one who steps out, looks forward for business opportunities which have not been grasped and acted upon by any one, he then renovates/add value to such opportunities, by creating something new added to the previous one, so as to satisfy his customers, and while doing so, he makes profit (Gbashama and Akpa,1998 p. 10). The entrepreneur is seen to be creative, innovative, energetic, versatile, ready and willing to invest in new business ventures.

An entrepreneur is to some scholars, one who organize wealth for the production of further wealth. This he does by the combination of the other factors of production. Still to other scholars, an entrepreneur is seen as the only factor of production that appears distinctive by its qualities. It is the only factor of production that exerts influence on followership in conducting and concluding a business with the sole aim of achieving a pre-determined goal (Gbashama and Akpa, 1998, P11).

The Nigerian entrepreneur, in a bid to perform positively in the cabotage trade, must embrace completely, not in parts, the aforementioned substances in order to live above board. He should be seen as one who has the zeal, determination, ability, energy, willingness, knowledge, and more of all, capital, to drive into this business opportunity, utilize it very well in order to satisfy the customers, while he makes profit. This profit will in turn improve his standard of living, and at the same time, improve the economy of the nation.

2.1.2a The Functions of Nigerian Entrepreneur.
The Nigerian entrepreneur, just like other entrepreneurs worldwide have similar functions, amongst which are:-
(i) Seeking of Business Opportunities. As per the definition, an entrepreneur is one who goes out to seek business opportunities, which have not yet been grasped and acted upon by any one, when he discovers such an opportunity, he now takes it and works on it. That is, innovate the opportunity or add value to it. This he does in order to entice his customers and satisfy them, and while he does this, he makes profit.

(ii) Risk Bearer:
The Nigerian entrepreneur is seen as a risk bearer. That is to say, whatever business opportunity he has had and has acted upon it, to make it look anew, in order to entice consumers, if he eventually does not sell or recover the cost, he loses. In this case, the entrepreneur bears the risk. Not just that alone, assuming while the entrepreneur was busy working on the product, in order to make it look good and more attractive and before he could re-introduce such a product into the market, the law of the land has been passed banning such a product from circulation and consumption. The entrepreneur then bears the entire risk.

(iii) Funds Provider:-
The entrepreneur provides funds for the start –up and down to the day – to – day running of the business. He alone or with his family members, friends or loans from which ever source provides the funds for the running of the enterprise. This might be from the entrepreneur’s previous savings, retirement benefits, from friends and/ or banks. But all we know is that the funds provision duty is the function of the entrepreneur who sources for same and provides for the day-to-day, continuity of the enterprise.

(iv) Co-ordinator of other Factors of Production:-
The entrepreneur acts as the co-ordinator of other factors of production by combining labour, capital, land in the right proportion in order to maximize production at the same time to reduce cost and in the same vein make profit. This the entrepreneur does by organizing labour, both skilled, semi skilled and unskilled in the right proportion to the available capital on the available portion of land in order to enhance production. Capital here might mean the venture capital from where plant and machinery, offices and warehouses could be obtained, just as the working capital. Land, just as other factors of production, is very important in that it is always on the land that the enterprise is situated. In accounting, land appears to be the only asset that seldom depreciates. It, in most cases, appreciates.

(v) Creativeness:-
This serves a dual purpose concerning an entrepreneur. Creativeness is one of the qualities of a good entrepreneur, just as a function of an entrepreneur. The entrepreneur is supposed to be creative enough to add value to an already existing business to make it new, or to create a kind of a new business line which might not have been in existence before. This is quite difficult to come-by. Thus, the entrepreneur creates something new in the eyes of the consumers so as to entice / encourage them to patronize him. This makes him a good entrepreneur.

(vi) Employer of Labour:-
The entrepreneur is an employer of labour from the labour market. Those who have skills to work in the enterprise are always engaged to put in their labour and are at the end of it paid salaries/wages. Depending, on the enterprise, skilled, semi skilled or unskilled labour is employed to provide services in order to accomplish the desired goal. The employees are remunerated based on the engagement terms.

(vii) Innovativeness:-
As was seen in the case of creativeness, innovation has dual purpose role to play in both the qualities of an entrepreneur, just as it has to do in the functions of an entrepreneur. To others, innovation may seem same as creativeness, but to others it may not. To some, creativeness may entail artistic skills to add value to the existing opportunity to make it new in the eyes of the consumer. Meanwhile innovation may encompass diligence in service, quality of service, ways/methods of attending to customers including some other side attractions made available including promotions and promo-tools that entice consumers. These create or bring about a difference in the instance of the business circle; which in turn makes the enterprise more viable.

(viii) Goal Setting:-
The entrepreneur is the one that sets the goals, targets or the level of achievement to be met within a predetermined period. It might be a monthly target, quarterly, bi-annually or annually. Some targets are hourly, others daily and so on. So, the entrepreneur sets these goals depending on the market situation.

Cases in point, most, if not all goods, have their peak periods. So a good entrepreneur through his production team, sets such goals that during the peak period will produce more goods in order to maximize production and minimize costs and at the same time reduce wastages through unsold stock, some of which might have to be recycled at extra cost to the company.
Target setting or Goal setting is one of the greatest functions which must be done and maintained by the entrepreneur. This is because, without the set goals nothing will be achieved. That is, there might be under production which means that, quantity produced may not be commensurate with the cost of production, or the quantity produced might be more than the demand in the market, thereby causing oversupply which inevitably will be in affirmative with the 4th law of demand and supply which states equivocally that, when the supply is higher than the demand, it forces the price to fall.

At this point, it becomes quite essential for the entrepreneur to set goals which will take proper check on the level of consumption as compared with the entire product or similar goods including his own in order not to make mistakes of supplying more than naturally demanded by the consumers (Gbashama and Akpa 1998 p. 58).

(ix) Business Administrator:-
The entrepreneur’s major function is that of business administrator. The reason for this is not far fetched. In the first place, a business administrator is one that has the acumen, versatility, i.e. broad knowledge in applying both human and scientific methods in trying to find a solution to a managerial problem. These scientific methods may be to uncover those hidden impediments that are causing problems in the achievement of the predetermined goals. These might be vide the use of computers, Simulators, Queuing theory, the Games theory, Critical path theory, Mathematical and other statistical gadgets. The entrepreneur who would like to succeed must be at a stage where these have to run round and when results are scientifically provided, he uses it for decision-making. A case in point: an entrepreneur who runs a petroleum filling station, he has six pumping machines with six attendants, still people wait on queue to be refueled. He will now, as the station manager, find out what must have been the cause of the long queues in the filling station. Is it that the filling stations has no sufficient pumping machines, or are the attendants not active enough or are the pumping machine faulty or what?

Now, the station manager, may at this point use his knowledge of the Queuing theory to determine
(a) How many people are in a queue?
(b) How long do the people wait in a queue?
(c) How long does it take to serve one person in a queue?
(d) How much does it cost to serve one person at a time on a queue?
(e) What will it cost the company to add a pumping machine and an attendant to avoid people Queuing – up?
(f) What will the company gain by adding one pumping machine and an attendant?
(g) What will the company loose by allowing customers to continue to wait on queue?

These and some other questions are some of the managerial problems that deserve scientific solutions which as an entrepreneur he is expected to provide answers to.

(x) Decision Maker:-
Decision Making, just as Goal Setting, is one the most vital aspects of issues that determine the success of any business. The entrepreneur is the one that takes final decisions which have bearance on the strategic positioning, the future growth, expansion and otherwise of the enterprise. It will not be surprising to discover that the lower managerial staff who are in the field, producing and selling at their levels have discovered virgin areas and products, but on advising the entrepreneur, he decides to take his own decision which invariably at the end of the day has made the company to lose. This automatically portrays the level of the type of Chief executives that we have here in Nigeria, who would refuse to listen to any advice. It is a pathetic situation, but it requires urgent attention of many chief executives, to better use professionals, and for those who have been using professionals to use their professional advice so as to enhance profitability (Akpa, (unpublished) 2000, p. 75).

(xi) Risk Taker:-
This, to other people and scholars seems same as risk bearing, but to some extent, no! (Akpa, (unpublished) 2000, p.8). To a large extent, risk taking is more burdensome than risk bearing. Most Nigerian entrepreneurs have taken a risk of mortgaging even their family houses including inheritances whose beneficiaries are more than the immediate family cycle. Some of these businesses have failed. The saddest story out of it all is that such family/extended family houses/properties have been sold, leaving such families/extended families stranded. Terrible!! It does not stop there, some entrepreneurs apart from mortgaging the existing structures go ahead to mortgage even farm lands, and when these enterprises fail, all and sundry are gone!!! Where will they go from here?

In risk bearing the situation is a little better, because the entrepreneur undertakes his business venture most probably alone. The failure of the venture is his problem. He might have been careless in handling his finance which could have gone a long way in the failure of the venture, or he might have been extravagant in expenditures, thereby making the business to fail.

One may not stop here, (as may be seen later), one of the problems is that they may employ a professional but refuse to make use of the professional advice given by such a professional. A case in point: assuming, as a professional accountant, one has adviced an Executive Director of a company, after having studied the accounts of the company, that, the turnover is excellent, and that it is expected that the net profit should also be high, but the result, is a net loss; what a serious problem!! On observation, you as a professional accountant have discovered that the administrative expenses such as phone, hospital, electricity, transport and sundry expenses, including Directors’ vehicle running costs have been on a high side.

The accountant now has advised that, there should be an internal control measure to reduce these expenses. This has earned him a sack. What are we really talking about? The entrepreneur believes that he is the owner of the company and what he wants to do in the company no one should control him. But does it really mean that the accountant is controlling the Chief Executive? No! He only wants to exhibit his professionalism by advising that some of these expenditures should be curtailed. This will help ameliorate the problems facing the company.

It is therefore unpalatable for a professional to relief himself of his professional ethics in the satisfaction of the Executive in order to retain his job. This has happened in such a way that most professionals have dumped their professional ethics in order to satisfy their yearnings thereby causing the failure of many companies or investment of their shareholders. It may sound unbelievable, but this is part of the reasons for majority of our banks and other public companies to have gone under. The questions among others that remain are that, will these professionals continue to drop their professional ethics in order to satisfy their selfish desires, and co-operate with the Chief Executives to falsify trading profit and loss results including the statements of Assets and liabilities?

In conclusion, the current entrepreneur and the entrepreneur to be, as they are risk takers, they have a lot to be desired. This is because, some entrepreneurs would wish to use this dubious means in order to transfer such burden unto others who might have been misinformed by the colossal misrepresentation of the statement of account by a “hand-tight” accountant who foolishly wishes to maintain retainer-ship as the auditor of the dubious company at the expense of his professional calling and ethics (Akpa, (Unpublished) 2000 PP.22-26).

(xii) A Trainer:-
The entrepreneur is a trainer in that he employs the un-skilled, semi-skilled and the skilled. The unskilled get trained on the job to become semi-skilled, while the semi-skilled get skilled through their training on the job from the skilled. This helps update the technological development of an entrepreneurial set up which, subsequently, translates to the overall development of manpower in the nation. And this does not stop at manpower development alone. Those trained help in producing more goods and services which in turn boost production at reduced costs, hence profit maximization, and increased taxes and Government income and improve national income (i.e. national economy).

(xiii) Dedication:-
The dedication function of an entrepreneur also cuts across the qualities of a good entrepreneur. It will be unfortunate and devastating if an entrepreneur is not dedicated. One wonders what such an entrepreneur will preach to the subordinates. It now becomes evident that he must be disciplined, dedicated and honest to what he calls his enterprise.

In fact, as we may see ahead, lack of dedication and dishonesty has a devastating effect on the progress of a business concern. Discipline and dedication make an entrepreneur to handle with care the funds of the enterprise, thereby reducing the extravagancy that would have been involved in taking away the funds of the enterprise. In fact, it is important to realize that funds that are meant for the enterprise are not meant for the Chief Executive to spend anyhow. These funds are supposed to be cautiously used for the purpose for which they are to be used. Invariably, some Nigerian entrepreneurs use such opportunities of the funds available for the day-to-day running of the enterprise in buying mansions, cars, marrying more wives, building unnecessary sky-scrappers. At the end of the day, theses enterprises go under.

(xiv) Hardworking:-
One other function of the entrepreneur that seems same as a quality of the entrepreneur is that of hardworking. It must be noted that if the entrepreneur himself is not hardworking, one wonders what he expects of his subordinates. He has to be energetic enough to carry out his day-to-day duties and activities of the enterprise. His presence in the premises of the enterprise creates a difference. He should always show good example of hardworking by coming to the office very early and closing later than other workers (including his immediate subordinate) (Akpa, 2000; p. 108 – unpublished).

(xv) Focused:-
This function might also seem to be a good quality of an entrepreneur. An entrepreneur must be focused. This entails, he must have had a business opportunity, this business opportunity might make him to have realized the vision he has had. On realization of this vision, he should then be focused. On focusing his attention on this opportunity, he should make it a reality. He must not allow it to pass. It is the duty of the entrepreneur to make sure that the vision he has is realized. This can only be done if he focuses his attention on the vision. E.g. if his vision were to build, operate and transfer (BOT) a dry seaport, then he should forget about trying to build a ship operate the ship, and transfer (BOT) same time when his resources are limited. He may not be in a position to handle the two at a time. It is only left for him to have “an opportunity cost” syndrome. In this case, he may only decide to embark on one out of the two in order to satisfy the immediate desired goal.

With all these in place as some of the functions of an entrepreneur, one expects that Nigerian entrepreneurs would benefit immensely from the cabotage trade as indicated “supra”.

2.1.2b Characteristics or Qualities of an Entrepreneur
There are certain qualities or traits that set entrepreneurs apart from the pack. Some research has been done on what qualities characterize successful entrepreneurs.
Kankha (2002) listed some characteristics prominent in entrepreneurs. These include:
(1) Hard Work: - The willingness to work hard distinguishes a successful entrepreneur from unsuccessful one. Most of the successful entrepreneurs work hard endlessly, especially in the beginning and the same becomes their whole life.

(2) Desire for High Achievement: - Entrepreneurs have strong desire for high goal achievement in business. This is the motive that enables them to surmount every obstacle on their way.

(3) Highly Optimistic: - Successful entrepreneurs are always up beat about the future and are never disturbed by the present challenges facing them.

(4) Independence: - Entrepreneurs do not like to be guided by others and to follow their routine. They like to be independent in the matters of their business.

(5) Foresight: - They have a good foresight to know about future business environment. They visualize in their mind’s eye what changes will take place in the market, consumer attitude, technological developments, etc. They also take timely actions accordingly.
(6) Good Organizers: - It is the ability of the entrepreneurs that brings together all resources required for starting up an enterprise and then to produce goods.

(7) Innovative: - Entrepreneurs initiate research and innovative activities to produce goods to satisfy the customers’ changing demands for the products (Kankha, 2002, PP. 3-4).

Ajagu (2005) added few other qualities of successful entrepreneurs. These are as follows:

(8) Initiative: - Successful entrepreneurs are original, skillful, gifted, resourceful and quick to enhance opportunities. Personal Initiation is a behavioral syndrome resulting in an individual taking active and self-starting approach to work and going beyond what is formally required in a given job. Initiative is the personal ability of starting an action. It involves being able to act without prompting, create and innovate ideas and issues without external influence. To summarize, personal initiative:

(a) is consistent with the organization’s mission
(b) has a long-term focus;
(c) is goal-directed and action-oriented;
(d) is persistent in the face of barriers and setbacks;
(e) is self-starting and proactive.

(9) Attitude: - Successful entrepreneurs have positive mental attitude. They are warm to people and exhibit good disposition to win friendship.
(10) Leadership: - This is very vital to the success of any entrepreneur. They must inspire people and by so doing earn their loyalty. They assert a lot of influence amongst their workers and business associates.

(11) Decisiveness: - Entrepreneurs respond promptly and accurately in making important decisions. Decision is the alternatives they believe it is better to take a wrong decision rather than not taking any decision.

(12) Responsibility: - A successful entrepreneur accepts full responsibility for the general operation, success or failure of his action or business.

(13) Perseverance: - This is the ability to continuously be focused towards one’s goal despite all the odds and failures. Successful entrepreneur do not give up. They have the ability to surmount obstacles, hardship, oppositions and failures and still succeed.

(14) Energy: - Entrepreneurs possess above average energy. They avoid stressors such as work overload, role conflict, role ambiguity, everyday hassles, perceived control over events occurring in the work environment, and job characteristics.

(15) Self-discipline:- Successful entrepreneurs subject themselves to rules and laws in order to achieve their ultimate goal in life. Self-discipline is the ability to positively respond to the demands of life with the confidence of laid-down laws.

(16) Feedback system: - Entrepreneurs desire feedback on their success and failures. This is because it enables them re-appraising their performance with a view to re-arranging their priorities. They are conscious of the fact that about 60 percent of delegated assignments are not done as directed and thus, there is a need for feedback, which helps to re-plan and re-strategize.

(17) Conscientiousness: - They are conscientious people. They are dependable, responsible, achievement-oriented and persistent.

(18) Fearlessness and Boldness: - They see fear as a conquered territory by their level of thought and imagination. They see opportunities and possibilities in spite of numerous obstacles and handicaps.

(19) Non-Procrastination:- Successful entrepreneurs take actions as soon as they see an opportunity. They are desirous of innovation and do not waste time at the slightest chance to act.

(20) Self-Confidence:- They have a high level of self-confidence. Self-confidence is being the best. A self-confident entrepreneur is distinct and stands out from the crowd. He guards his reputation and integrity jealously. They are always researching, innovating and improving on their products and services. Confidence enables entrepreneurs to attempt great things and achieve great results (Ajagu, 2005, PP. 13-25).

(21) Goal Setting: - Iheonunekwu (2003) stated that the entrepreneur sets high goals. They have a mission, a target and a desire to reach the mark. It is the goal setting strategy that makes the entrepreneur combine those other important entrepreneur qualities, abilities, ideas and ambition to the greatest advantage.

(22) Accountability: - Entrepreneurs are accountable to themselves as their lives depend on the businesses. They keep a careful record of their achievements as a result of which they are able to tell lofty stories of their humble beginnings.

(23) Informal: - The entrepreneur tends to be informal and very versatile in the pursuance of his business; this is to ensure that the jobs are done properly (Iheonunekweu, 2003, p17).

Longenecker et al (1997) discussed the following characteristics of entrepreneurs:

(24) Willingness to take risks: - The risks entrepreneurs take in starting and or operating their own business are varied. By investing their own money, they assume financial risk. If they leave secured jobs, they risk their careers. The stress and time required in starting and running a business may also place their families at risk.

(25) A Need to Seek Refuge: - Although most people go into business to obtain the reward of entrepreneurship, some become entrepreneurs to escape from something or find a refuge, which could be foreign or corporate. The foreign refugee escapes from political or religions or economic constraints of their homeland. The corporate refugee is an individual who flees the bureaucratic environment of big or medium sized businesses by going into business for himself. Other types of refugees include parental refugee, the feminist refugee, the housewife refugee, the society refugee and the educational refugee (Longenecker etal, 1997, PP. 11-12).

According to Olson (1987) cited in Ajagu (2005, P. 11), the major traits of an entrepreneur are: a determined sense of innovation – knowledge what are important and how best to accomplish them; tolerance for unorganized and undefined situation – ability to make a long-term view or goal attainment; good intuitive and analytical ability (Ajagu, 2005, P. 11).

2.1.2c Problems Militating Against Nigerian Entrepreneurial Growth.
These are some of the major problems hampering the growth of the Nigerian Entrepreneur;
(i) Lack of Capital:-
The issue of lack of capital has really hampered the growth of the entrepreneur to the extent that, some who have the managerial skills but do not have the capital with which to go into the business, it has become imperative for them to sit idle. Capital is the back bone of the business of cabotage trade which the law stipulates the building, ownership and manning of the ship by Nigerians. The aim is not to frustrate Nigerians, but to ensure that such business opportunities be left to Nigerians. Unfortunately, the capital is not there for Nigerians to build, own and man the ships themselves, hence the waiver. It is important to realize that cabotage business is a capital intensive business and it takes a long time to recover the investment made there from. This is the problem with the Nigerian entrepreneur who might even have the intention to take up the challenge, but may be estopped.

(ii) Lack of Infrastructure:-
The infrastructure here could be seen in various ways. But invariably these include roads, railways, schools, light, hospitals, water etc. While one is looking at cabotage trade which is more or less a trade along the coastal region, including the inland waterways, one also looks at the ports to where the consignments have to be transported to. Moreso, the dry port in the inland of the various countries concerned can only be serviced vide vehicles through the roads or trains along the railway. These are not here in Nigeria, and where they are, are not functional. The condition of the roads is so bad that in some places, they are death traps. The railway is completely down. When one looks at the electricity supply in the country, it is appauling.

No company completely depends on National Electricity Supply because of its epileptic nature. This contributes to the increased cost of production, hence increased prices of consumer goods and services. Companies like Cadbury and PZ have to rely on their generators in order to produce, and if one considers the cost of running a generator for 18 hours daily, it becomes so huge. No wonder, manufacturers have no choice than to transfer the cost to the consumers. There are few available warehouses to store the goods. Building materials’ prices are on the increase everyday. Therefore, it has become more difficult to build warehouses for storage.

The hospitals are ill-equipped and do not have drugs. Some hospitals do not have facilities, there are not enough qualified medical personnel, neither enough accommodation for patients. Schools are other areas where nothing good is coming out of. It is expected that, with the money Nigeria generated over the years, Nigerians by this moment should not be complaining about all these. But when one takes a survey of our schools, the schools are not stocked with enough books, no qualified, competent and trained teachers to man our schools and take care of our children. The school fees are so high and prohibitive that most of our poor parents can no longer pay the fees. Cost of books and uniforms including some unnecessary levies from the schools makes the situation more difficult and compelling.

The Railway, which is supposed to be the helping hand to the cabotage trade, is non existent in Nigeria. Railway happens to be the next carrier that conveys high tonnage of goods like the ship. Most of the heavy importers, would wish to use railway to convey their consignments because of its nature and the cost effectiveness, including the high tonnage it carries including the fact that the railway goes into the interior of the country than the ship, but it is quite disheartening that the railway has become a dead child yet to be revived.

Moreso, communication should have been made easier than what we have today by allowing land line telephone to be working so as to enhance communication. One discovers that the mobile phones, despite their advantages, are too expensive to maintain and recharge all the times. Furthermore, the charges from the services providers are prohibitive, to an extent that they are not economical in having business discussions with them. That is to say, before one concludes a single business deal on the mobile phone,one spends a lot, but assuming the landlines were functional only to be complemented by the mobile phones, this would have gone a long way in helping to boost communication.

(iii) Lack of Qualified Managerial Manpower
One of the most perturbing problems confronting the Nigerian entrepreneur is the inadequacy of skilled managerial personnel who will help in handling some of such complicated managerial problems which deserve scientific approaches in solving them. Most of the Nigerian managers now use propounded theories and or try to apply other orthodox methods which were somehow in the past applied by some past managers. Whether or not those theories failed or succeeded at that time, most probably they may not virtually succeed today.

It is therefore imperative to realize that, most Nigerian managers are not conversant with the new scientific methods of applying mathematics, statistics, computer simulations, ”Games”, theories’, Queuing theory in trying to proffer scientific solutions to managerial problems. In fact, some issues involving financial management which would have called for financial managers, in some cases, they are not there and even where they are, the Nigerian entrepreneur finds it difficult (if not increasingly difficult) to employ the services of a qualified managerial personnel who will endeavour to proffer a lasting solution to such a financial problem.

Management consultants are always looked down upon as if they do not have any work doing and that is why they continue to disturb Nigerian entrepreneurs on the need to have skilled workers who will help in decision making and alleviate the problems of one man business with all probable solutions to all the problems in the business, be it financial, administrative, production, marketing and human relationship.The Nigerian entrepreneur, as a one man business, feels it will be a waste of resources and employing a professional will not be necessary.

(iv) Lack of Access to Long-term Loan Facility.
Another toothing problem of the Nigerian entrepreneur is the non accessibility to long-term loans. Most commercial banks in Nigeria and other financial houses do not have the capability of giving long-term loans to the customers. This is because most of them are custodians of short-term funds.

Most savings carried out in Nigeria are short-term savings. It therefore becomes imperatively difficult for the financial houses to advance these funds for long-term businesses as the Cabotage trade, which involves long-term investment demand. That is to say, cabotage trade as the law stipulates, entails building, owning, manning e.t.c the ship by Nigerians, which invariably means spending or investing in a long-term venture. The Nigerian financial houses lack this capacity; hence the Nigerian entrepreneur does not have readily access to funds.

The situation is not far fetched even in a period of looking for her working capital; the condition is not much different. Assuming, if the Nigerian entrepreneur had been able to maneuver issues and came up with funds to finance the cabotage trade, and at the end of it all, does not have working capital which entails short term loan from the finance houses, the entrepreneur finds it difficult to operate. This is either as a result of lack of collateral security or the bottleneck conditions given by the Central Bank of Nigeria that commercial banks should not lend money to the cabotage trade beyond a particular limit. All these things put together have formed complicated blocks for the Nigerian entrepreneurs.

Moreso, the lending rates of the financial institutions in Nigeria are so prohibitive that, even to borrow has become a different ball game. Most entrepreneurs will not be prepared to go into borrowing funds whose interest rate is above 27 percent on short-term loan to finance an investment whose returns take a long period of time. This is because, while the entrepreneur will be battling to recoup the funds in order to pay-off the loan, the interest alone will almost put the loan balance at more than double.

This has created fear in even those entrepreneurs who might have access to the loans by all means. Even the sponsors, that is, the financial houses that would like to sponsor such ventures might be afraid of the time within which to recoup the amount, and at the same time pay-up the interest (Akpa, 2000, p 240).

(v) Lack of Proper Awareness of would-be Potential
Entrepreneurs in the Cabotage Trade.
Most Nigerian entrepreneurs do not know what cabotage trade is all about, and what the contents of the Cabotage Act are. Those who might be interested in going into the Cabotage business have to be seriously educated with the Laws’/Act’s themselves before they start putting themselves into an impossible task they have to face. This is because the Cabotage Act stipulates that, no Nigerian entrepreneur should front himself for and on behalf of a foreign vessel for the purpose of cabotage business in Nigeria.

This invariably means, Nigerians or the Nigerian entrepreneur must build, man, own and operate the ship. And where it becomes necessary to build, man, operate and transfer, this is serious money matter, which the Nigerian entrepreneur will have to take a critical look at and understudy the complexities in order not to fall prey to the whole business. The entrepreneur is to be duly informed that investing in cabotage business entails long term investment. It is not a type of investment that the recovery will come up the same year or the next. This will enable him plan and replan in order to overcome the problems that will be involved.

In fact, the cabotage business, on the onset is meant for those who have been involved in the coastal trade ever before now and those who have had the knowledge of marine businesses, so that by the time they would expand to cover ownership of ships, the routes, conditions, peak periods etc might not be something too new to them to do. Already, they must have acquainted themselves with some of these trends which to a new comer in the business might look so tedious and cumbersome.

(vi) Lack of Technological know-how
One of such technological know-how is to build the ships. Here in Nigeria the shipyard which initially was procured by the government, the “Niger Dock Yard” has been sold off. The training which those who worked there initially might have had, can not build a modern and transcontinental ship for cabotage business. Apart from lack of man power and technology to build the ships, there is the issue of the personnel who have the capacity to man the ships.

How many Seafarers do we have in Nigeria? How many captains do we have in Nigeria? How many of them will be willing to put in their best in order to overcome the problem of cabotage in Nigeria? Paper documentation and other processes in order to start off the cabotage business is a new assignment all together that has to be solved in order to get enough personnel to carryout this potential assignment. More judges have to be trained in this field of cabotage in order to handle the cases emanating from the business of cabotage.

All these are not issues to be resolved in a day. It means a lot have to be put together in order to see that the cabotage business has come to stay in Nigeria. Moreso, the engineers to be used as seafarers and others must not be left out in the training and retraining of the workforce that will be involved in the cabotage business. And if cabotage business is to succeed in Nigeria, the dry port including the railway and the roads must be properly maintained in order to accomplish the desired goal.

(vii) Government Patronage and Sponsorship/ Establishment of a Cabotage Bank.

The issue of government patronage of the cabotage business is not to take part directly in the affairs of the running of the business. It is aimed at the government to establish a bank that will be specifically in charge of the loans granted to the entrepreneurs who would be participants in the cabotage business. How the loans will be disbursed, utilized and paid back to the said bank should be part of the responsibility of the bank officials. This will go a long way in encouraging the would-be or potential entrepreneurs who will now be the ones operating in the cabotage business.

Shipping is generally believed to be a shrewd business riddled with sharp practices where only the strong survive. This, perhaps, explains why only very few Nigerians are active players in the shipping sector. Besides, ship acquisition is capital intensive and requires hardwork for the business to thrive. There is consensus that remaining afloat in shipping through sound management could be a more assiduous task than acquiring a vessel and that probably explains why many budding shipping lines go aground a few years after launching their vessels.

It is therefore not surprising to realize that only 11 Nigerians are key players in the ships owning business, and experts blame finance, poor management skills and government policies. The list of 11 registered members of the indigenous Ship Owners Association of Nigeria (ISOAN), a group of indigenous ship owning organizations, managing Nigerian – registered vessels of no less than 500 cumulative dead weight tonnages, who own a total of 37 vessels, showed that their ownership ranged between one and five vessels, which are often times under – deployed (The Punch Newspaper Feb. 13, 2006).

The list of the registered indigenous ship owners include among others;
i) Morlap Shipping Company Limited
ii) Genesis International Worldwide Shipping, which has four vessels each in their fleet.
iii) Al-Dawood Shipping Lines and
iv) Daped Nigeria Limited, which operates five and one tanker vessels each as well as Ship and Shore Services Agency (five vessels)
v) Sea Force Shipping Limited (Zenon) which owns four vessels.
vi) Tukuma Maritime Limited (OBAT) that owns tanker
vii) Pokat Nigeria Limited (Two vessels).
viii) Helko Marines Services Ltd (One vessel)
ix) Sea Services Agency and
x) West Coast Shipping Line with five vessels each in their fleets.

The Chairman and Chief Executive Officer, Walsen Ltd, a marine consultancy services and brokerage firm that assists prospective ship buyers, Captain Adewale Ishola, opined that having money is just one of the pre-requisites for buying a vessel and noted that an individual does not need all the money required to buy a ship. “People can pool resources; they can form associations, alliances and mergers to buy ships”. He advised and added that, usually, everybody must know the value of his input, which would translate into shares and ultimately dividends as the business grows. He said that many shipping businesses die due to poor feasibility study, and sound management is crucial to remain afloat. That subsisting contract ensures survival and growth. And that now the Nigerian Marine sector is growing, shipping acquisition can be achieved by pooling together resources, thereby employing experts and qualified professionals to man the vessels. This one can start by chartering a vessel with input to buy later (The Punch Newspaper Feb. 13, 2006 p19).

(viii) Lack of Proper Training and Retraining of Nigerian Entrepreneurs
Most potential and prospective entrepreneurs who intend to join the cabotage business do not have the basic knowledge of what the business is all about. Some who have but little knowledge about same do still require more training to enable them acquaint them with the Cabotage Act and how the cabotage business works. In fact, it is important to realize that it will be of paramount importance for the entrepreneur to understand the nature of the business she/he intends to go in for before doing so.

In a situation where the entrepreneur does not have or has little knowledge of the cabotage business it does not make good for patronage. He may end up having hypertension over trivial issues which if he had the previous knowledge he would not bother himself much. This therefore calls for the training and retraining of the entrepreneurs or his agents or representatives who will be in a position to handle the affairs of the organization without many problems.

Some of the specialized areas include ship management and ship logistics crewing with commensurate salary and necessary qualification and experience in line with the Standard Training Certificate for Watch Keeping ’95, classification of the vessel and proper insurance for the vessel, especially enlisting under the protection and indemnity club cover. And above all, the ability to sustain and keep the vessel afloat at all times by keeping it in good shape and preventing pollution to the marine environment.

Although the ship owner does not necessary have to manage his ship, but should have some of these basic knowledge so as to enhance productivity, by employing the best manpower to man the ships. Not the type who has no prior knowledge of anything who would wish to employ half baked personnel to man the ship as against the laws.

(ix) Lack of Research for Development
It is important to realize that most Nigerian entrepreneurs do not know the importance of research in development. Despite the fact that government has made it compulsory for companies to allocate part of their profits to research and development, they find it difficult to do same. Areas where some of these entrepreneurs would combine their efforts i.e contribute funds themselves and conduct a research to improve their production capabilities they look at it as a waste of funds.

Even after some higher institutions in the country have conducted some researches, have come out with results which the Nigerian entrepreneurs are asked to pay only a token and collect these researches to be implemented in their various organizations for improved output, has met them with stiff resistance. It is actually disheartening, perturbing and disturbing, but one would not actually blame them because they do not actually know the value of the researches.

Some of them, who pay for such researches, do so because they feel the government has only compelled them to do so, but not that the results obtained are of importance to their organizations. No wonder when it becomes necessary for a Nigerian entrepreneur to send a staff for training, they always frown at this. This is simply because they do not actually know the value of training to their workers. Despite the fact, such trainings make the output from such a person so trained to improve. All the same, it is hoped that the current breed of entrepreneurs that we have in the making now, who are educated, one believes that they will value Research and Training for development and improved productivity.

(x) Political Instability of the Nation
Most Nigerian entrepreneurs both at home and in diaspora find it increasingly difficult to invest in Nigeria now because of the instability in the nation’s political climate. One is not so sure of what one will see as day breaks. People are very much afraid to invest in an economy whose policies change every minute.

A case in point: as the present administration is emphasizing the cabotage business, another government may takeover and cancel all that concerns cabotage and start facing another area of business. But assuming there is always continuity in government policies, the cabotage business is a long-term investment, even if another person takes over the government, he might still encourage the stakeholders. This could have been a solution to the problem of instability in the polity. In this case, one will assume that the investment will not go under, even if another person takes over the government.

2.1.2d. WAYS TO COMBAT THE PROBLEMS OF NIGERIAN ENTREPRENEURS.
The Nigerian Entrepreneurs are saddled with so many problems which hinder their growth. Some of these problems have their solutions not far fetched. These are:
(i) The Infrastructure: The Nigerian government should put in more efforts in the provision of the require infrastructures in order to enhance the participation of the entrepreneurs in the cabotage business. This is very important because, cabotage business may seem to be coastwise trade, but this does not stop there.

The consignments have to be transported into the hinterland, and for this to be possible, the inland waterways have to be dredged, or the roads have to be in good shape and or the railway lines have to be functional to enable the goods to be transported to the consignee. Moreso, if the dry ports have to be used, then the ports have to be constructed and the dredged inland water ways have to be made in such a way that they connect the dry-ports.

These dry-ports also should have warehouses, good road network around it with constant power supply and should also have telephone lines connected to it. These will enhance the movement of the goods to the heavy importers who have been nursing such idea of running away from the seaports because of their constant over crowdedness, congestions and overcharging. In fact, this will make possible for the consignment to be delivered to the consignee very close to his company’s premises, thereby reducing the risk and transportation cost hence the reduced production cost and maximization of profits.

(ii) Capital: The Issue of capital has been one that has transversed so much in the Nigerian entrepreneur. This has been the reason why the researcher is of the view that the government should establish a cabotage bank or encourage now mega banks or bank of industry (BOT) to be able to lend money to the prospective entrepreneur who would like to participate in the cabotage business. These financial houses, after having studied the proposals, applications and feasibility studies or business plans of the prospective applicants, should be able to find out whoever is qualified and competent to do the business of cabotage and lend such monies to him/her to encourage such entrepreneur to carry on the business. This is will go a long way in providing the required initial venture capital to the entrepreneur. As for working capital, the Central Bank of Nigeria (CBN) should devise a means of scheduling part of the proceeds of the commercial banks throughthe Small and Medium Industries Equity Investment Scheme (SMIEIS) to be channeled to cabotage business for working capital which in this case can be recouped in the shortest possible time.

Just as has been explained by the Chairperson/Chief Executive Officer, Walsen Ltd, a marine consultancy services and brokerage firm that assists prospective ship buyers, Captain Adewale Ishola, who postulates that, having money is just one of the prerequisites for buying a vessel. He also noted that an individual does not need all the money required to buy a ship. He was of the opinion that, “people can pool resources; they can form alliances and mergers to buy ships.” He added that usually everybody must know the value of his input, which would translate into shares and ultimately dividends as the business grows.

According to Ishola, the first step is to carry out a feasibility study in terms of the level of finance to be involved, the character of the trade that the ship would be developed, the type of ship required and the tonnage or storage capacity. He reiterated that ship acquisition is better achieved when backed with a subsisting contract. According to him, “It becomes riskier if you do not have a contract and you buy a ship compared with somebody who owns a contract. The former will now be at the whims and caprices of the market forces.” He added that the enabling environment in terms of government policy must also be complementary. Ishola warned that, “it is advisable that you have a subsisting contract that can even pay up the value of the vessel so that you are not losing anything.

(iii) Access to Long Term Loan: As to access to long-term loan to enable the entrepreneur to acquire, man and operate the ship, apart from acquiring loans which are short term and which can not guarantee the commercial bank loans, it is imperative to have another way of acquiring the ship. The government should do her best to tackle the problem. Still on securing her funds for ship acquisition, Ishola suggested a gradual approach by owning a ship first, which if well managed would develop into a fleet of many ships. “You need to just own one. It is like building a filling station. Once you have one and you manage it well, you are likely to build more. A ship well managed will have a multipliers effect.” According to him, the prospective owner can also explore ship chartering once a contract has been secured with the option of buying that ship if it performs up to the optimal level. He said many people had in the past used this option to own ships.

He further remarked that the now scrapped Ship Acquisition and Ship Building Fund managed by the National Maritime Authority (NMA), which is being replaced with the cabotage vessel financing fund, had been explored for optimal use by some ship owners who are doing well and increasing the size of their fleet. He, at this juncture, cited the Managing Director, Genesis Worldwide Shipping, Captain Emmanuel Iheanacho, as a success story, even though the vessel he started with has been scrapped, saying he now has about five vessels.

According to him, prospective ship owners can also access bank loans, which would be more readily available now that Nigerian banks have been capitalized to a minimum of N25 billion. He said that generally if one has the financial muscle and support backed with the expertise around him, he can buy and run a vessel and become a successful ship owner firm” (The Punch Newspaper; Feb. 13, 2006 p.19).

2.2 OPPORTUNITIES FOR NIGERIA ENTREPRENEURS FROM CABOTAGE BUSINESS.
The viability of any industry is determined by the level of need, demand and market for the services it provides. The demand and availability of market create the opportunities. The maritime industry can boast of these and more. There is a huge market for prospective investors in the maritime industry which if fully exploited, has the ability to surpass current earnings in the oil industry.
Being a “shipper” nation interested in developing its coastal and inland waterways trade and its maritime industry (for the benefit of its nationals) and in having enough vessel to carry the cargo in its domestic routes, Nigeria needs to embark on proper and well implemented cabotage services that can be used to provide and increase the cargo support given to indigenous shipowners and operators. Nigeria would also need to attract new investors into the acquisition of coastal ships, thereby increasing the national tonnage. Lending and financial institutions should be interested in financing the acquisition of vessels to be procured by indigenous ship operators which ultimately will lead to the expansion of the national fleet.
Cargo is attracted by the presence of efficient, time and cost-saving services such as repackaging, assembling, manufacturing, and financial and port services. The availability of cargo and passengers to sustain their business makes domestic shipping company/companies attractive for credit facilities that could be used for fleet and business. Insurance companies will need to insure cargo, vessels, and seafarers. Banks will be needed to finance the building and acquisition of coastal vessels, while the Nigerian shipyards and dry-docks will have greater patronage in building and repair of ships.
The construction industry would also benefit from the construction, expansion and repair of ports and dredging of the inland waterways, just as those in information technology systems for safe coastal navigation. Freight forwarders, shipping agencies, shipping consultants and those supplying services needed in the coastal and inland shipping business will benefit from a regulated cabotage legal regime in Nigeria. This multiplier effect of maritime cabotage will induce professionalism, exposure to technicalities of shipping, improved indigenous maritime expertise and competence, and increased economic activities in the maritime industry.
Having looked at the whole spectrum of the shipping market-containers product carriers – VLCC’S, RORO, passenger crafts, support services for the oil and gas sector, and having taken careful view of the present situation and assessed the internal environment, the reality on the ground is:-
- Nigeria is a major crude oil producer.
- The event of September 11, 2001 is a temporary hiccup.
- The US will come out of the recession stronger and more respected
- China’s entry into the WTO will fuel their industrial power base, now known as the “workhorse” of the world economy.
- Low oil prices or not, Senegal, Ghana, Durban, India, UK, and the USA will continue to import oil from Nigeria. Oil demand is relatively inelastic.
- With professional approach and market driven sense of business urgency, the oil majors will be interested in accommodating local companies where they exist. The pressure from the national assembly, the industry, NMA and the share force of members under a democratic system will encourage the opening up of the NNPC to allow indigenous participation in:
- Crude shipment to African countries, India and China.
- Production shipment along Nigerian Coastal waters.
- Logistics and vessels support to the greater Niger Delta Coastal waters up to Angola, Cabinda, Lobido etc.
- On the container business, a prudent niche operator may still have a chance for the UK/continental route. Mega carriers may not fully commit resources given the uncertainties of port reforms, Cabotage etc. A wise investor who knows the trade well would capitalize on his local market knowledge and do good business. Caveat-he should not rely on home based cargo only. His partnership with quality operators must exploit new and the expanding markets of South Africa, China etc. (Asoluka, 2003. P.23).
Trade is the engine of development of any nation. A nation’s balance of trade affects her gross domestic product and the expansion of basic man power and technological development. Trading in today’s economy is mostly carried out on waters, and ships are the connecting vehicles. No form of transport equals the ship in the enormous quality and volume of goods traded between nations. Shipping remains the impetus by which a vigorous export promotion policy can be mounted and sustained. But there is not enough ships to carrying the world’s goods and sustain commerce.
Statistics from Lloyd Register of Shipping shows that since 1975 there has been a continuous rise in the world surplus tonnage due to shortage of merchant ships. Between 1975 and 1985, the world surplus tonnage increased from 86.0Million deadweight reaching a peak of 195.8million deadweight in 1983 before declining to 161.8million deadweight in 1985.
In relative terms, the share of surplus tonnage in total world merchant fleet increased from 8.4% in 1975 to a peak of 28.5% in 1983. Although, there is no current comprehensive data showing the percentage tonnage surplus as at today, it is believed the tonnage would have risen to about 40%. And the main reason why this figure continues to rise is decline in the volume of ship acquisition and ship building. It was gathered from the same source that the volume of active merchant fleet in the world was at its peak in 1978, when it recorded a volume of 632.7 The volume dropped in 1979 to 587.7 and by 1985, it had dropped to a volume of 503.0 (Omsa, 2005. P.16)
It is doubtful if Nigeria’s merchant fleet accounted for 3% of the world merchant fleet. As a matter of fact, it was not until the 3rd National Development Plan (1975-1980) that the Nigeria National Shipping Line limited (NNSL) placed order for 19 multipurpose general cargo vessels at a total cost of N200m. The vessels which were financed exclusively from our petro-naria revenues were built in Yugoslavia and Korea. No other shipping company in the country apart from African Ocean Line Limited placed orders for and took delivery of any vessel from any shipyard in the world until 1987. Today the story of NNSL is known to all. Neither company nor vessels are traceable. The NNSL palaver depleted Nigeria’s available and active merchant fleets.
It is evident that ship acquisition and ship building are big businesses. Our financial experts may readily confirm that they do not have the financial strength for such gigantic projects. The Obasanjo administration has set-up a machinery to take care of this situation and the would-be potential entrepreneurs who wish to dive into the cabotage business have been given an impetus on how to go about it. In the near future, this problem of finance will be overcome. It is also good to quickly draw attention to the current auction of the GSM license for mobile phones in the communications industry. At this time of the auction, the bids had risen to US$285.m. From where were the funds coming?
The world is moving towards privatization, concessions and competitions. A lot depends on the policy thrust of the Federal Government. The ports both dry and seaports have been given out through what is called concessioning. It is hoped that this will go a long way in trying to modify and revamp the already dying maritime industry in Nigeria. The ultimate objective is the emergence of Nigeria as a regional hub for a whole range of shipping services including ship construction, repairs and dry-docking.
Nigerians are highly mobile, with all the energy and drive at the disposal of her citizenry. This is hardly surprising. But very little opportunity is taken of this. Any ship building company in Nigeria can rake in fabulous profits, if it dares to explore the potentials available in passenger and commuter ferries, leisure crafts, cruising yachts, offshore supports vessels, fishing vessels, barges and lighters, to meet Nigeria’s inland and coastal trade and transportation needs. It is cheaper to build these smaller vessels than the sea going vessels.
There are also diverse opportunities to be explored in inter-coastal passenger and cargo liner services within the west and central African sub-region by the entrepreneurs. It is estimated that Nigeria generates about 70 percent of the total volume of cargo traffic in the west and central Africa regions which should be carried by Nigeria shipping companies. The reactivation of the solid mineral sector will also provide alternative export cargoes apart from oil and gas.

2.3 FORM OF CARGO SUPPORT PROGRAMMES.
Cargo support programmes may be in the form of reservation of carriage or preferential allocation of cargo (public sector or government owned or controlled) to shipping companies. Alternatively, it may involve the sharing of all cargoes generated within a country amongst its indigenous shipping companies so that they can remain in business and increase the national tonnage by acquiring more vessels since they will acquire more vessels when they are sure of availability of cargo to be carried with their new and increased tonnage through cargo preference, or reservation or sharing/allocation (M.I.Igbokwe, as in Asoluka 2003; p.79)

2.4 RATIONALE FOR CARGO SUPPORT PROGRMMES.
Cargo support programmes are usually put in place by governments interested in developing and sustaining the growth of their merchant fleet so that interalia. Such merchant fleets would be able to support its naval fleet in the times of war, or national emergency and to take part sufficiently in the lifting of foreign and domestic commerce as in the case of the US Cargo preference Act of 1904 by which only US vessels can be used to ship supplies by sea for the US Armed Force. Merchant Marine Act 1936 (Pl.835) as amended by Cargo Preference Act of 1954 (Pl. 664) requires that at least 50 percent of any government controlled cargo can be shipped by sea on privately owned US vessels. The Merchant Marine Act of 1936 as amended in 1985 requiring 75 percent of certain food aid is shipped by privately owned US vessels. It is also undertaken in order to withstand competition from the highly subsidized foreign ship owners in international seaborne trade and coastal shipping trade or increase their tonnage (M.I. Igbokwe as in Asoluka 2003 p.78).
The US Maritime Administration oversees the administration of, and compliance with, the US cargo preference laws and regulations by federal agencies as they relate to individual programmes, which generates ocean-borne cargoes. Among the programmes are, the humanitarian aid shipment provided by the US Department of Agriculture and US Agency for International Development, commodities financed by the Export-import Bank (Eximbank), Foreign Military Sales and Department of Defence Cargo Shipped by commercial ocean going vessels (Cf. MARAD 1999, p59) ( as in Asoluka 2003 p. 78).
Another rationale for cargo support programme is to give an incentive to indigenous ship owners to keep their vessels registered in the Registry of its country, thereby giving its nationals the opportunity to be employed onboard the vessels that would have got registered in another country. For instance, the US Cargo Preference Act provides that some government owned or government financed cargo shipped internationally should be carried by US vessels. But while the laws caused a decline in the percentage of ocean-going cargo carried by US vessels, which have given incentives to many vessels which would otherwise have left US Registry for other registry to remain there and had been offering shipboard jobs to thousand of US citizens (Cf. Report titled: Maritime Industry: Cargo Preference Laws- Estimated Cost and Effects at http:ntt.gov/ntc/docs/rc9543.html as in Asoluka; 2003. p.79).
Nigeria also has in her laws some form of cargo support programme which provided for the sharing of all cargoes among, and the reservation of public sector cargoes for carriage by its designated “national carriers” (Cf. section 9,5(i). 14 and 18 of the National shipping policy Act Cap 279 Laws of the Federation of Nigeria) although the Act seems to give the impression that cargo sharing and cargo reservation are for the benefit of only Nigerian shipping companies engaged in international deep-sea shipping and not applicable to cargo and Nigerian shipping companies on the Nigerian coastal or inland waterways which are routes that cabotage is concerned with. The cargo sharing/allocation policy enshrined in the Cap 279 was suspended in 1999. There are strong views by the stakeholders that it should be revisited, restored and effectively applied and monitored to eliminate fraudulent and sharp corrupt practices that were associated with its previous application and which led to its suspension (Asoluka 2003, P.79).
2.4.1 Impact of Cargo Support on Domestic Waterborne Transportation
Being a “shipping” nation interested in developing its coastal and inland waterways trade and its maritime industry (for the benefit of its nationals) and in having enough vessels to carry the cargo in its domestic routes, Nigeria needs to embark on proper and well implemented cabotage services that can be used to provide and increase the cargo support given to indigenous shipowners and operators. Nigeria would also need to attract new investors into the acquisition of coastal ships, thereby increasing the national tonnage. Lending and financial institutions should be interested in financing the acquisition of vessels to be procured by indigenous ship-operators, which ultimately will lead to the expansion of the national fleet.
Cargo is attracted by the presence of efficient, time and cost saving services such as repackaging, assembling, manufacturing, and financial and port services. The availability of cargo passengers to sustain their business makes domestic shipping companies attractive for credit facilities that could be used for fleet and business expansion. These could also attract more investors into the domestic shipping business. Insurance companies will need to insure cargo, vessels and seafarers. Banks will be needed to finance the building and acquisition of coastal vessels while the Nigeria shipyards and dry-docks will have greater patronage in building and repair of ships.
The construction industry would also benefit from the construction, expansion and repairs of ports and dredging of the inland waterways just as those in information technology systems will have to supply and maintain the marine radio communications and radar system for safe coastal navigation. Freight forwarders, shipping agencies, shipping consultant and those supplying services needed in the coastal and inland shipping business will benefit from a regulated cabotage legal regime in Nigeria. This implied multiplier effect of maritime cabotage will induce maritime competency and increased economic activities in maritime industry.
2.4.2 Uses of Cabtoage Policy in Enhancing Cargo Support for Indigenous Carriers.
2.4.2i Exclusion of foreign carriers from domestic shipping:- Since by virtue of laws, foreigners and their vessels will be barred from coastal trading, shipping in Nigeria or at least be limited to only the area where Nigerians do not have the needed special vessels to operate Tt means that cargo especially, petroleum oil (both crude and refined), the carriage of which is being dominated or controlled by foreigners and foreign vessels, will be reserved and available for lifting by Nigerian built or Nigerian owned vessels only. This will keep them going in business; for as long as there are sufficient cargo to be carried would be undertaken by Nigerian investors thereby promoting indigenous participation in waterborne cargo business and increasing the national fleet.
This is the major connection between the use of cabotage as a tool for the enhancement of cargo services (as part of the cargo support programme) and indigenous maritime capacity enhancement as part of indigenous vessels expansion and acquisition programme, leading to the expansion of national tonnage. The starting point in cabotage services as a means of cargo support is therefore to reserve the lucrative carriage of crude oil and refined petroleum products and gas, the volume of which is very high, an addition to other cargoes from port to port in Nigeria to only Nigerian-owned or Nigerian built vessels.
It is also noteworthy that the cargo which will be propped up for carriage by indigenous ship owners and shipping companies through the application of the cabotage principle will be in addition to the cargo meant for carriage by indigenous shipowners and companies on international sea routes. Cabotage is thus a means of cargo reservation for indigenous shipping companies under a cargo support programme.
2.4.2ii Extension of Area Covered by Cabotage Policy from Territorial Sea to the Exclusive Economic Zone:- Another way of using cabotage for enhancing cargo support is by extending the sea within which the cabotage law would be applicable from the limits of the Nigerian territorial waters which is 12 nautical miles from the baseline (Cf. the Nigerian Territorial Water Amendment Decree of 1998) to a point or place on the high seas within the Exclusive Economic Zone, which is 200 nautical miles from the baselines (Cf. “The Exclusive Economic Zone Act 1978) and the continental shelf. This will bring about the reservation of all economic activities including fishing and cruising within the exclusive economic zone to Nigerians. In order to fight the presence of numerous foreign fishing fleets along the Pacific coast of Japanese offshore grounds, the Japanese Government extended its territorial waters from three to twelve nautical miles and in 1977 set up a 200-mile fishery zone around its coast which it reserved for its national except the Koreans and Chinese (Cf. “formulation of Japans ocean policy” by Hideo Takabayashi, Emeritus professor of Kyushu’s University (1994) p.5) (as in M.I Igbokwe in Asoluka 2003, p,81).
The problem of technical know-how or the special vessels needed by Nigerians to provide the shipping services required in such activities in the area would be overcome by the granting of temporary license to foreign ship owners or to Nigerians to charter the right foreign vessels; to provide the shipping services required, thus, the carriage of off-shore installations, platforms, passengers and the needed transportation in offshore oil and gas operations up-to the continental shelf and within 200 nautical miles from the baselines and perhaps carriage of all seabed mineral resources on the continental shelf, will be reserved for indigenous maritime vessels and thus enhance indigenous maritime capacity

(iii) Extension of Cabotage Law to Non-transportation OffShore Commercial Activities: - The off-shore oil and gas industry in Nigeria, like elsewhere, is a major marine activity using mobile drilling rigs, production platforms and facilities, supply vessels, tugs and other support vessels, seismic vessels and various barges, for pipe laying, launching and structure. However, other vessels involved in non-transportation activities in the off-shore oil industry such as drilling rigs, seismic vessels anchor handling vessels, cranes, barges and production platforms may not be subject to cabotage if they do not engage in carriage of goods and passengers from point to point on the coasts. Thus, by both the zonal approach of adding carriage routes or points of origin and destination not previously included under cabotage and functional approach of including other non-transportation commercial activities under cabotage by reserving them for Nigerian shipping companies, the cargo support programme would be enhanced and beneficially implemented in favour of Nigerian shipping companies.
2.4.2ai External Threats to Usage of Cabotage for Cargo Support and Indigenous Vessels Expansion and Acquisition Programmes:-
i. Regional Cabotage: Members of the Organization of African Unity (now African Union (AU)) had on 2nd June, 1991 in Abuja signed the treaty setting up the African Economic Community and with Nigeria’s ratification on 26th May, 2000 of the Consultative Act of African Union, the African Union came into being on 26ht May, 2001.
Estabilishment of regional cabotage or short sea shipping, probably under the auspices of ECOWAS in view of the present effort at economic integration and collaboration in West Africa and Africa or its encouragement by the Federal Government because of its being seen as an important development strategy, adversely affect the cargo support programme and the quantum of cargo available for carriage by Nigerian shipping companies and ship owners.
Regional cabotage for West Africa is now possible because of the enabling signals and signs including those received at the mini-summit of ECOWAS Head of state and Government held in March, 2000 in Abuja, Nigeria.
Since ECOWAS has set up other workable (though not without its problems and costs) cooperative and integrative peace monitoring machinery for peace keeping and peace enforcement in West Africa called the ECOMOG, a Common Currency Unit through WACU (West African Common Currency), law-making and dispute adjudication through ECOWAS parliament and ECOWAS Court of Justice, Cooperation on Port State Control in West and Central African Region vide the Memorandum of Understanding on it signed in Abuja in October, 1999, apart from other private-sector driven collaborative actions on air transport (ECO-AIR) a regional airline which has started recruiting staff and maritime transport (ECOMARINE), a regional coastal shipping line in the process of development, banking (ECOBANK of NIGERIA PLC) created by chambers of commerce in West Africa, the ability of ECOWAS to facilitate the development and growth of or establish the machinery for organizing and implementing a regional cabotage in West Africa, in the nearest future, using its Specialized Commission on Transport, Communications and Energy should not be underrated.
At the mini-summit, ECOWAS adopted a programme of action in respect of maritime transport requiring member states to designate specialized port terminals for dedicated coastal shipping services harmonizes and update their shipping laws aimed at promoting the liberalization of maritime services between countries, and that maritime agencies of the member states should form themselves into a committee which should meet within three months thereof to examine the studies and other issues relating to the establishment of the coastal shipping line (Cf. Articles13 of the Final Communique dated 27th March 2000 of the ECOWAS Mini-Summit Heads of State and Government on the creation of a borderless ECOWAS held in Abuja at the invitation of Nigerian President, Chief Olusegun Obasanjo within the context of accelerating the regional integration process in West African (Asoluka; 2003. p.83).
2.4.2aii Hasten West African Regional, Economic and Political Integration and Cooperation:-
The other argument often put forward in support of regional cabotage is that it will hasten West African regional, economic and political integration and cooperation and at the same time facilitate the establishment of the Pan-Africanist African Union in 2001. Regional integration (statewide cooperation) would lead to the dismantling of borders and lead to larger, more homogenous and integrated markets, improved commercial terms and opportunity for further development, market expansion and political cohesion in the region. The expansion of a regional economy under a free trade it has been argued, trends to reduce the complexity of trade patterns thus, helping to proceed to the next step of a larger regional market of a world-wide integrated transport market. This, it is believed, will generate trade between state and regions that are isolated today due to different regulatory and logistic approaches and this is in line with current trends of collaboration and partnerships in maritime trade among maritime nations. It is, however, not certain whether these decisions have been or are being implemented and whether the countries’ maritime agencies met within three months of the final communique. But should ECOWAS or its members implement the decision or develop a regulatory framework for regional cabotage as an influential member of the ECOWAS will run counter to the Nigerian cabotage as a tool for cargo support and indigenous fleet acquisition and expansion. Domestic interests cannot, in regional cabotage, interrupt or interfere with or restrict through diccriminatory measures, access of other West African state-owned or operated vessel and crews to shipping markets of other West African states, including Nigeria.
Regional cabotage is also said to be capable of inducing innovations and investments in regional shipping services and growth and that if West African States cannot and are yet to afford a high fleet/tonnage in sea going vessels to control shipping trade between West Africa and the rest of the world notwithstanding the UNCTAD 40:40:20 principle. At least, they can pride themselves in starting deep sea shipping from the experience gained from the development and growth of an ECOWAS cabotage (“ECO-CABOTAGE”) fleet which they can use for the control of waterborne commerce on the West African coasts and inland waterways, thereby becoming a regional maritime economic power in the African Continent.

2.4.2b Bilateral and multilateral agreement:-
There may also be protocol by ECOWAS to which Nigeria is a signatory allowing free and unrestricted movement of goods services and vessels within member state territories including their coastal waters. A case in point is that of the Maritime Organization of West and Central African (MOWCA). Following two World Bank/MOWCA round tables on efficiency of shipping services held in Cotonou in 1992 and 1997, MOWCA adopted a resolution approving proposal on liberalization and competitiveness of the sub-region’s maritime transport services and adopted programme to implement those policies including the encouragement of West Africa’s private sector participation in ship operation, particularly in coastal shipping by way of ownership/ chartering of tonnage and forging cooperation/partnerships between regional operators and foreign shipping companies operation in the sub-region in accordance with the African maritime charter and African Economic Community (Cf. “MOWCA: 26 year of Bridge Building” in the maritime Quarterly of June 2001, P.7).
Therefore, if there are in existence such bilateral or multilateral agreements or treaties between Nigeria and other countries in or outside West and Central Africa on joint exploitation of marine resources that permit other nation’s vessels and citizens to carry out business (including fishing) within Nigerian coastal water (since municipal law which cabotage law is, cannot override international law or conventions and there could arise conflict when such treaties are domesticated as municipal (laws in Nigeria), cabotage policy would be made unworkable because Nigeria can only reserve its coastal trade for its own vessels, crewed by its nationals to the exclusion of foreign vessels if there is no treaty which it had signed to the contrary. If there exist such treaties, unless Nigeria renounce or withdraws from them, the Nigerian cabotage law could be in conflict with her obligation to honour its international agreement
2.4.2c World Trade Organization (WTO):-
As at 1998, the World Trade Organization (WTO) had 132 members including Nigeria, 98 of which are developing countries, 27 of which are categorized as least developed countries (LDCS) with another 31 in the process of accession. WTO is the organization set up out of Uruguay Round of General Agreement on Tariff and Trade negotiation in 1995 and which, as the successor to the General Agreement on Tariffs and Trade (GATT), was to interalia regulate trade and tariffs worldwide and settle trade disputes among members. There was a framework which provided annexes of the more important areas such as the General Agreement on Trade in Services (GATS) and the Agreement on Trade Related Intellectual Property Rights (TRIP) which were a part of the text.
GATS has two parts, the short framework agreement which is substantially similar to the GATT and the schedules of national commitments which members have undertaken and which form a part of the Agreement in the same way that tariffs are part of the GATT. However, in GATS, governments freely choose which services to include in their schedules and, in the committed sectors they are free to maintain limitations on the degree of market access and national treatment they are prepared to guarantee. Therefore, negotiation for further liberalization will involve negotiators pressing their partners to include more sectors in their schedules and to remove some of the limitations they still maintain.
The Agreement provides for every means by which services can be traded and supplied and is not limited to cross-border trade as with GATT, but also consumption abroad, which means the freedom of shippers to use foreign transport providers, the right set up any type of business to supply the services in the export market (establishment trade), and the temporary movement abroad of individuals to provide a service, all of which show that GATS is also concerned with foreign direct investment (Cf. Paper presented by David Harbridge, Director WTO at the XXVIIth IRU World Congress & Exhibition, titled “Mobility of People and Goods 2001 New Round of Negotiation , 2003, pp.86-87).
There were also several annexes prescribing treaty rights and duties of contracting parties. Dispute resolution mechanisms were established, generally and specifically, for key areas like GATS and TRIP The Dispute mechanism is such that decisions are reached by “consensus”, that is, where no member present at a meeting where the decision is to be taken raises an objection to the proposed decision, no vote of contracting members is taken. If mediation, consultation or conciliation do not resolve a dispute, a complaint panel of trade experts to report to the contracting parties will be raised to look into the matters.
In this regard, it will be necessary to look into any commitments which Nigeria may have made during the negotiations regarding market access for maritime services before they were suspended in 1996 till 2000 to see whether they concern freedom of shippers to use such services or are such as are opposed to the cabotage policy and would warrant sanctions from WTO in the nearest future if cabotage policy were instituted by Nigeria. This is because the negotiation were suspended in 1996 principally because the US was reluctant to open up access to its domestic maritime transport services which is heavily subsidized and protected against foreign entrance, but liberalization and opening up of such markets in the nearest future can not be ruled out. Moreover, since the exclusion and suspension on maritime transport and the failure of the WTO ministerial council in Seattle, USA in 2000, cabotage principles have not been decided by WTO as anti-competition and anti-free trade.
Even though WTO has started a new round of negotiations on trade in services (GATS-General Agreement on Trade in Services) through negotiations of domestic regulations, subsidies, government procurement of services and emergency safeguard measures, and for government to allow the provision of services in their market by foreign suppliers (“New Round of Negotiations on Trade and Services in the World Trade Organization” by David Haritridge, Director WTO), the liberalization or removal of any or some of the limitations already imposed by any country .may only be achieved through negotiations between the country and its business partners. For instance, at US insistence and despite other countries objections, the Jones Act was exempted from General Agreement on Tariffs and Trade on the grounds that the Jone Act applied only to domestic trade and had been in existence 27 years before the coming into effect of GATT. Free market and competition or liberalization should therefore not be a deterring factor to Nigerian cabotage.
2.4.2d Economic Project:-
In the same vein, the West and Central African private sector initiative has set up a sub regional coastal shipping company called ECOMARINE in 2000 to carry and deliver cargo to and from countries of the West and Central African Sub-region though targeted at economic integration of the region, is also a project which will damage, if not make impossible, the realization of a Nigerian cabotage regime and the attendant usage of it as a tool for cargo support and indigenous vessels acquisition and expansion progamme. On the other hand if the Nigerian cabotage regime is in place it will make it impossible for the ECOMARINE project to operate from port to port in Nigeria without making a stop in a foreign country although it would not be stopped from delivering cargo at, and carry cargo from, a port in Nigeria and to and from outside Nigeria and from outside Nigerian waters nor limits the operation for the cabotage regime. They are therefore completely opposed to one another such that the promotion of one is the discouragement of the other. At the end of the day, the better and more national and economic interest served by any of them should determine which is to be supplied.
2.4.2e Free Marketism:-
Since the cabotage law is seen as protectionism or a policy in favour of domestic shipping which is also meant to retain the construction and/or ownership, crewing and operation of the vessels involved in Nigerian hands, it can be said to run counter to the present international trends of globalization, trade liberalization and deregulation. Transportation is one of the four corner stones of globalization, the other three being telecommunication, trade liberalization, and computer technology.
Due to trade liberalization, governments and regional communities try to promote the trade through improved and less expensive transport services and are now becoming reluctant to prevent national and domestic maritime industries from foreign participation. Free Marketers therefore argue that a cabotage law is against the principles of free trade and that it restricts and hinder free maritime trade between countries, because of its restrictive elements; whereas deregulation forces encourage removal of government restrictions on participation in trade to allow the operation of market forces in maritime trade.
It is also argued that there is no need for strict application and enforcement of cabotage law, but at best there should only be a set of relaxed or liberalized cabotage law allowing some elements of foreign participation, if the passing of cabotage law will not be suspended altogether especially now that the Nigerian economy is in need of foreign investment. Some powerful foreign ship owners, for example, Maersk have been kicking against the promulgation of a Nigerian cabotage law on the basis that it will work against the Nigerian port being made a loading center in the region.
2.4.2f Competitive Forces:-
The position of competitive forces is that the introduction of cabotage law and policy in Nigeria will encourage and entrench indigenous monopolists in coastal and inland waterways trade, protected from foreign competition, thereby, stifling foreign competition.It is further argued that the stifling of foreign competition through restriction of coastwise trade to Nigeria with the enforcement of a cabotage law, will induce mismanagement, incompetent management, un-competitive high freight rates for inefficiency and inadequacy, low quality services by Nigerian shipowners and operators.
The Nigerian shipowners and operators will do so believing that the shippers and passenger have no (foreign) alternative carriers to patronize if they are not satisfied with their services. In that case, the passengers and shippers will be worse for it because delays, losses and damages to cargoes, innovation, modernization and high freight will be taken for granted by the monopolist indigenous carriers.
It is also argued that, if Nigerian carriers are allowed to compete with their foreign counter-parts in coastwise trade through non-introduction of cabotage law or non-exclusion of foreign ships from cabotage, coastal shipping will be more competitive and the Nigerian ship operators will work hard, become more efficient and improve their services, thus the shippers/passengers will have the freedom of choice from various carriers, cheap freights rate, shippers’ accessibility to those carriers with cheaper freight charges, qualitative and efficient services, quick delivery scheduled and regular schedules departure and arrivals while benefiting from the shipping companies’ innovation and modernization (Asoluka 2003 pp.88-89).
Competitive forces further argue that technological development in and growth of the domestic coastwise trading industry will be stunted because international competition which is in line with deregulation and free trade operation of market forces are being shut out by cabotage laws.
It is argued that, as a result of high shipping cost caused by the Jones Act restrictions in the US, it is often cheaper for US livestock producers to import feeds from Canada than to produce it in the US whilst Alaskan Loggers find it less expensive to export wood to Asia than to the continental US, and that high shipping cost has crippled the Hawaiian cattle market. (Cf. A Paper titled “Lobbying and Law: Don’t give up the ship” by Shawn Zeller, Published in the National Journal of 01:02 & 08:99 page 53) (As in Asoluka, 2003, P.89).
Consequently, it is argued that it may be necessary to weigh the benefits of protection through cabotage with the cost of producing the protection including negative external effects in order to achieve a situation where protectionism does not increase costs or distort growth in other sectors. It is argued that the returns from the growing industry must be high enough to off set the higher cost of its protection in order to warrant such protection. It is therefore, always necessary to set a time frame for the duration of the protection offered the growing domestic shipping industry within which it is removed, so as to minimize the cost of protection.
Absolute protection through cabotage law without some element of competition could be against the interest of shippers and actually dangerous and counter-productive. Conversely, liberalization encourages free competition and less government intervention and operation of free market forces where marginal utility will equal marginal cost, and in the long-run, minimize average total cost, thereby affording end-users reasonable prices and efficient services. Thus, it removes inefficient and uncompetitive players in the market and mis-allocation of resources to unproductive sectors.

The arguments in favour of free market and competition should however not be allowed to prevent a Nigerian cabotage law from coming into existence. It has been argued that globalization does not automatically produce universal benefits and there are negative consequences of blind promotion of market principles over safety and environmental standards, seafarers’ jobs are lost and their rights are denied or erased (Cf. TTD IN ACTION: Transportation Workers and Globalization). It has also been argued that deregulation, in the sense of reducing or eliminating government economic regulation in an industry, has nothing to do with opening competition in the affected industry to foreign companies operating under different rules from Nigerian companies in the industry.
Having a Nigerian cabotage law does not suggest that the world economy would be shut-out completely from the Nigerian maritime industry since foreign ships can still bring into and take away from Nigerian ports cargo and passengers and are only disallowed from transporting cargo from port to port within Nigeria. Nigerian policymakers responsible for international trade and the maritime industry should also be concerned with the interest of Nigerian ship owners, operators, seafarers, shipyards and the building of a domestic fleet for the control of maritime trade which a cabotage law will produce. The danger of relying on foreign vessels or shipping companies controlled or owned by foreign companies/interests in times of emergency, national or regional crisis, makes a strong case for a Nigerian tonnage.
However, the strongest reasons for not allowing globalization and competitive forces to prevent the Nigerian cabotage law from coming into existence are that, many of the countries in the forefront of globalization and competition have their versions of cabotage laws and because of its numerous benefits to those countries, Nigerian law makers and policy makers should not shy away from making a Nigerian cabotage law just because of globalization, political and competitive forces and interests. The promulgation of a Nigerian cabotage law will ensure the development of the local shipping industry (Asoluka 2003 pp. 89 - 90).

2.4.3 Cabotage and Indigenous Maritime Capacity Enhancement Rationale
The rationale behind indigenous capacity enhancement is usually to create an enabling environment that gives necessary assistance and incentives in order to empower and position indigenous carriers to be able to acquire more vessels and compete fairly with foreigners or among themselves in the carriage of cargo internationally or domestically.

2.5 IMPACT OF CABOTAGE BUSINESS ON THE NATION’S ECONOMY
Increased National Tonnage and Capacity Building and Utilization: - Restricting domestic waterborne trade to only Nigerian-built and for Nigerian owned vessels by virtue of the application of a Nigerian maritime cabotage law is capable of attracting new and higher investments in the domestic shipping sector, thereby leading to the growth, development and full capacity utilization of Nigerian shipyards and dry dockyards. A lot of private shipping companies will arise in response to opportunities that will be created by a cabotage policy and foster the growth of a national tonnage. This was part of the Malaysian experience which increased its national tonnage, after the implementation of its cabotage policy in 1980 (Cf. Growth and Development of Malaysian Merchant Fleet, Malaysian Maritime Year Book 2000/2001, page 24 published by the Malaysian Ship Owners Association) (as in Asoluka 2003 p.91).
Malaysian coastal fleet which has grown to a choice of modern fleet of about 900 vessels of 210 general cargo ships of 386,000 GRT; 63 Chemical Tankers of 467,000 GRT and 16 Container ships of 76,000 GRT, with about 1.4 million GRT, compared with about 500,000 GRT, in 1990, has a strong presence in the cabotage trade between ports in Peninsula Malaysia and the East Malaysian State of Sawarak. Many of the cabotage induced Nigerian shipping companies could emerge into strong coastal companies engaging in international shipping too.
Many entrants into the industry shall translate to an increased tonnage in domestic shipping, increased patronage by a large number of Nigerian shipping companies which will need to have their coastal ships built or repaired in Nigeria for quicker supplies, repairs and conservation of foreign earnings. Even when in a liberalized cabotage regime, foreign ships are allowed to participate in the Nigerian domestic shipping where Nigerian vessels are not available or on the condition that their vessels used in Nigerian domestic shipping must be built and or repaired by Nigerian shipyards there are bound to be increased capacity utilization for the shipyards. If properly equipped to do so, the shipyards could be building new domestic trade vessels eg. tankers, bulk carriers, tugs, barges, container ships roll-on-roll off vessels, ferries, cruisers and dredging vessels, to meet indigenous needs of increased available cargo and, so, the shipyard will have enough demands to attain their full capacity utilization which, in turn would boost their present capacities.
The increased need to build, repair and maintain the Nigerian built and owned vessels in Nigerian shipyard and dry dockyards will develop and enhance indigenous capacity in shipbuilding and repair and in turn lead to more business and revenue for the Nigerian shipyards and government. The peace of mind they will get in not having to bother about sending their vessels abroad for every little repair would encourage Nigerian ship owners and shipping companies to acquire more vessels thereby increasing national tonnage.
Protection of National interest: - Increased national tonnage protects the Nigerian national interest, namely: economy, strategy and defense. Many maritime countries give various subsidies to their shipping companies and ship owners in order to facilitate their ability to compete with other maritime nations in waterborne trade. For instance, in the US the Operating Differential Subsidy (ODS) where subsidy is based on the difference between the fair and reasonable cost of insurance, maintenance and repairs not compensated by insurance, wages of officers and crews, and the estimated costs of the same items, if the vessels were operated under foreign registry, is granted to US ship operator to place their ship’s operating costs at parity with foreign competitors.
There is also the US Federal Ship Financing Guarantee Programmme (FSFGP) under the Merchant Marine Act 1936 where US-flagged vessel operators are assisted in procuring private-long term financing at favourable interest rates to build ships in US shipyard for domestic and foreign trade and the repayment or non-payment of which is guaranteed and insured by the US government. Apart from the reservation of national cargo transportation in international trade for only US ships through the Cargo Preference Act of 1940, there is the US Capital Construction Fund (CCF) Programme under the Merchant Marine Act of 1970 for assisting operators in accumulating capital to build, acquire and reconstruct ships through deferral of Federal Income Taxes on certain deposits (eg. from vessels operation proceeds from the sale or loss of ships and ships’ depreciation).
The US shipping industry also has the experience and managerial skill in ship operation borne out of many years of existence of its maritime industry. When such highly subsidized foreign merchant fleet trade in the Nigerian coastal and inland waterway along with Nigerian coastal ships, whose owners are not supported by such subsidies, the Nigerian coastal ships, will be placed in an unfair position to compete. However, what a cabotage law will achieve as it has been promulgated and implemented in Nigeria is that it will protect Nigerian coastal shipowners, operators and coastal trade from foreign participation, competition, and domination, since the cabotage will be restricted to only ships that are Nigerian built and or owned and crewed. That way, it will enhance continued domestic economic growth and development and keep domestic shipping jobs in Nigerian hands. It is therefore in national interest. Good enough the National Shipping Policy Act allows the NMA to make renunciations to the Federal Government in respect of ownership structure of vessels and other facilities for off-shore support services (Cf. section 15 cap, 279 as in Asoluka 2003; p 93).
In the area of strategy, defence or security, banning foreign vessels from coastal and inland water trade will mean the exclusion from our coast those foreign vessels that may be used for or involved in espionage against the nations internal security and defence from doing so. The development and growth of high domestic fleets to meet the extra business available due to the exclusion of foreign participation will make available a ready and able fleet for the use of the Nigerian Armed Forces, especially the Navy, in times of conflicts or national emergency. Nigeria which has been playing a major role in peace keeping /maintenance and peace enforcement in Sierra-Leone and other West African countries through ECOMOG under the auspices of ECOWAS can then have the waterborne transportation needs of the Armed Forces, especially the Navy, met for quick development of Military personnel equipments and supplies in times of emergency or crisis in the West African sub-region. Due to an available reasonable pool of vessels and seafarers which the Armed Forces can rely on and make use of, the Nigerian Army may no longer have to rely on foreign vessels or countries to achieve their aims especially when in times of national emergency or crises, foreign ships will not be willing to come to Nigerian coasts. Moreover, reliance on foreign ships or countries during such times may also jeopardize Nigeria’s national security.
The Nigerian cabotage fleet will also really give the Nigerian Army, especially the Navy, access to Nigerian ports and inland waterways and provide mobilization crew for government ship. For instance, the domestic vessels operating under Australian cabotage laws recently crewed for the intervention forces in the East Timor crisis. In the US, the Jones Act fleet also contributed immensely to her military needs in the transportation of military personnel and equipments to the Middle East during the Gulf war of 1990-1991 and during the Bosnian operation of 1995. Whereas Britain that lacked a cabotage regime relied on the US cabotage vessels in carrying its military equipments to and from the Gulf during the Gulf war.
Therefore, the Nigerian cabotage fleet can also be available for similar purpose to supplement the naval and national fleet. This would save our military the enormous cost of purchasing and manning such vessels in times of peace and conserve budgetary allocation that would have been spent on such purposes, for application to other sectors of the Nigerian economy.
Enhanced Training and Evolution: - Cabotage is also capable of enhancing indigenous maritime capacity by igniting the flame of education, training and employment of Nigerian seafarers, ship operators and ship managers since the ships to be used in domestic shipping would be Nigerian-built or Nigerian owned, crewed and operated. Presently in the US, about 124,000 persons are on jobs directly related to its cabotage, including 20,000 workers in the shipyards and 14,000 repairing and maintaining the fleet. The building and maintenance of more modern coastal vessels for transportation of cargo and passengers will induce the need to employ more Nigerian seafarers/seamen, masterS, engineers, managers etc., to cope with the high demand of ships’ masters and crew and also the employment of more Nigerian workers to cope with shipbuilding and repairs and ship maintenance which meet high international standards. The seafarers’ exposure and experience in shipping and training will be enhanced whilst the workers in shipyards will be exposed to modern shipbuilding and ship repair technology. This will enhance the training and accumulated experience of Nigerian seafarers and bridge the gap between the old, experienced Nigerian Seafarers who are fast dying out and the young inexperienced ones who are roaming the streets without employment and experience. The situation will also be facilitated by the recent “White Listing” of Nigeria by the IMO under the STCW 1978/95 (Asoluka 2003, p.94).
Moreover, maritime and transport training school will have to be upgraded and equipped with adequate training facilities and courses in order to properly train and expose the seafarers into man and run the increased tonnage. Nigerian ship owners and shipping companies will be willing to invest more in shipping knowing fully well that the Nigerian seafarers will be employed to run and operate the vessels (since cabotage insists that the vessels should be manned and operated by the nationals only), are readily available. The cabotage principle has been found to provide national training opportunities for seafarers at home and can therefore make both the nation and Nigerian seafarers avoid having to depend on training policies of foreign shiponwers and manning agents. Such training is also advantageous in that whilst meeting international standards of competency, it can be tailored to meet our local needs in inland waterways and domestic port, bearing in mind crew members’ standard certification under the relevant convention on certification of seafarers. The Maritime academy, Oron and the Nigerian Institute of Transport Technology, Zaria and other maritime institutions will be useful in the training of the seafarers and workers required in domestic shipping.
The International Transportation Workers Federation (ITF) supports cabotage laws as a means of a nation to secure long-term sustainability and fair distribution of employment to seafarers and as a valid method of eliminating unfair competition in what is essentially a domestic transport services along the same line as road, rail or air transport. Consequently, in its report (Cf. ITF Maritime Department Policies; From Oslo to Delhi Document, 1998 chapter five, Cabotage and Regional Standards”), the ITF states inter alia that:-
111. In many countries where the national fleet has virtually disappeared the distribution of cabotage arrangement represents the main, and sometimes the only serious possibility remaining for local seafarers to secure employment.
112. In the main labour supply countries, the bulk of seagoing personnel are employed on board foreign flag vessels and to these countries the need for cabotage might, at first sight, not be obvious, although even here it can have significant advantages; Cabotage provides national training possibilities which can avoid Seafarers having to rely on training polices of foreign owners and/or manning agents; Cabotage also provides jobs, for seafarers who, for various reasons (age, family etc,), need to work closer to home; and cabotage retains an employment base not dependent on the whim of employers in the international shipping industry who may decide to change crew nationality with little notice.
The prominence is (by the researcher) for emphasis because Nigeria is one of the countries whose national fleets have disappeared and whose seafarers would benefit from cabotage laws. In the US, for instance, the domestic merchant fleet creates 87 percent of the entire seafarers’ employment and touches the US economy in every region. Nigerian cabotage laws can similarly impact its economy through indigenous maritime capacity enhancement under the programme of indigenous vessels expansion and acquisition.
Growth of Nigeria-Only Fleet:- Due to the fact that the Nigerian cabotage law will limit domestic waterborne trade to Nigerian owned, crewed and operated ships, such a law will bring about the establishment of a Nigeria-only ownership and control over the domestic fleet, domestic marine transportation system and the national maritime infrastructure. A developed and grown cabotage-induced indigenous fleet/tonnage is seen as an appropriate entry point to international shipping for Nigerian shipping companies and this will prepare them well for competition with foreign ship owners in deep sea shipping.
Since water transportation is a key aspect of the Nigerian economy, it will allow Nigerians to own, control, and retain the ownership and control of the operation of such a key sector of the Nigerian economy thus, eliminating foreign control, domination and competition. It will also prevent avoidable damage to the Nigerian economy through foreign manipulation. It is instructive to note that even the US actualized and retains the ownership and control of its citizens through the Jones Act, and other promotional incentives such as the operating Differential Subsidy (ODS) and the Capital Construction Fund (CCF) referred to.
Employment Opportunities: - Moreover, more Nigerians are becoming employed in jobs that are directly related to the domestic shipping industry in order to provide the materials required in the dockyards and shipyards and supply the needs of the shipbuilding and maintenance industry. The third world-low paid foreign crew will also be prevented from depriving Nigerian seafarers of opportunity in domestic shipping as a result of a cargo support leading to indigenous expansion and acquisition of tonnage which will increase indigenous participation in Nigerian coastal shipping business. There will be less dependence on foreign vessels, and Nigeria will be on its way to becoming at least a medium maritime nation able to compete in international sea-borne trade with other maritime nations.
Improvement of Balance of Payment: - Since the cabotage law would restrict coastal shipping to Nigerian-built and Nigerian owned ships, through building and maintaining a substantial part, if not all, vessels engaged in coastal shipping in Nigerian shipyard and dry dockyards, the foreign exchange which otherwise would have been used to purchase and repair ships abroad by Nigerians will now be conserved.
The freight and insurance which would have been paid foreigners would now be earned and paid to Nigerians, thus improving the balance of payment situation of the country. Consequently, capital flight would be reduced if not stopped and foreign exchange would be conserved and earned within the country. These are some of the main rationale behind the development of national tonnage through cabotage by Malaysia. This has led, in the past 25 years, to the growth of the national fleet from about 400,000 GRT to about 6.60 million GRT in 1999. The most dramatic period of growth being after 1980 as a result of the implementation of the cabotage policy (Cf. “Growth and Development of Malaysian Merchant Fleet” published in the Malaysian Maritime Year Book 2000/2001 page 23) (As in Asoluka, 2003, P.97). The conserved foreign exchange earning can then be channeled towards the development of shipping and currently other socio-economic infrastructure and the reduction of the national debt put at US $28.64 billion by the debt management office (Asoluka 2003; P.97).
Fair Competition: - It is also important to mention that another reasons why cabotage will enhance indigenous maritime capacity, improve the national economy, and induce fleet expansion and acquisition is that since Nigerian cabotage laws will bring about the reservation of Nigerian domestic waterborne trade for Nigerian owned, built, crewed and operated ships, all the participants in such trade will be subject to the same laws and rules. This would be so, especially in the areas of taxation, labour, seaman’s wages, shipping safety and environmental protection laws. Where government subsidies and incentive are available, the Nigerian operators and ship owners will have equal access to and use same. This will eliminate the present unfair competition between the highly subsidized foreign ships, some of which are involved in their carter liner shipping and alliances with larger ships. These are not subject to federal or state taxes whilst within Nigerian ports and are backed sometimes by better expertise, experience and managerial skills, while manned with low-paid foreign crew from South-East Asian or West African countries.
Nigerian shipping companies, some of which lack some expertise, experience and managerial skills and are subjected to taxes and presently, lack government subsidies, incentives or favourable ship acquisition loans, can not compete on a level playing field with such foreign companies. So by ensuring that all shipping companies operating in the domestic transportation field compete under similar constraints, benefits and responsibilities to their workers as well as regulatory bodies and the nation, Nigerian cabotage will put in place a level playing field for domestic shipping operators. This would produce a fair competition. Shippers would have more options and compare freight rates and could dump expensive, inefficient and slow coastal operators for the fast and efficient ones. Shipping companies with better and efficient services will have the highest patronage. Increased and increasing capacities lead to lower freight rates which will in turn bring about increasing capacity in order to bring down unit costs.
The fair competition (which can not exist where there is participation by highly subsidized foreign vessels exempted from certain taxes and regulators) will force the crews and shipping companies to improve their productivity and services and become more efficient and effective especially in cargo handling capacity and crew member productivity. The benefits of these will be delivered to the Nigerian coastal shipper or passenger. The increased productivity which adds to the gross national domestic product would be good for the economy and would increase the domestic fleet. It would also facilitate investment in shipbuilding, acquisition and operation because the cabotage trade will reasonably assure an intending shipowner/operator or investor in a Nigerian-built/owned ship of stability. No investor in the highly capital intensive shipping industry will be ready or attracted to invest in it if, within a short time thereafter, he would be forced to compete in the coastal trade with the lower-cost and/or highly subsidized foreign vessels. The ITF supported cabotage laws as a good way of removing unfair competition in a domestic service.
Environmental Protection: - The cabotage law will prevent sub-standard foreign (including flag of convenience) vessels known for low safety standard from trading in Nigerian coastal and inland waterways thereby, reducing the risk of marine causalties and hazards, pollution and degradation of the environment. This is because the Federal Government of Nigeria as part of its flag, coastal and port state controls can, through the appropriate authority indicated in the Coastal Act, ensure that before any Nigerian-owned or Nigerian-built ship is registered or licensed for coastwise trading, its inspection shows that it meets certain minimum international standards that will enhance safety and environmental protection in line with international maritime organization policy of safer shipping and cleaner oceans. This will be similar to the US coastwise trade vessels requirement, which bars vessels not filled with certain requirements from partaking in coastwise trade. Unless flag, port or coastal state controls are used, foreign ship below the international acceptable standards could easily cause mishap and environmental problems within the coastlines if allowed to partake in coastal and inland waterways shipping.
It is the submission of the researcher that, from the foregoing impact of cabotage on the nation’s economy, a national cargo support and indigenous ships acquisition and expansion by the means of cabotage policy is really defensible, achievable and maintainable for the purpose of promoting, encouraging and developing the nations economy vide indigenous participation in domestic water and sea-borne cargo carriage.

2.6 THE CHALLENGES OF THE CABOTAGE POLICY.
The indirect return of indigenous investment in shipping to Nigerians is a welcome idea. There are also significant indirect economic benefits, which stand to be realized through investment in shipping generally. These benefits may ultimately become manifest through the derived multiplier demands, which are created in association with the original shipping investments. Some of the shipping linked multi-pliers benefits include: the development of steel industry, the development of a viable bunker industry, the development of a victualling industry for the supply of ship stores, spared and provisions. From the forgoing therefore, it should be entirely and clearly to the impendent observer that from the economic perspective alone, there are very compelling strategic imperatives which derive the proposition for increased participation of indigenous operators in the business of shipping services production, whether considered in the context of coastal cabotage or internal trades.

If one now factors in the contemporary argument about the requirements to further safeguard national security through the ability to ensure the continuity of our trading commitments using Nigerian flagged vessel particularly in times of war, and the related strategic requirement to restrict the free access by foreign vessel into sensitive coastal facilities and locations, then the argument of a Nigerian flagged cabotage and deep sea fleet become even more compelling.

CHALLENGES.
By way of recapitulation, we can very categorically declare at this point that there is no doubting the nature of the enhanced business and economic opportunity, which is currently represented by the cabotage law currently in existence. These economic potentials can only be fully actualized through the process of effective implementation.

Having thus recognized and acknowledged the positive potentials of the cabotage regime, one is now constrained to examine the true extent to which we have become mobilized to expliot the considerable strategic opportunity, which is represented by the law force and the nature of the constraints which may stand in the way of its successful implementation.
There are clearly a number of challenges, which may make or mar the outcome of the current cabotage experiment.

Tonnage Availability Constraint: - A successful cabotage regime in Nigeria would essentially require to be conditioned on the availability of Nigerian-owned, registered and crewed vessels of the appropriate market role and description. Given that the main market vectors of the Nigerian cabotage trade consists in the operational requirements for tanker vessels as well as off-shore support craft, Nigerian shipping interests would invariably require to develop indigenous shipping fleet of the appropriate market role description and capacity in order to be properly positioned to take full advantage of the cabotage law. Ships however cost a lot of money to acquire and the source of funding would therefore need to be adequately addressed.

Financial Constraints: - Capital intensive is a generally acknowledged characteristic of shipping services production, whether considered in the context of international or coastal application. In the context of our current effort to optimize our cabotage potentials the point must be made regarding the need to provide adequate funding support for asset acquisition if the expected results are to be achieved.

Financing for Equity Participation:- Apart from the funding requirement for ship acquisition, it must be borne in mind that, given the apparent balance which currently exists between supply and demand factors in Nigeria’s coastal cabotage trade, some of the funds requirement for cabotage market entry may well be for the acquisition of equity interest in existing shipping business, rather than in the acquisition of additional physical assets which may subsequently be added to existing stocks. The problem of undercapitalization of Nigerian banks in relation to the high assets value required for vessel acquisition has been fully dissected in contemporary Nigerian shipping literature. The problem of an adverse interest rate regime in the Nigerian financial environment has also been fully elucidated and amplified.

Possible Sources of Funding: - In the light of the foregoing it would seem as if there is a need to make provision for a reliable source of funding for the vessels to be acquired under cabotage. Large sums of money are required in foreign currency and to be delivered to borrowers at a rate of interest, which would have to be competitive in relation to the cost of funds in the international finance centres. Nigerian banks certainty cannot afford to fund shipping investments with their shareholders funds for obvious reasons. One of the quickest ways to financially jumpstart the cabotage process in the current circumstances would be to press into use any funds which may be available under the operation of the historical SASBF.
Funds sourced from the international financial institutions by Nigerian banks acting on behalf of Nigerian operators may be subject to future refinement, become the preferred method of financing cabotage asset requirements.

Human Resources Constraints and Manpower Development Initiatives: - There is an urgent requirement to commence a programme of full time training of all cadres of maritime manpower, particularly of ship officers and engineers. The importance of shipping to Nigeria’s economy and the imperatives which dictate the need for greater indigenous participation in shipping production have been fully articulated. A national fleet cannot be established without a related programme for the training and certifications of the technical factors required to man and operate the vessels to be acquired under the cabotage regime.

Since the collapse of the NNSL, structured training of ships’ officers and engineers have virtually come to a standstill, leading to the development of huge and yawning gap between technical factor requirements and availability. Efforts and resources are required to be committed to the resumption of structured training. As Nigeria has recently attained membership of the IMO’s “White Listing”, an effort should be made to restructure MAN Oron’s curriculum to enable it train cadet from induction through to the issuance of seagoing certificate by the institution.

Corporate Capacity Constraints and Development Programme for Nigerian Shipping Companies:- Additional to the requirement to assist indigenous shipping companies to buy ships and to train Nigerian seafarers to STCW standards, it is believed that there is a need to facilitate the corporate training of existing Nigerian shipping management. This training can be done through the NMA seminars and workshops on relevant ship management topics. The availability of this corporate training assistance would facilitate a rapid shortening of the lead-time for the attainment of ship management proficiency whenever the opportunity of ship owning materializes for such companies.

Implementation and Enforcement: - However good a law may be if the implementation is not properly conceived then chances are that the full impact of its promulgation may not be fully realized. Implementation and enforcement of the Nigerian cabotage laws would require necessary co-operation between the Nigerian transport/shipping administrative authority and the real indigenous industry operators in fashioning out practical workable guidelines in regards to how the cabotage regime would best be administered. At the present time, it would seem that the necessary degree of co-operation between the administrative authorities and the real operators has not been of gaffes in respect of the administrative and enforcement efforts in cabotage. Currently, it would be fair to say that, there is very limited efforts to enforcement of the existing cabotage provisions, consequently, leaving the field wide open to continued exploitation by foreign flag vessels at the expense of local operators.

On the Guidelines for Cabotage Implementation: - Certain guidelines have been issued in relation to the cabotage law, which recently came into force. The guidelines have been issued ostensibly to clarify any areas in relation to the provision of the act and to facilitate ease of the legal interpretation and enforcement of the Acts. Regrettably, the guidelines issued have not achieved the desired effects and have in many cases actually created even greater difficulties with regards to how certain provisions in the law may be interpreted. For instance, the issue of the applicability of cabotage provision to trans-shipment cargoes was a totally unnecessary distraction, which was thrown up by the guidelines. Thankfully, the timely intervention of the Minister in setting the records straight on that issue put paid to what had threatened to develop into a long drawn out argument on the issue, given the Ministers welcome intervention in settling the matter of the trans-shipment issue, it is the industry expectation that for the sake of posterity, the written records should be quickly amended to reflect the correct position in order to avoid further misunderstanding on the matter in the future.

RE: 15-year Age Limit for Cabotage Vessels: - Another contentious challenge which was thrown up in the context of the provision of the cabotage Act is the matter of a 15-year age limit which was prescribed in the Act in respect of vessels trading within Nigerian cabotage limit. The insertion of this provision in the Act does not appear to be guided by any objective information, but simply by the subjective view of the legal drafters that a 15-year old vessel may be necessarily better appointed than say an older better maintained vessel. We observed that nothing in any rules anywhere prescribes an age limit for seagoing vessels provided that such vessels continue always to comply to existing rules with respect to compliance with all safety provisions including the conduct of periodic inspections, dry docking, surveys, certification etc, which are necessary to validate all shipboard statutory and trading certificates.

In this regard, one further observes that the specification of the 15-year age limit for vessels which may trade under the cabotage limits is not supported by the provisions of international law (SOLAS or indeed any other international convention) on the requirement for safety and seaworthiness of a vessel or for the issuance of any of the trading or statutory certificates which are required to be carried. Enforcement of the 15 – year age limit in Nigeria would create the embarrassing paradox wherein Nigerian owned and registered vessels which are over the 15 – year age limit, which conforms in all respects to the requirement for safety and seaworthiness including the possession of all necessary statutory and trading certificates and which are licensed for worldwide trading (including Nigerian territorial waters), can indeed trade to every corner of the earth, but not within its own coastal cabotage limits.

Enforcement of the 15 – year age limit in Nigeria’s cabotage trade would not only constrain the ability of Nigerian operators to enter the cabotage trade, it would also severely curtail the availability of tonnage in Nigeria’s coastal trade generally, as most vessels currently in trade in Nigeria’s international and coastal maritime trade, whether of Nigerian registry or otherwise, are over the 15 – year age limit proposed.

The Requirement That Nigerian Cabotage Vessels Are Built In Nigeria: -
Much as we would like to identify with any initiative which may be designed to facilitate the early industrialization of the national economy, we believe that we also need to be sufficiently pragrammatic to appreciate the fact that Nigeria does not currently possess any appreciable capacity for building ships and may indeed not develop this capacity for some time to come.

In the light of this fact, one believes that Nigerian Ship owning interests would be made to look decidedly foolish in a situation where they fought and succeeded in establishing a cabotage regime ostensibly in the protection of their corporate interests only to find themselves standing in the same queues as the foreign Ship owners, in respect of the requirement to obtain a waiver for the “built in Nigeria” conditionality. One believes that necessary amendments, such as the indefinite standing down of this provision should be considered.

Documentation Requirements to be Submitted by a Nigerian Ship for Placement on the Cabotage Register: - One believes that most of the documentary requirements specified are completely superfluous and unnecessary given that all vessels currently entered in Nigerian flag registry would ordinarily have submitted the very same set of documentation to the NMA, which is specified under the cabotage registration process. In approaching the issue of registration under cabotage, one believes that a proper distinction ought to be made between the process of statutory registering a vessel in a national flag register and the administrative process of entering vessel particulars in the cabotage register.

Whilst the process of statutory registration under the Nigerian flag register might call for the submission of the full inventory of the company and vessel statutory certificates for reference, the requirement for vessel registration under cabotage should be a more simplified process which does not involve the requirement to replicate all the documentation, including company and vessels statutory and trading certificates which may already pre-exist in the NMA’s archives, in respect of the particular Nigerian vessel seeking administrative placement in the Nigerian cabotage register. Finally there is no doubt at all that the cabotage law which was recently promulgated and is current force is a welcome development which if properly administered, would lead to the establishment of an indigenous Nigerian national fleet which would be maintained predominantly under private sector ownership.

The restrictive provisions of the Act provide a lucrative captive market, which should mitigate the ordinary cost of shipping market entry for aspiring Nigerian ship owners. Whilst the issue of technical capacity requirement appears to have been addressed through the positive demonstrations of the few Nigerian ship owners who are currently involved in active trading in cabotage, the issue of capital requirements still remains a major hurdle to be overcome given that Nigerian banks have proven themselves inadequately capitalized in relation to the asset values which are required to purchase fully founded coastal trading ships.

There is also the issue of the legal enforcement and administration. The cabotage law has achieved very limited impact so far, partly because operators who continue to interlope this market somehow believe that they can continue to disobey our laws without getting caught or sanctioned. One ought to make them think differently (interview with Capt. Iheanacho, the Chief Executive Officer, Genesis Shipping Worldwide, by The Guardian Newspaper, February 23, 2005).

2.7 CABOTAGE IMPLEMENTATION
According to Mrs. Mfon Ekong Paul Usoro, cabotage is a law that seeks to establish an enabling environment for Nigerians to take over the multibillion Naira maritime industries.

The law insists that all seafaring vessels in the inland waterways of Nigeria must be owned, managed and run by full-blooded Nigerians. Once an international vessel berths at its approved port within Nigeria local vessels take over from there. This holds for vessels originating from inland waterways to the coastal ports. Now, here is one wide world of opportunities thrown open to the discerning Nigerian investor. From May 2004 all foreign vessels including those ones masquerading as Nigeria’s are prohibited from running the Nigerian inland waterways. The news is that the industry has been overwhelmingly dominated by foreigners mostly using Nigerians as fronts. And now is the time to transform it to a truly Nigerian dominated industry, she contended.

According to her, there are a lot of opportunities in the maritime industry, with the coming of the era of cabotage. Real business opportunities in the off-shore and on-shore transportation of oil, one can imagine the volume of trade in the lifting of oil by indigenous tankers and barges. One can also imagine the opportunities available in dredging and movement of dredging equipment. At present, all vessels involved in dredging are foreign-owned and that include manning all of these would be opened to Nigerian shipping operators in the cabotage era. It is important to realize that the tonnage and the corresponding returns that would engender from the cabotage era can not be over emphasized. It would also impact on inter-states trade in Nigeria due to cheaper cost of transportation consequent on the movement of haulage from land to water and vice versa. It would also help relieve the burden on the roads and highways transportation of goods on to the waterways thereby encouraging internal trade.

Despite the exciting picture of greater prospects in the maritime industry, there is lack of infrastructure to support the implementation of cabotage in Nigeria.

There is a gross inadequacy in the industry at present. This is due to over-whelming dominance of the industry by foreigners. Most of the ships that are even registered here are in fact owned by foreigners or foreign investors. However, our situation is peculiar. The same was the circumstances in the Philippines export when they started developing their maritime industry. Today Philippines export skilled maritime workers to the rest of the world. The important thing is that we should start from a given point and start developing gradually. Who knows, we could also end up being a skilled manpower exporting country.

Since shipping has to do with experience, we have to start cultivating our own indigenous shipping industry which is the major thrust of the cabotage law, like the Philippines examples this by extension, would also impact on vessels building (Interview with Mrs. Mfon Ekong Usoro: Fortune & Class Magazine, May, 2005 pp.16-18).

The Maritime Digest No.2 vol. 1, 2005, has it that cabotage is a legislative tool, restricting access of or reserving maritime or aviation trade within a country’s territorial jurisdiction to the local capacities. The Nigerian maritime cabotage was introduced by the Nigerian government following calls by prominent maritime specialists and operators on the need for government to make concerted effort towards harnessing the indigenous maritime capacity and utilizing the abundant opportunities in the sector for the benefit of the Nigerian people in order to reverse the trend where it still has its maritime trade both territorial and extra territorial dominated by foreign operators.

The intention of the government in introducing the cabotage regime is to encourage the development of the maritime industry by an interventionist scheme aimed at boosting growth of the local capacity in the face of choking external companies and domination. Cabotage is a practice worldwide that is over 60 years old, a contemporary economic approach which justifies intervention of this nature to induce some determined result as against the classical economic approach of free market forces as an acceptable tool to achieving some set economic goals especially where competition is unfair and dominance is prevalent. It has been observed that this practice worldwide, both in marine and aviation, has been induced by diverse factors including reserving all or part of the national market opportunity to national flag ships or aircraft either for political, economic or security reasons. Other reasons for this protective policy practice around the world are to develop indigenous human and capital capacity. These are the major aims of the Nigerian maritime cabotage.

Recently, the Federal Government released operating guidelines for the implementation of cabotage. Beyond the operating Guidelines embodying the objectives and general principles of the cabotge regime, the question of many observers of the maritime industry is the safety and protection of the marine environment element under the law. It would appear that there seems to be little or no marine protection policy embodied in the law. The content of the cabotage law is insufficient in this regard, especially, as relating to the protection of the inland territorial water environment and the preparedness of the authorities to develop the inland waterways. It had been expected that the law would have considered the diverse potentials derivable by taking a broader view of the indigenous maritime market as an ongoing cultivation of not only the indigenous marine resource potential through a well-thought out deliberate policy of protection, exploration and management. We must begin now to evolve and strengthen environmental issues and considerations not only because of their being veritable factors for sustainable development in the entire maritime structure, but also as there are strong security and economic factors generally in the final analysis.

Although, much emphasis have been laid on port management and labour reform, not much interest has gone to the development of the port environment as such. Admittedly, the structure of the ports and its administration need to be revisited from the stand point of administration and control as the ports are very vital to the whole maritime system both as infrastructure for Nigerian export trade and her national productivity. It must be pointed out that the entire port environment, marine structure and natural habitat navigability and health of the seas and territorial waters re equally important. Thus, every effort towards reform must be holistic and sustainable.

The port system in Nigeria is made up of Lagos port, Apapa, Tincan Island Port complex (TCIP) which includes Kirikiri and Ikorodu Lighter Terminals, Container Terminal, Apapa Lagos, Roro port, Lagos, Delta ports (Warri, Koko and Burutu), Port Harcourt port, Onne Federal Ocean and lighter Terminals (FOT and FLT), and the Calabar port. The state of these ports leaves much to be desired, being the nation’s gateway to the world. The same is the state of private jetties and inland ports. In the reform objective, it would appear that this very vital access port facility, environment is not paramount in the paradigm of the reform formulators. Our coastal waters and inland waters stink and very precious aquatic life species are gradually annihilated.

Port activities cover a broad spectrum of maritime activities generating significant job creation and economic growth. The movement of waterborne freight through ports has an overwhelming impact on the economy and peoples’ lives. Waterborne freight consists of international cargo (foreign trade) and domestic cargo.

The place of cabotage and indigenous participation in the maritime trade within the inland and territorial waters must be viewed not just in relation to movement of goods and persons by ships, but in terms of the maintenance of this primary infrastructure of maritime, the waterways. There is need to adopt a comprehensive, serious minded effort to the development of our maritime resources in such a healthy way that produces far reaching results which ultimately are most profitable. We could take a cue from China, which has adopted a policy of developing and utilizing its maritime resources in a comprehensive way so as to also promote the co-ordinated development of the marine industry. In recent years, China has made constant efforts at upgrading the maritime fishing, transportation, salt making and other traditional industries. At the same time, it has spared no efforts to develop the industry of marine reproduction and marine culture. It has actively explored new marine resources, and promoted the formation and development of some potential marine industries, such as deep-water mining, comprehensive utilization of seawater, and power generation with marine energy. In 1997, the total output values of the major marine industries, including ocean fishing, salt – making, the salt – chemicals industry, marine transportation, and shipbuilding, topped 200 billion Yuan. As a result, these industries have become forces actively promoting the development of China’s economy as a whole.

This is a comprehensive maritime development policy from a cabotage point of view. We must begin to see cabotage as a total concept with overarching reach. Nigeria has a very strong potential in fisheries, salt production and other integrated maritime economic ventures as it pursues its diversification programme. China has adhered to the principle of speeding up the development of indigenous capacities not just in the fabrication of maritime tools and ships, manning, and other special skills but, also, moved into pursuing unique aquaculture, conserving and rationally utilizing offshore resources, actively expanding deep-sea fishing, emphasizing processing and circulation, and strengthening legal administration. Since the mid-1980s, China’s saltwater aquaculture has developed rapidly, with a large increase in species and expansion of breeding areas. The output of such products rose from 1.926million tons in 1987 to 7.91 million tons in 1997, with their proportion in the total output of the maritime harvest rising from 27% to 36%. In accordance with the actual conditions of marine fisheries resources, China has actively readjusted the structure of this sector, made efforts to conserve and rationally utilize offshore fisheries resources and fishing grounds, so as to make the fishing industry constantly adapt to the changes in the structure of maritime resources.

We must take the maritime environmental protection and development policy seriously and integrate it within a wider maritime-wide policy that could be developed simultaneously; with the emphasis on human capacity and shipbuilding by a conscious promotion and preservation of the aquatic environment especially in the inland waters in order to stem the rising culture of abuse being perpetrated everyday where ignorantly, people now assume that the seas and inland waters are refuse dumps. And there is very little attention paid to monitoring the seas for illegal dumping of chemical and biological wastes in the seas. This will guarantee the utilization and preservation of our natural marine resources and protect the availability of safe drinking water for generations to come. We may need to refer to China again as it is a good example of the immense benefits a good marine development policy could have through cabotage. China attaches great importance to the protection of marine fisheries resources, and has adopted various measures to conserve such resources so as to guarantee the implementation of a sustainable marine development strategy. It has done this by instituting various closed fishing seasons, closed fishing areas, marine sanctuaries and moratorium systems, banning harmful fishing gear and methods, and restricting the size of net meshes and the proportion of young fish caught in the process.

The adoption of a consciously, applied marine environmental protection policy will no doubt, achieve encouraging economic, ecological and social results. We must now attach importance to marine reproduction and the reproduction of fisheries resources. These are measures that must be integrated into the jurisdiction of the maritime securities authority and the ministry for environment working in concert with the ministry of science and technology to adopt such monitoring, evaluation, and assessment processes that integrate the least technology in surveillance in order to optimally utilize that God given infrastructure for economic growth but particularly the government agencies charged with the responsibilities of protecting our waters and waterways.

Today, marine tourism development policy requires massive investment by and on the coastal cities, stressing marine characteristics, and developing it region by region and sector by sector. In recent years, the aspect of maritime trade has created more than 300 marine and island tourism and recreational zones in China with a variety of marine features. Marine tourism is now a developing industry. Nigeria has very strong maritime development potentials along these areas.

The future of the Marine Transportation System (MTS) in Nigeria should be addressed now! We ought to have a dependable, safe and affordable MTS, an efficient and easily accessible system that is globally competitive, technologically responsible. Marine transportation needs to be promoted as a cost effective, energy – efficient and environmentally friendly mode. The maritime sector should be seen as benefiting communities, supporting technology clusters and providing long-term high skill career for youth.

It is the equal responsibility of the private, local, state and national stakeholders to shape the strategies and actions necessary to develop the desired state of the Nigerian Marine Transportation System and other marine potentials that will be technologically advanced, safe, secure, efficiently effective, accessible, globally competitive, dynamic, affordable, and environmentally responsible system. A public – private sector partnership will meet the challenges through shared responsibilities, accountability and agreement on funding.

When port authorities consider any development projects, they are fully prepared to avoid or mitigate adverse environmental impacts through extensive assessment works and various counter measures. For port operations, great care is also taken to avoid or minimize environmental damages, if any, caused by port activities. In other words, port management itself will be more based on an integrated and continuous system for environment management. Closer cooperation and coordination among ports, ships and local community will need to be developed to enhance port environments, thereby ensuring the sustainability of our society.

Since September 11, 2001, security has come to a top priority on the international agenda. Vulnerabilities to terrorism have become a real threat to all industries. This has led to the introduction of the ISPSC, which came into force on the 4th July, 2004. Information sharing and other collaborative maritime security structures have been introduced to nip terrorist threat in the bud. Also, a growing range of value – added activities in logistics is being exchanged. It is expected that by so doing, ports and other maritime activities will be safe and attractive.

With the cabotage regime and the paradigm shift in government policies towards local content and national treatment, increased local and indigenous participation in the maritime industry in Nigeria is expected. A synergy should be forged between the government, national, state and local and the private sector shipping industry and its cluster, financial institutions, importers and exporters, to develop the Nigerian Marine Transportation System to encourage and support the nations shipping firms so that they can compete on equal footing with the firms of other countries in the inland, coastal and international market place.

A major challenge ahead is to ensure that the infrastructure improvements will be in place when needed to support trade growth and that efficient personnel are trained and equipped with the necessary tools to increase efficiency while improving safety and value of services.

We must restructure the maritime industry in Nigeria so that it can ensure the availability of:
- Efficient water transportation services to Nigerian shippers and consumers;
- Sustainable aquaculture marine resource, safety and development;
- Integrated port, inland and territorial security structure;
- Adequate shipbuilding and repairs base;
- Efficient ports;
- Effective intermodal water and land transportation connections
- Sufficient intermodal shipping capacity for use in time of national emergency.
- Safe aquatic habitat that can become a tourist hub, (Maritime Digest; N0, 2vol 1. pp 24-27).

2.8 FLEET EXPANSION
The National Maritime Authority’s Ship Acquisition and Ship Building Fund (SASBF) was suspended in 1995, following a directive from the then Head of State of Nigeria. The fund, itself, was established in pursuance of section 13 of the National Shipping Policy Act (NSPA) which was intended among other things to “assist Nigerians in the development and expansion of a national fleet”. The aim is to deepen indigenous participation in the carriage of the nation’s sea-borne cargo with all the attendant benefits. Before the suspension of disbursement from the fund, a number of loans had already been granted and released to private and public shipping companies totalling over $92.0m, ￡214,000, and N141m (Asoloka; 2003 p. 232).

The general perception of the fund as a “national cake” controlled by forces of patronage, no doubt overstretched, drained and exposed the Authority and its inability to properly play the important facilitating role of building up a competitive national fleet. The defunct Nigerian National Shipping Line (NNSL) is a classic case. Loans and Funds were continually thrown at problems such that it became an unending tale of losses incompetence and corruption. There was indeed no expectation that such loans were to be repaid. In the end, the outstanding indebtedness to the NMA was over US$72m. Other debtors were not much better in keeping to repayment terms with outstanding and overdue amounts of $84.7m, ￡247,622 and N138.7m (Ibid).

The funds gradually dried up as beneficiary companies defaulted in keeping to agreed terms of repayment. Yet the loans merely added 52,000 dwt to Nigeria’s shipping capacity. Even at that, the vessels procured with these funds were aged, poorly maintained and consequently, their operations were fraught with numerous exposure to risk and distress.

One implication, however, is that, the statutory responsibility reposed on the NMA by the NSPA, especially in section 13, has since the suspension of the fund remained neglected to the detriment of even genuine applicants who need to be supported. From whichever angle shipping is viewed, it remains an industry characterized by high capital requirement, intense competition, and a high level of volatility both in freight rates and ship prices. Under a competitive and safety conscious environment, indigenous shipping efforts without sustainable support cannot grow nor compete and in such a situation atrophy creeps in. And the quest for maritime development, given the nations numerous potentials and opportunities as other studies have indicated, would not only remain mere lip-service but also be lost. And this would be an enormous loss to national interest, prosperity and defence capability.

The object of governments all over the world is to enhance the welfare of its people. A responsible government therefore, uses sectoral policies and measures to enable institutions and organizations in every sector rise to the limit of their potential. Through such policies, they are enabled to contribute to the economy by becoming more efficient and more productive. This remains the way to serve the interest of the state and those of its citizens.

The challenge facing the NMA, therefore, is how to come up with policies and a strategy for policy implementation process that would promote the realization of government intention in building a competitive maritime sub-sector over time. This goal is one of the ways the potentials of the sub-sector will help accomplish the quest to diversify the nation’s economic base. As the Director General of the NMA often wants to say, “The building block of maritime transportation via expansion of the national fleet is a solid foundation that ought to have been laid yesterday.”

The world depends on merchant ships to transport over 80% (by weight) of all international sea-borne trade. The global economics of the 1990s could not exist without ocean shipping. International economic integration supported by ocean transport has been developing for centuries. To create demand for ship, the trade must be sea-borne and the longer the distance over which a commodity moves, the greater the demand for ship in that trade. Thus, it is the pattern of world trade that is the most important factor in determining the need for shipping activity and, in this regard, ship owners often refer to the tonne-mile demand (one tonne of cargo transported in one mile).

Ships now transport more than 4 billion tonnes of cargo each year and the total annual tonne-mile exceeds 19 trillion. Nigeria’s shipping market (including crude oil) accounts for about 596 billion tonne-miles (about 3.1% of the world total) and yet plays a very important role in the nation’s economy (cf. data on cargo throughput and traffic statistics of the Nigerian Ports Authority (NPA) in abstract of ports statistics 1997-99) as in Asoluka 2003; p.214).

The United Nations Conference on Trade and Development (UNCTAD, 1977) in recognition of this has indicated that where national investment in shipping can be justified economically, it should be encouraged as a means of conserving foreign exchange of developing nations with an export/import potential. For developing countries such as Nigeria, foreign exchange earned from international maritime trade is a factor in their economic development.
The nation’s merchant fleet companies have three categories of watercraft. They are:
i. Commercial vessel: - These transport cargo or passengers.
ii. Industrial vessels:- These Specialized marine functions such as fishing or pipe laying; often using specialized personnel
iii. Service/supply vessels: - These provide support capability to commercial ships and/or industrial vessels.
Table 2.8a Shows Representative Vessel Types.
Commercial Vessels Industrial Vessels Service Vessels
General Cargo Ships Suction Dredges Tugboats without barges.
Container Ships Drilling Vessels Off – Shore Supply Boats.
Tankers Semi Submersibles Crew Boats
Liquefied Gas Carriers Incinerator Vessels Crane Support Ships
Bulk Carriers Upper Dredges Dividing Support Ships
Ore/Bulk/Oil (OBO) Carriers of Fish Processing Vessels Fire Boats.
Integrated Tugs/Barges Fish Catching Vessels Pilot Boats
Chemical Tankers Hydrographic Survey Vessels

However, analysis of Nigeria’s balance of payment for the past three decades indicates three imbalances in the shipping industry, especially, in the areas of:
- Freight earning/conservation – loss of revenue through non – participation of indigenous shipping companies,
- Ship–ownership–only five ships (70,000dwt) owned by indigenous carriers, and
- Cargo sharing–less than 12% of cargo carried with Nigerian ships. Faced with the issue of fleet expansion, that is, resolving the demand for domestic ships, the Nigerian shipping industry has to determine its ship acquisition alternatives and cost implication of the following nature:
- Conversion of existing ships. There are virtually no ships in the nation’s fleet to convert as our surveys have indicated.
- Charter of existing ships. Decree N0. 10 of 1987 on the establishment of the NMA mandate the Authority to allow national carriers to use chartered vessels where there is insufficient number of indigenous ships for the cargo available. Such a plan can only enrich the ship owner as the operator reaps little or no profits. The chartering of foreign fleet also brings with it some uncomfortable foreign exchange implications. Moreover, the nation cannot rely on foreign operators in times of national emergencies or wars or regional conflicts.
- Purchase of existing ships. There are two categories of existing ships, namely second land tonnage and ship built in anticipation of demand, such as product tankers. Although, many used crude oil carriers and chemical carriers are being sold as second hand tonnages, operating the former is fraught with incessant inspection and detention by the Port State Control and a short economic life. The latter can be purchased and operated to transport petroleum products at lower costs.
- New construction–Building new ships will address the long-term increase in the nation’s maritime trade. To construct a new ship is about 10% cheaper than buying it readymade. Therefore it is advisable to consider constructing these ships both locally and abroad. However, it must be noted that increases in foreign ship prices result from two causes, namely, currency depreciation and increased unit costs.
The analysis so far indicates that there is a need to reduce the demand for domestic ships through building new ships and purchasing existing ones. The number of ships to be employed, dimensions, type and construction cost should be addressed next.
2.8.1 NUMBER AND TYPES OF SHIP
A good insight into the needs of the shipping industry is obtained with respect to the number and type of merchant ships, cargo characteristics, and cargo throughput documented on Nigerian Ports. By considering the market characteristics, a competitive lead would be gained.
2.8.2 Merchant Fleet Product-Mix (Non-Oil Sector)
An examination of the cargo types involved in the sea-borne trade and the respective ship types used in lifting them over a period of 20 years (1979-80 to 2000) indicates five types of vessels (excluding oil tankers):
- Bulk carriers (dry bulk and liquid (wet) bulk): These constitute the largest segment in this potential market. The bulk carriers (the workhorses of the sea) account for over 66 percent of the existing market. Dry bulk comprises 21 percent while wet bulk comprises 45 percent.
- General cargo vessel: This accounts for about 18.0% of the existing market and has shown a decreasing trend in the volume of cargo lifted over the years.
- Containerships: These are transport cargo in utilized van without the trailer chassis. These constitute about 12.6 percent of the existing market.
- Fishing Vessels: These comprise fishing trawlers and refrigerated ships for preserving fishes and perishable goods. They constitute 2.7 percent of the existing market.
- Roll-on/Roll-off: Ro/Ro ships offer shippers the most expeditious service. They constitute about 0.6 percent of the existing market.
In summary, in order to meet the needs of the national fleet the number and types of vessels acquired should be in accordance with the ratios in table 2.8b on merchant fleet product-mix:
Table 2.8b MERCHANT FLEET PRODCUT-MIX
- Bulk carriers
–Dry bulk 8
–Wet bulk 16
- General cargo 6
- Containerships 4
- Fishing vessels 1
- Roll-on/Roll-off 1 or negligible
Total 36
The sizing of the future fleet and the determination of the current quality and replacement tonnage require a careful analysis of the costs and benefits. But the Federal Government would have to articulate a policy and guidelines to ensure that the national merchant fleet lifts a certain volume of cargo generated by the economy. This, in turn, would be matched by correct sizing, number and types of ship.
It becomes obvious from the foregoing that, when faced with a blank order, the Nigerian ship owner must make a decision as to the market sector to be targeted. Such decision, have often in the past, been made intuitively, due to lack of defined methods or constraints against the product-mix. It would enable organizations such as NMA, shipyards and facilities to be correctly matched against the market niche.
2.8.3 Demand on Ship Size Ranges.
One circumstance that will tend to increase the average ship size is the economy of scale that can be obtained since a larger ship would be more economical. Economy of scale has led to the design and construction of ever-larger crude carriers. Port limitations on vessel draft have been the only restraining factor on the maximum size, as evidenced by the eight meters draft limitation on Nigerian ports. In replacing the 16,000dwt ageing ship (defenders) of the defunct Nigerian National Shipping Line (NNSL), the decision would be to substitute it with a new ship (challenger) in the range of the Handy size/Handy-max (20,000 up to about 45, 000 DWT). This approach combines economy of scale with better operating economics (a higher performance design) to meet the growth in shipping demand.
Furthermore, the construction costs per unit of a cargo carrying-capacity also go down as ship size increases. Meanwhile, a construction-cost saving of about 7% has been recorded in favour of larger ships (Asoluka 2003, pp.216-219).

2.9 PROJECTED MERCHANT DEMAND BY YEAR 2010 (NON-OIL SECTOR)
The data for the cargo throughput of 22.2 million tonnes in 1999 provides the basis for the estimate. It approximates 22.6 million tonnes of cargo throughput in 1983. The projected ship demand has been estimated based on the product-mix composition, phased and demand-driven, with the objective of lifting at least 40% (in freight and volume of sea-borne trade) by 2010.
By 2010, it is envisaged that 12 dry bulkers, 24 wet bulkers, nine general cargo vessels, six container ships, three fishing vessels and one roll-on/roll-off ship, totalling 55 ships with a combined deadweight of 1.1million tonnes would meet the shipping demand. Table 2.9a on projected ship demand (Non-oil sector) illustrates this estimate (Asoluka, 2003, P.219).

Table 2.9a – Projected Merchant Fleet Demand, Year 2010.
Types of Ships Base year/units (Non oil sector) Year Units Year/Units Total/year 2010
Bulk Carrier: 2004 2007 2010 -
Dry Bulk 4 4 4 12
Wet Bulk 8 8 8 24
General Cargo 3 3 3 9
Containership 2 2 2 6
Fishing Vessel 1 1 1 3
Roll-on/Roll-off - 1 - 1
Total 18 19 18 55
Deadweight 360,000 380,000 360,000 1,100,000
Cumulative DWT - 740,000 1,100,000 1,100,000
Estimated Vol. of Cargo lifted 3,600,000 7,400,000 11,000,000 11,000,000
% of Vol. of Cargo lifted and freight 16.2 33.3 50.0 50.0
Note: The total number of ships is 55 with a combined Cargo-carrying capacity of 1.1m. Deadweight Tonnes

2.9.1 Projected Merchant Fleet Demand (Tanker Sub–Market).
Presently, Nigeria is the only member of OPEC that has not involved herself in the lifting of crude oil, petroleum and associated products. The non-participation in this lucrative business is based on the premise that the contract for affreightment of crude oil is based on F.O.B (Free on Board). Therefore, it presumes that the owner of the crude oil nominates the ship owner that would lift the cargo.
But foreign-flag ships require that the crew be citizens of their countries, whose wages are much higher than those of Nigerians. Table 2.9b below illustrates the disparity in wages, which could lead to higher operating costs for foreign – flag ships. Nigeria, therefore, can easily enter this market by providing the same services at lower freight rates. The United States of America, for example, has provisions which state that “foreign petroleum products may be imported in foreign-flag ships at a lower delivery cost than US product” (Carson, et al. 1990) (as in Asoluka 2003 P. 220).

Table 2.9b Typical Seaman’s Monthly wages (Paid 12 months a year for 7 months work, 1998).
Rank or Rating International $ USA, $
Master 3,766 7,600
Chief Engineer 3,514 7,000
First Officer or first Engineer 2,786 4,260
Second Officer or second Engineer 2,430 3,880
Third Officer or Third Engineer 2,378 3,500
Electrician 2,430 3,400
Radio Officer 2,430 3,780
Chief Steward 2,430 3,840
Boats man, Carpenter, Chief Cook, Pumpman 1,017 2,500
Able Sea Man, Motorman, Oiler, 2nd steward 921 2,250
2nd Cook, Messman 799 1,000
Ordinary Seaman, wiper 711 2,140
Source: Butman (1998) (as in Asoluka 2003, P.221).

The analysis of the crude oil, petroleum and associated products lifted between 1995 and 1999 follows. Based on 2.9c, an average of 94 million tonnes of crude oil and eight million tonnes of petroleum products are considered for this estimate. In order to lift 50% of these products by 2010, four Panamax Tankers (80,000dwt), 12 Capesize Tankers (125,000dwt), and 16 Hamptonmax Tankers (150,000dwt) are required.

The projected ship demand for this sector is illustrated in Table 2.9c.
S/N Type of Cargo 1996 (TONS) 1997 (TONS) 1998 (TONS) 1999 (TONS) TOTAL (TONS)
1. Crude Oil 86,420,804 99,667,433 97,953,211 92,463,264 376,504,712
2. Refined Petroleum 7,743,137 6,877,407 7,238,965 8,108,736 29,968,242
3. Sundry Gen. Cargo 2,401,129 3,302,573 3,513,201 3,934,217 13,151,120
4. Containerzed (dry) Cargo 900,996 2,173,687 2,474,994 2,808,256 8,357,942
5. Cement 1,044,686 1,183,274 1,784,571 2,250,221 6,262,752
6. Wheat 832,314 1,132,573 1,470,766 1,400,954 4,836,507
7. Sundry Bulk (Dry) Cargo 666,114 1,220,267 1,175,270 1,022,780 4,084,431
8. Sunday Bulk (Dry) Cargo 135,166 218,254 658,439 1,872,202 2,884,061
9. Fish 411,509 435,604 558,177 605,649 2,010,939
10. Vehicles 38,729 38,253 68,812 129,912 275,706
11. Vegetable Oil 34,376 20,913 6,297 - 61,586
The above is Table 2.9c – Ranking of Cargo throughput All Nigerian Ports (1996 – 1999) including crude oil.
Primary Source: NPA
Secondary Source: NMA
Table 2.9d – Projected Merchant Fleet Demand, Year 2010 (Oil Sector) Tanker sub– market.
Type of Ship Base year 2004/Units Year 2007/Units Year 2010/Units Year 2010/Total
Panamax Tanker (Chemical Products) 2 1 1 4
Capesize Tanker 4 4 4 12
Hamptonmax 4 6 6 16
Total 10 11 11 32
Dead weight –Panamax 160,000 80,000 80,000 320,000
Capesize 500,000 500,000 500,000 1,500,000
Hamptonmax 600,000 900,000 900,000 2,400,000
Cummulative dwt -Panamax - 240,000 320,000 1,500,000
Capesize - 1,000,000 1,500,000 1,500,000
Hamptonmax - 1,500,000 2,400,000 2,400,000
Estimated vol. Of Cargo lifted, dwt –panamax 1,920,000 2,830,000 3,840,000 3,840,000
Capesize 6,000,000 12,000,000 18,000,000 18,000,000
Hamptonmax 7,200,000 18,000,000 28,800,000 28,800,000
% of Vol. of Cargo lifted and freight –Panamax 24.0 36.0 50.0 50.0
Crude Oil 14.3 32.0 50.0 50.0
Note: The total number of ships is 32, with the combined Cargo-carrying capacity of 4.2 million deadweight tonnes.
2.9.2 Industrial Vessels.
These vessels are owned and operated by multi-national oil companies prospecting for oil and a few private operators that provide support services. The number of these vessels has not been officially documented, but our survey shows a continued rise in the number and size of off-shore vessels that include floating platform for the storage of oil (FPSOs), oil rigs, oceaneering vessels etc.
2.9.3 Service/Supply Vessels
Coastal vessels are the predominant water crafts in this category. There are basically three categories of coastal vessels presently operating in Nigerian waters:
(a) Service Vessels
(b) Dry Cargo Vessels, and
(c) Wet Cargo vessels
(i) Service Vessels: These are vessels mainly of less than 1000dwt needed in the oil/rig operations in the country’s oil fields. They are for the movement of men, material and in some rare cases, anchor handling. These are special crafts built just for anchor handling operations that are presently engaged in the above services in the oil industry.
(ii) Dry Cargo Vessels: These vary from the small (500dwt) general commodity carriers to the most common pliers (of 2500 – 3000dwt) used in the west coast trade. They pick mainly commodities such as plastic products and food items from Nigeria to neighbouring countries along the coast. They, in their return trip pick salt or any other products from Senegal or any other port along the coast.
(iii) Wet Cargo Vessels: These vessels come in different shapes and sizes - from small self–propelled barges of say, 450dwt to coastal carriers of, say, 20,000dwt. The self–propelled barges, mostly owned by small quantity, are involved in bunkering and small operators’ movement of products such as A. G. O, Aviation Kerosene, Domestic Kerosene, PMS, LPFO etc. Their operations are usually limited to ship-to-ship (STS) transfers, jetty to jetty, (JTJ), Ship to jetty (STJ) and loading and discharging operations. Their products carrying capacity vary from 300MT to 2000 MT.
(iv) Dumb Barges: These, as the name implies, are without engine for propulsion. Some are fitted with pipes and Cargo pumps for “load and discharge” purposes whilst some are without pumps. The capacity (Load) of these vessels ranges from 200 MT to 1500 MT. The self-propelled barges usually for fresh water supply and products carry them. Their movement is always with the aid of tug(s). The exact number of units of the watercrafts named above is not documented but these are demand-driven and it is on the upward trend (Asoluka; 2003. PP 219 – 223).
2.9.4 Maritime Expansion Financing Needs
The best approach to appreciate the financial outlay required to bring the nation’s maritime sub-sector into reckoning is to take a close look at the sector, examine the nature and scope of the services it provides and finally determine the adequacies of support of such services in the light of the demand generated by various kinds of maritime and allied activities.
2.9.4i - Maritime parastatals Under FMOT: An examination of the maritime service can only be done comprehensively by surveying the various agencies coordinated by the maritime services of the Department of Maritime Services in the Federal Ministry of Transport (FMOT). This department is charged with the duty of formulating and implementing government policies aimed at improving maritime practice, and efficiency through the instrumentalities of the various maritime parastatals. A scheme of relationship of these parastatals with the FMOT, is outlined below:

Figure 2.9.4a MARITIME PARASTATALS UNDER FMOT.

From figure 2.9.4a above, it can be deduced that, maritime parastatals that report to the Minister of Transport through the Director of Maritime Services include Nigerdock (which has been jettisoned, that is, sold out), Nigerian Port Authority (NPA), National Maritime Authority (NMA), Maritime Academy of Nigeria (MAN), Nigerian Shippers Council (NSC) and National Inland Waterways Authority (NIWA), These agencies broadly cover the maritime services industry. From the NMA’s regulatory and promotional functions which include attending to the nation’s drive towards fleet expansion, NPA’s provision of essential linkage services to ships and cargoes, NIWA’s handling of inland navigation and domestic vessel needs, NSC’s shipping protection role to NMA’s training portfolio, there runs a common thread of providing services to the nation’s maritime needs. Complementing this role is Nigerdock’s responsibility in shipbuilding and ship repairs. In order to assess the nature of expansion of these facilities and services, a more detailed role/functional review is important.
2.9.4ii: Cargo sufficiency in Nigeria: The business of shipping arises from sea-borne trade. Because, the success of shipping is contingent upon the availability of sea-borne cargo, we propose to examine whether or not there is cargo sufficiency in Nigeria. Much of this has been done by other researchers, especially, the study on Cargo Support Programme (CSP) such that what is done here, is to present a nutshell of the findings.
Cargo throughput, a Nigerian seaports for the period 1996 – 1999 as can be seen from the table below, reveals a total of 376,504,712 metric tonnes of crude oil requiring about 2,667 tankers to lift.
Table 2.9.4iia – Cargo Throughput at Nigerian Seaports.
Year 1996 1997 1998 1999
General Cargo 4,752,363 5,950,117 6,615,184 7,478,043
Dry Bulk 2,810.359 3,516,114 4,806,833 4,773,955
Crude Oil 86,420,804 99,667,533 97,953,211 92,463,264
Others 7,912,579 7,116,574 7,903,701 9,980,938
Total Trade 101,896,105 116,250,338 117,278,929 114,696,200
Source: NPA Abstract of Port statistics, 1997 & 1999
Also, refined petroleum for the same period was estimated at about 30million tons. Sunday General Cargo, containerized cargo and cement provided about 28m tons from NPA abstract of statistics, the summaries of containers discharged and loaded at Nigeria seaports from 1997 – 1999 were about 301,000 TEUS and 80,596 40’ containers were discharged while a total of 108,654 TEU’S and 10,431 40’ containers were exported.
A further decomposition of the crude oil shipping activity from Nigeria to African countries is shown in Table 2.9.4iib. For 1999, a volume of 19,180,582 MT of crude was exported to various African countries 24,482,567 MT in 2000, and about 6,358,529 MT for the first four (4) months of 2001.

Table 2.9.4iib Nigerian Sub-regional Trade.
Year 1997 1998 1999 2000
Volume of Import 288,956 181,279 72,303 -
Export of Crude oil - - 19,180,582 24,482,567
Export of non-oil product 2,201,956 2,583,279 19,252,885 24,482,567
Source: Compiled from NMA & NPA Abstract of Port statistics, 1997 & 1999.
Out of the 2667 tankers that called at Nigeria’s oil terminals, for the period 1996 – 1999, only one (1) was recorded as a Nigerian flag as shown in Table 2.9.4iic below.

Table 2.9.4iic – Number and NRT of Tankers that Entered Nigerian Terminals, 1996 – 1999
Year 1996 1997 1998 1999
Total Number 629 693 766 639
Total NRT 41,126,605 64,713,740 44,924,309 40,561,719
Nigerian Number 1 NIL NIL NIL
Nigerian NRT 95,283 NIL NIL NIL
Source: NPA Abstract of Port Statistics, 1997 & 1999.
2.9.4iii: Nigerian Coastal Trade: From the study conducted by a consortium’s consultants, the following findings were made:
(a) The volume and traffic of petroleum Cargo loaded and distributed /discharged treated as domestic tanker shipping is high. The figure is about two million metric tons for an average year.
(b) The business of carrying petroleum and its products in the domestic sector is still being highly dominated by foreign tankers.
(c) Unlike Malaysia where the domestic shipping companies have a strong presence in LNG shipping, Nigeria’s LNG, by an existing Act, is precluded from the coverage of the NSPA. Even though, this law enacted in 1993 was supposed to offer vital incentives to encourage investment in this area, the volume of transactions and financial implications call for a more mutually beneficial review.
(d) In the event of a cabotage regime in Nigeria, there is evidence that there would be a drastic increase in tonnage for indigenous shipping companies.
(e) The scope of off-shore oil activities is on the increase and would require off-shore service vessels. Consequently, there is the nagging issue of vessel sufficiency among Nigerian shipping companies for this viable trade.
2.9.4iv: Inland Transport: Nigeria’s inland waterways system is still at its infancy and naturally saddled with teething problems. Presently, inland transport activities are noticeable only in Lagos, the Delta region and River Benue. The activities involve mainly the movement of passengers and small tonnage of cargo in the major rivers and creeks. Table 2.9.4iva, indicates that only 19 passenger vessels with a combined NRT of 911 and 10 Motor ferries with a combined NRT of 1151 operate in these rivers and creeks. Of the 19 passenger vessels, only one has NRT above 100. The motor ferries generally have NRT above 100 but are seldom operational. This may be attributed to frequent breakdown and management problems. Records of age distribution is however not available for the motor ferries. In the case of the passenger vessels, age distribution ranges from three years to 36 years averaging at 12 years.
Given the geographical distribution of the Nigerian Markets, its population and cargo throughput in Nigerian ports, tremendous investments exist in Nigeria’s inland waterway transport and could be exploited to national advantage with proper planning. Before taking advantage of this potential, there is a need to continually dredge the rivers and its approaches. This creates the demand for dredging vessels, rightly classified as part of cabotage services.
Table 2.9.4iva: Vessels Employed in the Nigerian Inland Waterways.
Type of vessel Total No of Vessels Total NRT NRT > 100 Average Age as at 31:12:2000
Passenger 19 911,455 1 12years
Motor ferry 10 1161.46 8 N/A
Source: NPA Abstract of Port Statistics, 1997-99.
2.4.4v Shipyards: Although many shipyards claim to exist in Nigeria, only a few are presently operational, Nigerdock Nigeria Limited (Nigerdock) appeared to be the most active. It main activities included shipbuilding and repairs. Statistics indicate that in 15 years period, (1986-2000) of its existence, Nigerdock constructed 28 vessels and repaired 218 along quay. The constructions were dominated by five types of vessels. These were mainly passenger ferry, mooring launch, harbour launch, water bus and vehicular ferry. Recently, it started off-shore facility construction.
It is clear that at the moment Nigerdock serves limited segment of the indigenous shipping industry, basically the waterways. This limitation derives mainly from inadequate and deteriorating equipment and facilities being used by the company. However, in the past three years the company has been able to upgrade its capacity to produce up to 30,000 gross tonnage vessels comprising mainly tugboats, coastal tankers and supply boats which find a wide market in the sub-regional trade (Asoluka 2003, p. 248).
The recent privatization of the company with the acquisition by Global Energy /NC Dermott Consortium of 51% of its shares (formerly owned by the Federal Government of Nigeria), spells a new era for Nigerdock. It is expected that with a more focused management and the injection of more funds, the company will be in a position to build adequate capacity to support the indigenous shipping industry, in Ship construction, maintenance and repairs.
2.9.4vi Ports/Terminals: The Nigerian ports system is a vital element in its transport system. It provides the critical access to domestic and overseas markets as well as serves national defence/security interests. With the first established in 1955, there are now eight ports with several terminals, handling over 35m Metric tons of cargo. For administrative purpose, the ports and terminals are grouped under three zones as follows:

(a) Western Zone comprising
i. Apapa part
ii Tin Can Island Port
iii. Iliri Lighter Terminal
iv. Ikorodu High Terminal
V. Ijora Wharf and
vi. Fisheries Terminals
(b) Eastern Zone Comprising:
i. Port Harcourt Port
ii. Onne Port
iii. New Ocean Terminal Port and
iv. Calabar Port with all other ancillary Wharves and Jetties.
(c) Central Zone Comprising
i. Warri Port
ii. Sapele Port
iii. Koko Port, and
iv. Burutu Port
Of these ports, those in the Lagos Ports Complex (Apapa, and Tincan Island) handle over 70 percent of cargo throughput. The increased involvement of the nation in international trade is putting more pressures on the equipments, infrastructure and services of the ports that very often there are indications of congestion. The situation is further aggravated by the scale of the ports which calls for massive rehabilitation, provision of sufficient equipments, and the overall need to overhaul all port services.
With the proposed privatization/concessioning of the ports, there is the need to support certain efforts to improve efficiency, safety and productivity of the ports. One other area that is crucial to the transformation of the port in the intermodal framework is the landside connection infrastructure, (by rail and roads). This measure is a key factor in reducing the impediments to freight movements and improving traffic flow, both at ports and on the highways.
Apart from the use of port privatizational/concession, to improve its activities, there is also another move to situate storage, delivery and distribution of cargoes outside quay apron. The increased reliance on terminals, both contiguous and dry ports, invites more action in terms of planning and funding in order to extensively improve maritime infrastructure. All these activities require trained personnel.
Other services, such as stevedoring, ship management, ship brokerage, insurance, flag administration, classification, societies, fuel and lubricants, equipment manufacturing and supplies etc; are quite essential in the development of a maritime service delivery. For optimal maritime services, these services require closer attention and support.
2.9.4vii Scope of Fleet/Maritime Infrastructure Expansion: The study on Cargo Support Programme has proved the nature, type and volume of cargoes dealt with in Nigerian ports. This has made a case for a deliberate cargo support programme hinged on indigenous participation (Cf. Section 14 of NSPA). This is the so-called public cargo. In terms of participation, a case was made to the effect that indigenous companies should be involved in order to develop competence and competitiveness over time. The conclusion was that it is not only necessary for the development of the sector, it is also defensible both on grounds of strategic security consideration and on its catalytic economic impact.
One major pitfall, however, in the attainment of this critical position is the non-availability of Nigerian vessels. Another is the level of competence and the critical issue of expanding the fleet, if the aims of NSPA, even if amended, were to be realized. In a similar view, a study has shown that with the suspension of the Cargo Allocation and Ship Acquisition and Ship Building Fund, the local tonnage has been shrinking. In fact Ekwenna (2001) has noted that from 26 vessels of 502,000 DWT in 1977, the position is now that of 70,000 DWT of five ships. Arising from this, he concluded that “Nigeria has lost the ability and capacity to generate and conserve revenue on foreign exchange through non-participation in the lifting of international sea-borne trade generated by her country.” Apart from the balance of payment (BOP) implications, its negative impact on seafarers’ employment and national defence interests cannot be quantified.
The same study has it that, resolving domestic ships’ demand entails the following choices:
- Conversion of existing ships: since there are virtually no ships in the fleet, this is not an option to be considered.
- Charter of existing ships: Though allowed by the NSPA, it does not offer a permanent solution as the dividends flow across borders and cannot be relied on in times of national emergency or war neither can it be sufficiently reintegrated to impact positively on the economy.
- Purchasing existing ships (secondhand building or new ships from shipyard). This can be used to meet instant demand but has the draw back of state of customization, technology and maintenance issues if an old one. Besides, such ships can easily become targets for Port State Control attention.
- New construction: This entails building new ships which normally addresses long term expectation of demand. Although, this offers flexibility, it must also be borne in mind that the prices are generally higher. However, the various stages of construction work involved may offer respite in funds outflow. Also, there are a number of possible structures and deals available with shipyards.
Whichever combination is chosen, the fact remains that there is a strong need to increase domestic tonnage if Nigeria is to reap its maritime potentials. In this regard, Ekwenna’s (2001) study and that of NMA’s management have indicated the following Merchant Fleet Product – Mixes.
Ekwenna has advocated that in replacing “16,000 DWT ageing ships (Defenders) in the defunct NNSL, the decision would be to substitute them with new ships (Challengers) in the range of Handy size/Handy max (from 12,000 up to around 45,000 DWt) range. The approach combines economy of scale (a larger ship) with better operating economics (a higher performance design) to meet growth in shipping demand.
Another study carried out by NMA management decided on “retonnaging three (3) key market segments, including ocean – borne trade, sub–regional shipping and coastal shipping” (Asoluka, 2003, P.253).
Ekwenna’s projection, perhaps for a 10 year period, “will entail an initial investment of about $200million from the escrow account (SASBF) kept by the NMA and there would be an additional funding of $100m to expand the Nigerdock ship Repair and Building Company to effect the transformation.” Whether the amount specified for acquiring the 25 ships, that is 600,000 DWT in the “cradle period” (i.e 2002 – 2003), is sufficient or not remains doubtful.
The other proposal from NMA management on sectoral retonnaging calls for a more in-depth view. Looking at various statistics, ships of over 128,800 DWT, and three (3) passenger vessels, at a protected cost of $888million is considered realistic. However, it may be quite an effort pooling the money together and for how long. Before going to the issue of funding the fleet expansion programme, it is important to return to the question of the need to expand the scope by the fleet and other maritime infrastructure.
The case of NMA’s responsibility to develop on competitive domestic shipping industry has clearly been made. Not only is this desirable for the economy, social and defence interests of the nation, it is also, one area where efforts must be concentrated to realise the domestic maritime potential as well as broaden the revenue base of the economy. In spite of the wave of libralization and deregulation the issue here has not been the advocacy of government coming in to participate in shipping business, directly. It is the case of inviting government to use its regulatory and promotional instruments to develop the economy and improve the well – being of its citizens.
The wave of privatization/concessioning cannot be read as a design to prevent domestic shipping from becoming competitive and growth bound. In fact, it is in furtherance of economic growth that a clear strategy be involved to reduce the disadvantage which competition with foreign shipping companies (which are in one form or the other subsidized) pose to domestic operators. Apart from various supports government give to their nationals, they pay a much lower interest rate, their exchange rate is stable, and their business climate is certain and supportive. A Nigerian shipping company exposed to their soil of competition without support from its government cannot survive.
To make the domestic shipping industry competitive, there is therefore the need to introduce a simple supply – side intervention as well as the demand – drive measures. Other sectors of the economy, including the sister institutions of banking, insurance and other transport modes like aviation and land transport enjoy this regulatory protection. Supply side measures, as can be seen, include grants, soft loans, subsidies and fiscal incentives. To bring this about, there must, ip so facto, be a fund created as intended by section 13 of the NSPA. However, the funds’ scope of application must extend to key areas that must be nurtured to add to Nigeria’s maritime competitiveness.
A Reactivated Fleet Expansion and Maritime Infrastructure Development (FEMID) should make provision for the following:
(a) Vessel Acquisition Fund: New and secondhand buildings for the markets to be decided on. However, after analysis of the market, the priority markets should include:
�X Offshore supply vessels,
�X Coastal Tankers
�X Tankers for Regional Trade (African Routes), and
�X New Generation Tanker (1) for long haul.
(b) Vessel/Infrastructure Repairs and Management Fund: These small bits of loans will help in massively reconstructuring and repairing existing tonnage with sufficient economic life.
(c) Maritime Infrastructure Fund: Floated to fund efficient terminal /ports operations in a privatized and intermodal framework. The value of this to the entire maritime system is immeasurable and impacts positively to costing.
(d) Shipyard Expansion Fund: This element of financing is needed urgently to cope with the demands of ship and boat repairs, maintenance and construction in the “capacity cultivation period,” (2004 – 2008).
A privatized Nigerdock needs solid recoverable assistance to play its role adequately and competitively.
e) Operations Construction and Repairs Differential Subsidy Fund: The NMA should begin to promote the use of local shipyards for the above purpose by subsidising whatever differences they may pose in charges and costs. The researcher suggests that, the financing structure of this fund starting with NMA’s seed capital should be diversified as follows:
a) Applicant’s contribution 10 percent (min)
b) NMA, Bank of Industry & Other Agencies 30 percent
c) Primary Lending Institution 10 percent
d) Other Syndicated Interests (Consortium of Financial Institutions) 50 percent.
2.9.4viii- Size of Funds and Duration: In the short-run, (1-2years) the strategy is to build up a fund of at least US $150m based on the contribution ratios in the last sub-heading. This fund will be for procuring vessels needed immediately for cabotage purpose as well as other essential acquisitions. A further study may be prompted by this episode. In the mid-term, the NMA should seek to explore all bilateral and ship-yard liaisons and take advantage of several deals, leases and supports on offer. It is important that, within the first two phases, support should be granted to shipyards, other maritime infrastructure and services. Within the period of four years, NMA’s fund should have grown to about $500m revolving the fund. This amount should constitute the limit until a further review. It must be pointed out that this limit for the revolving fund including direct funds contribution and use of guarantees where applicable. Details could be worked out by the Business Development Unit, supported by consultants.
Apportionment and disbursement from this fund should be based on modalities recommended by experts. However, there should be a clear policy to weigh disbursements in favour of areas which the NMA, from careful studies, would have determined to be most deserving, considering its mission of building a competitive domestic shipping industry. However observations made above under SEMID should inform the rationale and priority and could be reflected in further studies and analysis to provide guidelines and specific industry needs and responses.
2.9.5 Review and Assessment of Past and Current Situation on Ship Acquisition/Ship Building Fund.
A review of SASBF: The NSPA in section 13 clearly spells out the mandate of the NMA which is to assist Nigerians in the development and expansion of a national fleet. In other words, one vital parameter to assess the performance of the NMA could be to evaluate the extent, quality and sustainability of support it has offered the indigenous shipping operators acquire or repair their vessels, and also, forms of operational support it has given to make them remain in business.
Earlier, the researcher made a referral to what could have been the cause for suspending the Ship Acquisition and Ship Building Fund (SASBF) in 1995. What we propose to do here is to visit the instrument of fleet expansion schemes, analyze the suspended SASBF together with its operational guidelines, nature of loans and its loans recovering mechanism, even if not within the whims of this particular study, (because of lack of time and other logistic problems) that prohibit the researcher from doing so now, it will surely be done at a later date. This is expected to throw more light on the causes of failure of the scheme.
2.9.5i Comparative Fleet Expansion Scheme:
The USA, apart from the various fiscal incentives offered to traditional maritime nations, also extends quite a strong support by way of financial aids to her shipowners especially by investing in, and encouraging them to patronize local shipyards. By this strategy, two goals are achieved. Not only are the shipping services offered by their nationals indirectly subsidized with the goal of an enhanced competitiveness, their shipyard also grow stronger to support the economy as well as provide social benefits of massive employment generation.

2.9.5ii- The suspended SASBF:
This Fund was established by the NMA pursuant to sectors 13 of the NSPA. Apart from the fact that this very important instrument for expansion of national fleet was given only one (1) section with four (4) brief subsections by the Act failed to provide sustainable, self-revolving mechanism for the fund. It rather placed, in sub-section 13 (4), the responsibility of providing “general procedure and guidelines for the administration and the carrying into effect the purposes of the fund”, entirely on the shoulders of the Minister.
Unlike its United States counterpart, the SASBF was imprecise, ambiguous and susceptible to manipulations and extraneous influences, to the extent that, there was no way the fund could have been revolving. The Act did not even clearly suggest this vital element. Also, the fund was not truly established, no clear mandatory rule was made on its funding, the credit limits and monitoring/recovering mechanism were not spelt out. Compare this with the USA maritime Act, 1936, Title Xi. These lapses obviously made the task of administering the fund quite difficult for bureaucrats who must accept in the absence of clear restraining laws, in the influence of their political masters. Even at the point of financial exhaustion of the Authority, it is intriguing that requests for loans and approvals to such loans were still being forced on the NMA; meanwhile, the rate of default in keeping to loans granted was very high. Indeed, the suspension of further disbursement from the fund was sound and informed. There was a need to take stock, review strategy and procedure as well as general evaluation of performance.
That the scheme failed is not an issue of debate. First, it was not properly funded neither was it replenished, given the poor repayment response by the scheme beneficiaries. Second, in spite of the amount of money granted, all the addition recorded in domestic tonnage was mere 52,000 DWT. Worse still, the average age of the so-called vessels required was over 25 years, considered in shipping circle as the limit of useful engagement of dry cargo vessels and 20 years for tankers.
How was the fund given for this type of tonnage acquisition? The operational guidelines and procedure used by the defunct SASBF, as noted were quite susceptible to extraneous influence. Not only were the evaluation and approved processes for loan requests done in-house by bureaucrats who could easily be instructed against their judgment, the approval loans were also disbursed direct to loan beneficiaries. In this circumstance, it was not easy to confirm whether loans were actually utilized for the purposes they were granted.
The post-approval process only involved an assent from the ministry where after the beneficiary was requested to forward certain particulars and information. Lack of control of the vessel acquired accounted for the poor repayment record and also the quality of vessel. One more debilitating factor was the issue of loan amount approved. It would appear that certain decision to reduce loan request were taken arbitrarily, regardless of the actualization of the purpose of request. In a situation where the Authority could not grant loan request in full, needed detailed renegotiation and alternative financial leverage should have been ascertained. The practice of handing over to applicants what the Authority could afford to give as loan was an indication of lose financial appraisal and monitoring mechanism. It was an invitation to failure for the fund.
The loan structure offered by the Authority for a maximum of six years reflected poor understanding of the shipping market and presented a triple tragedy. For old vessels with high maintenance costs, not only was a moratorium of one year insufficient, the compression of repayment tenure to between three and five years also implied an exaggerated view of the earning power of the acquired ships. It created little room for cash flow problems which were common in shipping yet the age of the ship could not permit a longer amortization schedule. Also, granting loans ranging from $.5m to $2.5m to private shipping companies to acquire old ships for tramp operations reflected poor analytical and technical judgment.
Another major defect was the issue of age, route and viability of acquired vessels. These indeed reflected the status of ship appraisal, credit analysis and operational techniques used by the NMA. A closer examination of each of the requests would have sent signal as to their viability. The case of the NNSL was even more depressive. Money was just thrown in at problems, not minding their nature, demand and timing. Indeed there was no way such funds could have been recovered. In the end, the SASBF lost all the funds amounting to US $53, 619,493 granted to the NNSL. For now, a total of US $18,975,880, ￡64,622 and N135m Naira remained outstanding.
On the part of the loan beneficiaries, defaults arose from both internal factors peculiar to shipping companies and external ones that were beyond their control. However, a sound business plan must include a thorough feasibility study with sufficient provision made for variance based on painstaking sensitivity analysis. Not only was their judgment in ship markets, route and ship specification suspect, there were also indications of the absence of track record and commitment to the venture; and a poor management and understanding of the key critical factors for survival of shipping business in the Nigerian environment.
With little statutory support to enhance their competitiveness, there was every likeli-hood that such investments could run into troubled waters. At the point of business distress, no conflict reduction mechanism was erected. The creditor and borrower were just not meeting to find solutions. Even the well meaning and determined ship operator could not be helped as no particular instruments were in place to address each case on its merit. The result is that, out of eleven beneficiaries only two could be said to be performing.
In a nutshell, the SASBF failed, not because it was a bad policy. However, the law was sketchy, full of gaps that encouraged arbitrariness, political influences and implementation by an institution exposed to such dangers. From NMA, there was absence of rigour in handling loans appraisal, disbursement, and monitoring and recovery mechanisms. All these gaps exposed the authority even more to outside influences. The beneficiaries showed little preparedness for a volatile sector like shipping investment. It would appear as if most of them merely sought to avail themselves of the available fund which they perceived as a national cake. That object of the SASBF, in a way, encouraged this feeling as it implied that the national fleet must be expanded regardless of its sustainability and competitiveness. Given the absence of these key qualifiers, it was the case that decisions rested more on non-financial/non-economic criteria. Consequently, the national fleet could not be expanded on the structure and procedure of the defunct SASBF (Asoluka 2003. pp. 257-262).
2.10 STRUCTURE AND SOURCES OF SHIPPING INVESTMENT FINANCE:
(i) Global Trends: The current situation world – wide is that government support shipping through policy and regulatory means to enhance the competitiveness of their private shipping concerns. This arises from the very nature of shipping business which is fiercely competitive, capital intensive and safety conscious, and within investment, is further exposed to the slippery terrain of market volatility. Both ship prices and freight rates have been known to move in fits and bursts. Yet, government has recognized and pursued measures to support shipping on points of both economic and social expediencies. The benefits outweigh the costs in the end.
In order to ensure the viability of shipping, individual governments have adopted the use of a combination of instruments to intervene, either on the supply side or the demand side of maritime service. Another study on cargo support programme (CSP) has dealt extensively on the issue of demand – side intervention in shipping. What can be added is that this policy is often criticized as protectionist and anti–trade.
However, the instruments of supply – side intervention remain commonly used more by the so called liberal maritime nations. Although in a strict sense, such intervention could distort the efforts of market forces, it has been distinguished from the demand – side intervention. Instruments include financial assistance in the form of soft loans, grants, subsidies, guarantees and fiscal incentives. It is clear that loans, interest subsidy, general repayment tenure, grants and other tools are commonly used by EU countries to cushion the exposure faced by their nationals in shipping investments. Also, various types of fiscal incentives and tax concessions are adopted by most EU countries in order to make their ship owners more competitive.
ii. Structure of Fleet Expansion: - Although many methods of financing ships and other maritime infrastructure have been developed, they can safely be classified into two: Equity financing and debtor financing. Equity describes the investors funds which are put into a given business venture. In terms of business returns or even failure, he is always the one that gets the last treatment after repayment of various debts. Ship investment is not noted for high returns neither does it ripen quickly for profit. In Nigeria, as in most of the developing world, fleet expansion and investment cannot possibly be so financed.
To complement equity in fleet expansion are the various forms of debt financing structures. There is an increasing reference to mezzanine finance defined as encompassing a broad spectrum of financing that ranks between pure quality or ordinary share and forms of senior debts (loans) which fall within traditional bank lending parameters. Mezzanine finance can utilize either debt instrument or quasi-equity but generally, provides a return much higher than pure debt finance for every high-risk exposure. For long-term funding, the capital market could be relied on, although, this has recorded quite a limited success in shipping.
Other forms of debts financing include legally enforceable loan agreement where the borrower pays the lender interest at predetermined intervals with repayment of principal after a specified period. This form is always supported by accepted forms of security i.e using the ship as collateral as in mortgage, or the cash flow earned by the vessel. In the event there is a time charter income, it can also reinforce the collateral as it guarantees future earnings.
Another form of financing occasionally viewed as alternative to debt finance is leasing. The growth of this instrument in ship financing structure is due to the greater flexibility and financial advantage it offers shipowners when compared with conventional financing structure. The two basic types of leasing in fleet expansion are:
a. Financial leasing which transfers to the leasee great operational agreement responsibility. The lessor signs the ship purchase contract and is effected by means of a bareboat charter party over an agreed period of lease.This may include a right to purchase the asset at the expiration of the lease.
b. Installment sale leasing allows the lessor to purchase and transfer ownership to the ship owner who then makes payments on agreed installments. To secure sale proceeds, the lessor normally takes a mortgage on or place liens against the ship.
iii. Sources of Finance: - Shipping financing was traditionally handled by large banks, which in exchange for their loans accepted ship mortgage or charter party as collateral. The volatile nature of the ship market has in recent times made ship financing difficult and expensive in an already highly international and competitive environment.
For new ship acquisition, financing has also been done by a combination of credit from the following sources.
- Government loans or guarantees , covering up to 87.5 percent of ship value, in USA for example;
- Government export credits, eg the US facilities to shipyard to improve their competitiveness;
- Supplier credits which may include shipbuilder’s loans; and
- Commercial loans against charter and agreements or other acceptable collateral.
In support of ship financing, a number of different financial institutions have risen to provide a range of services including loans directly or in syndication with other bodies, private placement, facilitation bond, equity offering and securitization, fund managers, leasing and risk management services. The major players here include commercial banks, which provide the bulk of debt finance for ship acquisition. Key players include Citibank, DerNorske Bank in Norway, UBS and Midland Barclays. Apart from having dedicated fleet expansion departments, they also facilitate syndication when necessary. The tenor of loan term determines how they can be financed. Short-term loans have a maximum of five to six years, while they could offer term loans of two to eight years. This area of funding comes handier in financing secondhand building. Generally, loans interest rate is quoted at a margin over LIBOR, usually a spread range from 5/8 percent for an exceptionally strong borrower to 2 percent for a more risky transaction.
Other financial institutions involved in fleet expansion include ship mortgage banks that can arrange a more extended tenor of say 12 years. Loans however do not exceed certain limits, 60 percent in terms of ship value in Germany. For investment and merchant banks, they facilitate funding by arranging and underwriting ship loans. They can also arrange loan syndication, public offering of equity bond issues in capital market and private placement of debts, or equity with financial institution or private investors. Leasing companies specialize in leasing assets and can arrange long term lease of ship. The Japanese relationship with Hong-Kong ship owners in the Shikumi-Sen deal is an example. Under this arrangement, Japanese shipyards and intending charterers were linked with Hong-Kong owners to the benefits of all the three parties.
Shipyards credits schemes are possible because home government offer a number of financial and fiscal supports. These credits are often offered to domestic and foreign owners. Recently the OECD understanding on export credit set limits at 80 percent advance of 81/2 years at eight percent per annum interest. South Korea and China however seem to be excluded from this rule.
iv. Fiscal and Financial Supports: - Fiscal incentives and other financial support from government can go a long way to facilitate fleet expansion. Apart from clear subsidies as in Construction Differential Subsidy (CDS), Operating Differential Subsidy (ODS) and tax incentives as in Capital Construction Fund (CCF), the USA supports solidly its domestic maritime interests. The Federal Shipping Fund (46 App USC 1272 (2000)) of the US declares that:
There is hereby created a Federal Ship Financing Fund (hereinafter referred to as The Fund) which shall be used by the secretary as a revolving fund for the purpose of carrying out the provision of this title. The title deals with ship financing mechanism.
The law also empowers the secretary of transportation to guarantee, and to enter into the commitment to guarantee the payment of interest on and the unpaid balance of the principal of any obligation which is eligible to be guaranteed under this title.
This support is in response to the realization that shipping is of an enormous economic, social and strategic importance and that it is difficult to develop without government aid. In a situation where a nation maintains an absolute liberal attitude, it is most likely that its nationals in shipping would be facing some sort of unfair competition. This arises from the fact that the playing field is different from the competitions given the presence or absence of home government assistance to their respective shipping interest. This also underscored the deliberate strategy and significance of shipyard support scheme almost universally adopted by maritime states (Asoluka 2003, PP.235-239).
One point, however, is that any forms of assistance must take into account a deep knowledge of the real problems faced by the operators. Solution package should then be designed to strengthen competitiveness, as opposed to supporting inefficiency and incompetence. Support based on patronage cannot lead to growths, and so, can not be sustained. Therefore, it should be discouraged.
In the United States of America, the nature of guarantee is broad, covering ship acquisition, export vessels, reconstruction or reconditioning of vessels or fishery facilities, construction and reconstruction or reconditioning of commercial demonstration, Ocean Thermal Energy Conversion Facility or Plant Ship. The area of shipyard modernization and improvement for advanced shipbuilding technology of a general shipyard facility located in the USA is adequately included in the title XI of the Merchant Marine Act, 1936, of USA.
One interesting feature is that, the fund is clearly established with a coverage and scope wide enough to accommodate both domestic activities and international shipping and allied activities. For details on procedure, it provides an outstanding limit not exceeding $12,000,000,000 as long as;
i. $850,000,000 shall be guarantees of obligations for fishing vessels and fishery facilities made under this title, and
ii. $3,000,000,000 shall be limited to obligations pertaining to guarantee of obligations for eligible export vessels.
For the amount of guarantee, “the Secretary shall not guarantee the principal of obligations in an amount in excess of 75 percent, or 871/2 as it is applicable under the title. The security interest may include a mortgage or mortgages on a vessel or vessels, as the Secretary may reasonably require protecting the interest of the United States.”
va Ship Financing in Nigeria: Banking service: - The difficulties in shipping in terms of financing and management in an emergent maritime nation like Nigeria are legion. The crewing and operational issues apart, the problem of finding finances and funds to invest in the sector is not easy to overcome. Going by recent events in the industry together with unfulfilled promises, the prospects of handy solution in the near future are challenges that require concerted and dogged efforts.
The general peculiarities of shipping are not quite known by the Nigeria financial sector. Hence, here is one investment that calls for large capital outlay. Its assets are quite mobile and demand constant tracking. Its market (shipping) is quite volatile in asset value and freight rates, all worsened by the fact that information on its activities is quite difficult to find and at times downright misleading.
With little or no track record by Nigerian shipping companies, the chances of their loan requests, on strict financial, commercial credit appraisal, remain weak. Thus, there is little comfort to financiers given the plethora of risks afflicting shipping investment in Nigeria. Such risks include the followings:
Vb Market Risk: The probability that the business will survive and bring value to the asset and make profit is low,
Vc Physical Risk: Given the age, quality and manning of the vessels here, there is a high incidence of accidents. So, the issue here has to do with the safety, loss or damage to vessel, including collision and seizure (recall case of MV Trainer and the Strict Port State Control regime now operating in shipping).
Vd Debtor Risk: Given poor route analysis and feasibility studies, the certainty of freight income casts doubt on whether the borrowers can repay the loan. Again, the recent experience of the suspended SASBF does little to reflect commitment character and capacity of prospective loan beneficiaries.
Ve Currency Risk: Nigerian banks deal in Naira while ships are purchased abroad in Dollars. As the Naira depreciates regularly against the Dollar, a huge exposure arises from any credit granted for income stream/freight that is Naira denominated. This fact gives the little comfort that what may look viable in Naira terms would be insufficient to offset liabilities of operational and financial costs incurred in dollars
Vf Interest Rate Risk: One characteristic of the Nigerian monetary system is the volatility or swings in interest rates. In a situation where the rates gyrate over 50 percent within a short spell, credit granted under a floating interest rate regime, as we have, can spell doom to maritime investment.
Vg Country Risk: Although normalcy seems to have returned with the advent of democracy, this is still a strong factor that can determine the viability, profitability and sustainability of shipping investment.
Vh Managerial Risk: Other studies have noted the ageing seafarers in Nigeria, coping with old vessels. The extent of navigating these “rusty buckets” acquired randomly for the sake of remaining employed cannot induce much confidence. Also, the current economic situation seems to have dried up funds needed to keep qualified seafarer operationally up to date and conversant with safety and environmental standards. This is the risk that can not be assumed as light just because we had in the past produced excellent seafarers. Moreover, successful shipping investment are not just started and concluded with seafarers, the other constituents’ services are equally important.
In the face of all these problems, three pertinent questions arise:
i. Does Nigerian shipping have a convincing case to warrant funding? This is crucial to the study as emotions alone cannot provide funds. Also it should guide our solution to the specific question to the NMA to successfully intervene.
ii. Has the Nigerian banking sector got the financial muscle, experience and commitment to support shipping in Nigeria now? and
iii. Can other sources including the capital market be called upon to support shipping in Nigeria now?
As it stands now, the NMA has not addressed any of these critical matters. Not only has the statutory instrument not sufficiently addressed the issue of funding, scope and spread of application and modality, the procedure adopted in the erstwhile SASBF failed to seriously look into such matters. For banks, it is quite clear that they did not understand the intricacies of fleet expansion. They were also fundamentally restrained by the nature of their deposits. One standing rule in finance remains that you can not borrow short and lend long. Their deposit is short and at best applied to money market operations and not for long-term needs of the shipping interests. Apart from this fact, the poor track record and non-provision of adequate security could negatively influence the attitude of banks generally. Compounding the matter further, is the unstable macro-economic frame-work with volatile interest and exchange rates. The reality is that the competence of the banking sector in shipping must be reinforced. The banking role needs to be properly aligned to serve the shipping industry in Nigeria within the constraints discussed “supra” (Asoluka 2003. pp 341-343).

2.11 CAPACITY OF SHIPPING AND DOCKYARDS IN NIGERIA.
Due to the relevance of the shipyards and dockyards to the indigenous ship expansion and acquisition programme and their importance in the enhancement of indigenous capacity in ship-building and repairs it is imperative to realize that statistics has shown that vessels repaired or constructed by the Nigerdock from 1986 to 2000 were as follows; since 1986, Nigerdock has dry-docked 400, repaired along quay 199 and 28 vessels respectively. This shows that the highest number of the types of vessels it repaired is tankers (97) followed by fishing/shrimp trawlers (76) General cargo/Merchant vessels (25), Naval ships (20) Tugs (20) with only passenger/vehicular ferries, whilst the least number of vessels repaired by it is Gas Tanker (1). This is an indication that the commonest type of vessels is operating and being serviced within the Nigerian Domestic shipping industry which are making use of the repair services of Nigerdock. The position is also an indication of the most and least available cargo since the nature of available cargo attracts the type of vessel to carry it. Crude oil and refined petroleum products, fishing activity and fishes and general cargo services can rightly be taken to be in such a sizeable quantity in Nigeria as to attract the high number of such vessel being repaired by Nigerdock. It is also clear that the highest number of repaired vessel (36) was recorded in 2001, which was an indication of increased capacity utilization, patronage and performance of Nigerdock in ship repairs, whereas, the lowest number (1) was in 1985. The achievement in completed repairs recorded in 2001 by Nigerdock could be seen as a sign of improved performance from the previous known record of 16 repaired vessels (records in 1998, 1999 and 2000 were not available) and higher patronage and readiness to meet shipowners’ repairs demand.
One can still see that, only 28 vessels have been built by Nigerdock since 1986. The first two were built in 1990, the highest number being eight in 1992; while the last two ships were built in 1999. Again the size or gross registered tonnage of the vessels or the duration of their construction are not known but they cannot be big vessels, bearing in mind, the facilities available to Nigerdock. From all indications, it can be seen that, 22 of the 28 vessels are made up of four passenger ferries, four mooring launches, five harbour launches, four water buses and five vehicular ferries. There are no tankers or trawlers or general cargo vessels or tugs among the vessel built by Nigerdock (Asoluka 2003, p.104).
At a recent Maritime workshop held in Lagos on “Challenges of Maritime Practice in the New Millennium” organized by the Federal Ministry of Transport in February, 2001 at Le Meriden Eko Hotel Victoria Island Lagos, the Managing Director of Nigerdock Nigeria Limited, Mr. Nkpubre said Nigerdock Nigeria Ltd had to date built 26 vessels (which are mainly waterways vessels) the highest tonnage of which is 150 tonnes. Although in the past three years the company’s facilities had been upgraded to build up to 30,000 gross tonnage vessels comprising mainly tugboats, coastal tankers and supply boats for which there is a potential market in the West and Central African sub-regions. However, he was reported to have admitted that Nigerdock equipment and facilities were fast deteriorating and needed to be re-equipped for better productivity. He also added that, there was a need to develop the technology and culture of building ocean-going vessels like oil tankers tugboats, service boats, trawlers which are essential for effective operation of the cabotage law (cf. the “Maritime Watch” column of ThisDay Newspaper of Friday, 19th October, 2001 page 27) (as in Asoluka 2003. p.105).
Presently, Nigerdock’s privatization paved way for the acquisition of 51 percent of the shares of the Federal Government in the company by Global Energy/Mc Dormott Consortium at N3.4b. The new ownership structure of the company may affect the policy and focus of the company entirely.
It should be noted from the forestated that, whilst Nigerdock may be able to cope with the repairs of expanded national fleet, consequent upon the introduction of the cabotage, and cargo support programme, it has not shown, from the number and types of vessels it has so far built that it has the capacity and capability to build enough coastal vessels, such as tanker, trawlers, general cargo vessels, tugs, necessary for the domestic shipping of the available cargoes which would facilitate a coastwise trade, nor meet the demands for the construction of coastal ships to be used in the cabotage trade by indigenous shipping companies. Regrettably questionnaires sent to Nigerdock intended to obtain data on its present capacities in shipbuilding was not responded. Response would have reconciled the differences in Nigerdock performance and capacity. For the failure of the other shipyards or repairs yards to respond to the questionnaires (thereby hiding their shipbuilding and repairs capabilities and activities) it is clear that some of them are no longer operating (Asoluka; 2003. p.105).
Daman shipyard, NPA Dockyard Burutu, Central Water Transport Corporation, Burutu were discovered not to be operating anymore. Since their facilities and records are not likely to surpass those of Nigerdock which claims to have the capacity to construct vessels of upon 30,000 deadweight, repair vessels of up to 25,000 deadweight and construct off shore/deepwater platforms, offshore buoys, yokes, piles, mooring systems, jackets, flow lines and risers, a lot of work still has to be done to upgrade their facilities, capabilities, and capacities before Nigerian shipyards can be relied on to build the Nigeria cabotage vessels in sufficient quantities.
The US had nineteen major shipbuilding facilities as at January, 1999 (MARAD 99, P. 16) (as in Asoluka; 2003. p. 106), whereas, Malaysia has not less than fifty-seven shipbuilders and repairs (Malaysian Maritime Yearbook 2000/2001, p. 204-205) as in Asoluka; 2003 p. 105), servicing their coastwise trade needs. No doubt the opportunity to build Nigerian coastal ships preserves shipyards’ base which can be used to track shipbuilding capability and activity. However, the capacity and facilities to build the vessels are equally important.
2.11.1 Availability of Cargo; Domestic Tanker Traffic Returns from 1977 to 2001.
The data on domestic tankers traffic returns for the years 1997, 1998, 1999, 2000 and January to September, 2001 shows the lowest number of indigenous tankers involved in the domestic shipping of petroleum products. In April they were five (18 percent) out of the 18 tankers involved whereas, the highest number of indigenous tankers involved in the domestic shipping in November1997 indigenous carriers were 17(65 percent) of tankers so involved. However based on the 132 vessels involved in the carriage of petroleum products, the percentage of both the volume of the products which indigenous tanker discharges (77 percent) and loaded (71 percent) in 1997, were higher than the percentage discharged and loaded by foreign tankers. It also shows that 292, 392 and 1,759, 613 metric tons of the cargo were loaded and discharged respectively domestically in 1997.
It can also be seen from statistics that in 1988 there was a fall in the percentage of the total volume of petroleum product lifted by indigenous carriers to 41 percent (747, 973) of the loaded cargo and 14 percent (559, 637) of the discharged cargo even though more indigenous tankers (180) than foreign ones (169) were involved in the carriage of the cargo. The highest number of indigenous carriers (12 out of 20 or 60 percent) involved in the carriage in 1998 was in March, whilst the lowest number (14 out of 35 or 40 percent) was in October. The total volumes of petroleum products discharged and loaded in 1998 were 559, 635, and 1,841, 733 metric tons respectively.
Statistics shows that even though the number of indigenous tankers involved (169) was higher than the total of foreign tanker involved (152) the percentage of the total cargo discharged (174, 632 out of 468,255 tons, i.e 37 percent) and loaded (76299 out of 2,265,877 metric tons, i.e 34 percent) respectively by indigenous carriers, were lowers than those of foreign tankers. The highest percentage of indigenous carriers involved in the carriage of the cargoes in 1999 was in August, when they were 13 out of 22 (59 percent) and the lowest was recorded in October when they were eight out of 19 (42 percent).
It has been observed that the percentage of the proportion of the total petroleum cargo (2,000,603) in the year 2000 loaded by indigenous carriers (27 percent comprising 535,374) fall, whilst, the percentage of the total cargo discharged by indigenous carriers rose to 56 percent made up of 360,570 out of 648,266 metric tons. The number of indigenous carriers involved in 2000 in the carriage of the cargo (115) was less than the number of foreign tankers involved (137). The returns for the year 2001 is for only nine months and has revealed that even though more (105) indigenous tankers had taken part, 26 percent of the total loaded cargo was carried by indigenous carriers, whilst foreign tankers carried 74 percent. Even though indigenous carriers carried 75 percent of the total cargo discharged, the total volume discharged (51,411) is quite low compared with previous years or corresponding period in the previous years. Out of the total metric tons of 1,934, 480 loaded, foreign vessels carried 1,441,107 which is a big chunk of the total volume.
The following findings are made from the above analysis of the data on domestic tankers traffic for the years 1997 to 2001;
i) The volume and traffic of petroleum cargo loaded and discharged and warranting carriage by tankers in the domestic shipping industry is high. They run into about 2million metric tons on the average per annum.
ii) The business of carrying petroleum and its products in the domestic sector is still being dominated by foreign tankers despite the fact that indigenous shipping companies now have a lot of tankers (going by the repair capabilities of Nigerdock and the number of indigenous vessels involved in the carriage between 1997 and 2001 for instance), and that, this cargo generated within the Nigerian territory. Apart from the year 1997, when indigenous carriers dominated the volume of such cargo loaded, foreign tankers dominated it in 1998, 1999, 2000 and 2001. Indigenous carriage cannot also be said to be dominating the discharging or carriage of the petroleum products discharged in the domestic markets.
iii) The trend since 1997 to date of petroleum products being loaded by indigenous carriers has been that of a systematic decline.
iv) With a less number of tankers than indigenous shipping companies, foreign owned vessels lifted more petroleum products than indigenous shipowners, and so the indigenous shipping companies must have been competing on an un-level playing filed with foreign owned ships.
v) Cabotage policy will prevent foreign vessels from partaking in the whole cargo for Nigerians and enable indigenous shipping companies to be assured of cargo thereby increasing their tonnage for lifting the cargo which foreigners would no longer lift due to the operation of cabotage policy. This will therefore, perfectly fit into the cargo support programme of the management of the NMA.
2.11.2 Domestic Waterborne Petroleum Products.
From chief Chris Asoluka and Co’s findings from the staff of the pipelines and Products Marketing Company Limited (PPMC), a subsidiary of the Nigerian National Petroleum Corporation, are as follows:-
- PPMC is not involved in the shipment of crude oil on the Nigerian Coast, but is involved in the coastal shipment (which is a lot) of refined petroleum products such as Diesel Purpose Kerosene (DPK) which includes kerosene and jet fuel, Automotive Gas Oil (AGO) that is to say, Diesel, Premium Motor Spirit (PM or Petrol) Liquefied Premium Gas (LPG) or cooking gas all of which are clean products, and fuel oil which is one of the dirty products.
- The Crude Oil Division of NNPC in Abuja handles the shipment of the share of the Federal Government based on production sharing agreement with its oil exploration joint ventures, whereas the latter oil companies individually handle the carriage of their shares of the crude oil.
- The Supply of Crude oil to all the Nigerian refineries for refining into other products is by pipelines and only the Kaduna refinery refines imported crude oil which is transported through Escravos and Warri to Kaduna in addition to Nigerian crude oil whilst the rest refine only Nigerian crude oil. The main domestic coastal traffic for shipments of petroleum products are the Warri/Port-Harcourt to Lagos and Calabar to Warri to Port-Harcourt, vice versa, whereas imported refined products are also brought into Lagos from the ship at sea, through lighterage.
- About 80 percent of the coastal vessels involved in the transportation of refined petroleum products are owned by Nigerian operators. The Nigerian operators involved in such shipment acquire their vessels on charter from foreigners and sometimes under commission arrangement. Many Nigerian operators are more interested in the commission earned than in developing the shipping industry. Their vessels are very old and usually not seaworthy.
- The NNPC has only two tankers MT TUMA (1985 with deadweight of 136,000 MT, it can store up to 100 million liters of refined products) which is used for the storage of refined products and MT Oloibiri (1978) which has a deadweight of 276,000 MT, it can store about 1.6 million barrels of crude oil) MT Oloibiri is said to be presently on bareboat charter to Texaco Overseas at Pennington, whilst MT TUMA now receives AGO from import vessels and also transports same into smaller vessel for distribution on the coast. So, the NNPC/PPMC relies on either time charters for usually an initial period of two years subject to renewal from five to seven years, or on contract of affreightment, or volume charter where the tanker is guaranteed three shipments per month or payment in lieu in the event of non availability of products for shipment. As contained on pages 5-6 of the paper, “Supply of products/chemical Tankers and Tugboats to NNPC” the average gross rate per day payable by the NNPC/PPMC for time chartering vessels of different sizes for coastal movement of refined products, is as follows: US$11,111.11 US$13,333.33 for Gas carriers of size 1,500 -2,500Mt; US$9,444.44 US$10,556.56 for products tankers of 800-10,000mt and US $15,556.56- US$17,222.22 for product tankers of size 20,000-30,000mt; whereas for volume charter in respect of which three voyages are guaranteed a vessel per month, the going market rate is between US $10 and –US $12 per metric ton and US $ 70-85 per ton for gas carriers. The paper also estimates that NNPC/PPMC will need at least one gas carrier of 1,500 to 2,500mt, three or four product tankers of 8,000 to 10,000 and two product carriers of between 20,000 and 30,000.
- The shortfall in refined products from the refineries and the non-availability of product for the vessels to carry led to the under-utilization of the coastal tankers used by the NNPC/PPMC for coastal shipments. The number of coastal tankers employed by the NNPC/PPMC has been reduced from 20 to nine presently, six of which are on contract of affreightment while the other three are on time charter. However, its hiring of vessels is based on advertised biddings showing the required number, size, and type vessels. Vessels to be used in Warri and Calabar must be flat-bottomed in view of the drafts of the ports while fuel oil shuttles must be fitted with heating oil. As a result of vandalizing of pipelines which has affected the movement of refined products especially the port-Harcourt, Abia, Enugu, Auchi, and Benin axis and the Warri Benin, Ore, and Shagamu axis, it is expected that pipelines would not be able to handle the expected increased supply of refined products when the rehabilitation work on the refineries are completed and operate at optimum capacity. So, coastal tankers would still have to be heavily relied upon for the movement of petroleum products to the South West which consumes 40 percent to 50 percent of the refined products nationally.
Even when the pipelines are fully functional, 60% of the suppliers of petroleum products to the South West is by coastal vessels through Lagos jetties. It is important to realize that, the volume of deliveries to Lagos jetties between 1994 and 1998 from which it was been concluded that six vessels vessels would be needed to deliver petroleum product to the Lagos area every month.
- Consequentially, the inability of the NPA to adequately furnish tug services to the NNPC/PPMC in order to ensure the prompt berthing and sailing of the vessels hired by it the NNPC/PPMC now hires tugboats, which are already four in number for these purposes. Three of the tugboats are in Lagos area to take care of the increased activities due to ship-to-ship operations in Lagos while the remaining one is working at the Okrika jetty (Asoluka; 2003 p.111).
2.11.3 Domestic Waterborne Transportation of Gas (LNG)
The Nigeria LNG limited was granted certain guarantees, incentives etc. by the Federal Government under a Decree in 1993 in order to encourage the huge investment in the tapping of Nigeria’s Liquefied natural gas which was being wasted through flaring. Even though in the letter dated 27th November 2001 written in response to the consultants questionnaire the company claimed not to be involved in the carriage of gas domestically but internationally and not to be governed by the national shipping policy Act, it is submitted that the company has enjoyed enough incentives, guarantees and protection which should now be withdrawn. Recently, a national newspaper reported the arrangements the company had been making to ship gas domestically. This information is worth investigating. In the regime of cabotage, there is no cargo shipped domestically that indigenous shipping companies are the ones that the carriage of all cargo generated domestically are reserved for in a true cabotage regime.
In Malaysia for instance, Malaysian tonnage dominates the carriage of LNG from LNG plants in Bintulu, Sawarak to various consuming markets with a fleet of 13 vessels which is acclaimed to be the single largest owned, managed and operated fleet by a shipping company (Malaysian International Shipping Company (MISC) in the world. Malaysia has a strong presence in LNG shipping in the international trade. There is no reason why Nigeria which is equally a gas-rich and gas producing country should not involve its national fleet in the carriage of LNG both domestically and internationally. If the Nigerian shipping companies lack the gas tankers needed for its carriage, the government and its agencies should empower them to do so.
Observing from the aforementioned therefore, using cabotage policy by NMA’s management to achieve national cargo support and indigenous vessel expansion and acquisition programmes is defensible, viable, sustainable, and so, should be pursued without further delay. To further justify the above conclusion, it is necessary to refer to the statement recently made by Clyde J. Hart Jr. as US Maritime Administrator, to the students of the US Merchant Marine Academy (Kings Point) on the Jones Act. He said:
The Jones Act has been a cornerstone of US maritime policy in every Administration since its passage 80 years ago. In the first days of the new century, it remains relevant for America’s economic health and for national security. Yet critics continue to doubt its necessity and fairness. The most important and let me add, legitimate, question one can ask about cabotage laws, is, “Are they necessary?” And secondly, because that is important to Americans as a people; “Are these laws fair? The “why” question has a very simple answer. Cabotage laws are critical to every maritime nation’s security interest. More than 40 nations – including all G – 8 members – agree that “free markets” are bedrock ideas but secondary to the welfare of their citizens … Fairness? Who really believes that if Jones Act were repealed the market place would provide affordable services on non-profitable routes? Domestic trade operators furnish reliable, efficient water transport to distant US offshore areas with limited market size, seasonal demand and generally one – way trade (Asoluka, 2003, PP.120 – 121).

2.12 THE NATIONAL SHIPPING POLICY ACT;
Introduction:
The legal framework for the achievement of the statutory objectives and the exercise of the statutory functions of the National Maritime Authority have already been set out in the National Shipping Policy Act (Cap. 279 Laws of the Federation of Nigeria, 1990), which also created the Auhority, (Cf. sections 1(1) and 1(3).
One of the most important functions of the NMA is to co-ordinate the implementation of The National Shipping Policy as may be formulated from time to time by the Federal Government (Cf. Section 4(a)). The National Shipping Policy ought to include the cabotage policy or the cabotage Act. It is an enormous function which the makers of the National Shipping Policy Act intended to enable the NMA supervise, organise, direct, manage or harmonise the implementation of the National Shipping Policy formulated by the Federal Government.
In their paper, John Corkery, Anthony Land and Jean Bossuyt identified seven stages in the policy formulation process namely, identification of policy issue, specification of objectives, development of options, choice of preferred options, policy decision making, design of implementation strategy and policy review and implementation strategies. Chrzanowski in his book on maritime economics stated that:
“National Shipping Policy, an element of overall economic policy, expresses the attitude of the State to shipping. Shipping policy can be understood as the totality of economic, legal and administrative measures by means of which the State influences the position of its national fleet, that is, its place and role in the national economy and in international freight markets”.
The attitude of the State to its own merchant marine, as a rule, reflects indirectly its attitude to the fleets of other countries’ shipping policy, then has two aspects: foreign, expressing the attitude to other fleets; and domestic, to own merchant marine. In another paper, it was shown that “Shipping Policy” could be interpreted in a wide sense to cover the entire maritime sector or in a narrow sense to cover trade and service related to shipping policies and that, even if interpreted narrowly, a shipping policy cannot be developed in isolation but must take into account policies being developed at ports, infrastructure and ancillary services, road and rail transport and related industry sectors. A comprehensive maritime policy which government should formulate should therefore include ports infrastructure, maritime services, and comprehensive shipping services for trade, development of national shipping capabilities, safety of life and protection of maritime environment, and human resources development.
For instance the Malaysian shipping policy focuses on two main issues: Fleet expansion and Port development. The aim of fleet expansion is to reduce dependence on foreign vessels for the shipment of Malaysian cargo and minimize the economic vulnerability caused by over-dependence on foreign fleets for carriage of cargo. The goals of its port development is to make its ports transshipment hubs for South East Asia, encouraging local shippers to ship through national ports to prevent capital flight and ensure growth of other maritime related services such as shipbuilding, ship handling, banking and insurance. The objectives of the Indian shipping policy since independence have been to safeguard the importation of essential supplies for the national economy, to reserve 100 percent of coastal trade for national flag vessels, to ensure adequate provision of shipping services to meet the needs of national trade, to improve the balance of payments position through import substitution and export of shipping services; and to develop merchant fleet to act as a second line of defence to protect India’s maritime interest and preserve its channels of communication.
2.12.1 Statutory Objectives of NMA on Cargo Support and Indigenous Vessels Expansion and Acquisition
There are certain provisions of the NMA Act that give directions on the nature of cargo support and indigenous vessels expansion and acquisition programme to be applied and executed by the NMA. They are as follows:
It shall be the objective of the Authority to:
a. Correct any imbalance in the Nigerian shipping trade for the purpose of implementing the provision of the UNCTAD code of conduct for Liner Conference, especially to observe the ratio of 40:40:20 in respect of carriage of goods to Nigerian ports;
b. Improve Nigeria’s balance of payment position by enhancing the earning and conservation of foreign exchange from the shipping industry.
c. Ensure the greater participation of indigenous shipping lines in liner conferences thereby influencing the decision making processes of such liner conference servicing the Nigerian international sea-borne trade.
d. Promote the acquisition of shipping technology by creating and diversifying employment opportunities in the shipping industry, through the stimulation and protection of indigenous shipping companies.
e. Increase the participation by indigenous Nigerian shipping lines in ocean shipping through the application of the provision of the UNCTAD code on General Cargo and by entering into bilateral agreements or other suitable agreements.
f. Encourage the increase of ownership of ships and the achievement of indigenous skills in maritime transport technology.
g. Achieve a systematic control of the mechanics of sea transportation.
h. Promote the training of Nigerians in marine transport technology and as seafarers (cf. section 3) as in Asoluka; 2003 p.124).
Even though, in achieving its statutory objectives of implementing the UNCTAD code of conduct for liner conference and increasing participation of indigenous Nigerian shipping lines in ocean shipping through the provision of the UNCTAD Code on General Cargo, the NMA would be offering Cargo Support to indigenous Nigerian shipping lines or companies. The ratio of 40:40:20 in sections 3(a) of the Act applies in the realm of international deep-sea shipping; and increased participation of indigenous Nigerian shipping lines in ocean shipping is envisaged in section 3(h) (cf also section 4(a) of cap.297). Coastal and inland water-ways transportation which cabotage is concerned with, are excluded in the scheme of cargo support programme or the objectives envisaged by the makers of the Act to be achieved by the NMA. This is inspite of the fact that one of the special functions of the authority is the investigation, determination and keeping of the records of inland water transportation including their relation to the transportation by land and air (cf. section 5(j) of cap 279). Therefore, the Act has no direct and exact cargo support objectives to be achieved by the NMA in respect of cabotage services or policy.
Furthermore, even though the provisions of the Act on cargo sharing (Cf. Sections 18 and 19 of cap. 279) and cargo reservation (Cf. Section 14) are for only shipping companies with national carriers status in foreign trade and not in respect of coastal and inland water trading, the Act has not excluded foreign ships from coastal and inland water trade as required in a cabotage regime and as such the Act is not very helpful in the implementation of a true cabotage regime in Nigeria through the NMA.
However, in respect of indigenous vessels expansion and acquisition programme, the Act contains provision that will indirectly and directly achieve the objectives of the NMA.
Pursuant to section 3 (i) of the Act, NMA’s objective of encouraging increased ownership of ships and acquisition of skills in maritime transport technology without limitation to only sea-going vessels, provides it with the needed basis for cabotage vessels expansion and acquisition programme. By encouraging such a vessel’s expansion and acquisition programme, the NMA will indirectly be improving Nigeria’s balance of payments position while enhancing the earning and conservation of foreign exchange generated through the shipping industry (Cf. Section 3 (b) of cap. 279). This is because, cabotage vessels would be built and or repaired in Nigeria instead of being purchased or repaired abroad in hard currency which depletes the nation’s foreign reserves and induces balance of payments problems. Freights and insurance premiums earned by foreign ship owners and insurers would also be earned by Nigerian tonnage that would lift the cargo internationally as well as our local insurers. Moreover, through cabotage policy, the NMA could achieve its objective of a systematic control of the mechanics of sea transaction (Cf. Section 3 (i) of Act) as a result of the experience and control gathered from coastwise trading.
NMA’s indigenous maritime capacity enhancement can stand on its statutory objectives of promoting the acquisition of shipping technology through the stimulation and protection of indigenous shipping companies and the promotion of the training of Nigerians in maritime transport technology and as seafarers (Cf. Section 3 (c) and 3 (k) of the Act). As in Asoluka, 2003 P.125)
One of NMA’s functions is stated to be the supporting of indigenous companies in fleet expansion and ownership (section 4 (c) which includes those in coastwise and inland water trade. When it comes to lifting cargo or cargo support, NMA’s function of ensuring the carrying of at least 40 percent of the freight in revenue and volume of the total trade, relates only to shipping companies with Nigerian “national carriers’ status”, which are involved in international sea-borne trade (section 4b), thereby excluding cabotage trade or domestic waterborne transportation. So, it is clear that the Act gives the NMA the function of supporting indigenous vessels that are involved in deep-sea shipping and owned by shipping companies conferred with “national carrier status” in the area of availability and provision of cargo to be carried, thereby excluding cabotage vessels or cabotage shipping companies. But, in the area of indigenous maritime capacity enhancement and ship expansion and acquisition, the Act makes room for the vessels and shipping companies (whether or not national carriers), engaged in both deep – sea shipping and domestic waterborne transportation to be assisted by the NMA. Since national carrier ships are to operate on the deep – sea and not on the Nigerian coasts or inland waterways which cabotage laws deal with, the provisions of the Act are inadequate for a true cabotage regime.
In the light of this defect of the Act, it is obvious that the ominibus section 4(g) of the Act was put there by the framers of the Act to fill gaps as related to NMA’S performance of its statutory function.
Section 4(g) of the Act provides as follows.
The function(s) of the Authority shall be to perform such other functions as may be required to achieve the aims and objects of this Act or any national shipping policy as may be formulated by the Federal Government pursuant to this Act.
The above section has two alternate legs. The first allows the NMA to perform functions other than those in section 4 subsection (a-f) of the Act, which are for the purpose of achieving, not just the aims and objectives of the Act as stated in section 2 of the Act, but also for achieving the aims and objectives of the Act as a whole. The second allows the NMA to perform any function other than those in section 4 subsection (a-f) which are for the purpose of achieving any national shipping policy formulated by the Federal Government pursuant to the Act.
Therefore, pursuant to section, 4(g), any of the functions of the NMA in the Act that gives cargo support to indigenous shipping companies, or any national shipping guideline on cargo support for indigenous shipping companies in domestic waterborne transportation by way of the cabotage principle formulated by the Federal Government could be performed by the NMA as part of the Authority’s statutory functions. So, under, and by virtue of the omnibus section 4 (g) of the Act, the seeming lacuna in NMA’s statutory means of achieving cargo support for indigenous shipping companies in domestic waterborne transportation, can be appropriately filled.
Moreover, the term “national carrier” in the Act is difficult to interpret because on the one hand “national carrier status” may be granted to a shipping company that meets certain conditions in which case, it is a reference to a shipping company, (cf. section 7(c) of the National Shipping Policy Act, and on the other hand it is a reference to certain vessels (cf. section 12(1) and (2). Another problematic area for cabotage is section 7(b) and (d) which state: The Authority may grant national carrier status to a shipping company if:
The vessels owned by the company operate on the deepsea and not on the Nigerian coastal or in-land waters; and
The company owns at least one ocean-going vessel of not less than 5,000 net registered tonnages.
Since “the” is a definite article (according to Asoluka, 2003 p. 127), its effect is that all the vessels of the shipping company concerned must be operating in deep sea and not domestic waters, thereby disqualifying vessels in their fleet from being conferred with a national carrier status. Vessels of at least 5000GRT are already outside the non-conventional vessels usually used in coastal waters. The costs of their purchase meet IMOs regulations but may be burdensome, if not too high, for an indigenous shipping company to bear. However, because “may” and not mandatory “shall” has been used by the legislation in section 7, the NMA can still grant national carrier status to a shipping company which has vessels operating in both deep sea and coastal and inland waters or those not meeting all the conditions in section 7. But since “may” is also sometimes interpreted as mandatory if it is so construed in section 7, a “national carrier status” may not be granted to a shipping company which has vessels operating in both deep sea and coastal and inland water and not meeting all the condition in section, 7.
Besides, even though the Act stipulates that all “national carrier” vessels and other Nigerian-flagged ships shall be serviced, repaired and maintained where practicable in Nigeria (cf. section 12(1) and 2) it does not go far enough as required in a true cabotage policy to provide that all other non-national carrier Nigerian-ships shall be built in Nigerian (provided there is that capability) and/or owned by Nigerians.
Equally, an anti-cargo support for cabotage shipping companies and against the use of cabotage policy by the NMA for its cargo support programme in the Act is that, in regulating the bulk dry and wet cargo to be reserved and shared and the shipping companies to be allocated the said cargo, the Act limits it to cargo meant for international deep sea shipping, the carriage of which is to be by only the shipping companies with national carrier status. Section 8(2) of the Act states:
Nigerian operators wishing to charter vessels shall make national carriers operating national flag vessels their fleet choice and consider other vessels only when vessels are not available as stipulated in subsection (1) of this section.
This is another cargo support for national carrier. Since some of the conditions for a shipping company’s qualification for national carrier status is that the vessel owned by it operate on the deep sea and not on the Nigerian coastal or inland waterways and that it owns at least one ocean-going vessel of not less than 5000 net registered tonnage (cf. section 7(b) and (d)), a shipping company operating on the Nigerian coastal or inland waterways (which is what cabotage is all about) appears to be excluded from being granted the national carrier status. National carriers are thus given an edge over non-national carriers in the procurement of cargo by their vessels.
In addition, the Act provides in section 9 as follows:
(i) Subject to subsection (2) of this section and in addition to cargo as defined under the UNCTAD code of conduct for liner conference, national carrier shall have the right to participate in the carriage of bulk cargo (dry or wet)
(ii) The participation of national carriers in the carriage of bulk cargo to and from Nigeria shall be subject to carriage right of not less than 50 percent of such cargoes
(iii) All other cargo to and from Nigeria outside the jurisdiction of liner conference shall be subject to the same principle of cargo sharing as stipulated in subsection (2) of this section and subject to such expectations as the Federal Government may from time to time determine.
(iv) Cargo sharing shall cover the totality of available trade including bulk-dry and wet cargo and shall not be lifted to the UNCTAD 40:40:20 formulas.
(v) Ships owned or hired by Nigerian national carriers shall carry at least 50 percent of the cargoes generated through technical assistance or international aid.
(vi) The Authority shall determine ways and means of involving national carriers in the carriage of crude petroleum in Nigerian vessel.
Viewing it from the above presentation since the indigenous shipping companies engage in domestic shipping and can not be granted the Nigerian national carrier status, the NMA cannot involve them in the carriage of “crude petroleum” as national carrier from one port to another in Nigeria in spite of the lucrative nature of such business and the availability of such cargo. However, it is arguable that, since it is only the carriage of crude petroleum that the NMA is mandated to determine ways and means of involving national carriers, refined petroleum products which are equally available for carriage in coastwise trade are part of the cargoes the NMA shall determine ways and means of carrying. So, whilst only the Nigerian- flagged vessels of national carriers status can be involved by the NMA in the carriage of crude petroleum on the basis of regulations made by the NMA, Nigerian shipping companies which are involved in coastal shipping are free to involve themselves in the carriage in Nigerian vessels of refined petroleum products under agreement reached with the NNPC/PPMC, without any regulation, hindrance or intervention by the NMA on ways and means of such carriage.
Another drawback in the provision of the Act with respect to cargo support programme of the NMA on and for cabotage, is that pursuant to section 3 (f) of the Act, the NMA has a statutory intention and purpose to “assist in the economic integration” of the West African sub region.” It has been observed exhaustively that the establishment of a Nigerian cabotage would threaten the take-off and hinder the implementation of a Nigerian cabotage policy. Therefore, should the NMA start assisting the establishment of West African regional economic integration through the regional cabotage principlel in line with the Act, the NMA would be working against all that maritime cabotage could do for indigenous shipping in terms of cargo support and ship acquisition and expansion.
It is quite true that the Federal Minister of Transport is empowered by section 27 of the Act to make regulations for the effective implementation of the Act; such regulations cannot properly be made to fill gaps in the Act. They can only be correct if they will facilitate the advancement and effective implementation of what is already provided for in the Act.
Moreover, the use of the Act by the NMA to coordinate the implementation of the national shipping policy formulated by the Federal Government is hampered by the Nigerian National Petroleum Act (Cap. 320 Laws of the federation of Nigerian, 1990), and the Nigerian LNG (Fiscal Incentives, Guarantees and Assurance) Amendment Act No.113 of 1993 which was passed in favour of the Nigerian LNG Ltd in order to induce a speedy completion of the Nigerian LNG project. Section 5(1) (d) of cap 320 provides as follows: “Subject to the provision of this Act the corporation shall be charged with the duty of:
(d) providing and operating pipeline, tank ships or other facilities for the carriage or conveyance of crude oil, natural gas and their product and derivatives water and other liquids or commodities related to the corporation’s operation.”
If the NNPC performs its statutory duty by providing and operating its own tank ships (rather than chartering such vessel from indigenous shipping companies and other foreign ship owners as is presently the case), there will not be any such cargo available for carriage in our domestic water by indigenous shipping companies.
Furthermore, by virtue of section 4 of the petroleum Act 1990, the Minister of Petroleum shall grant a license to any person before he could import, store, sell or distribute any petroleum products in Nigeria. The said Minister is also entitled to make regulations relating to the importation, hardly storage and distribution of petroleum products, petroleum and other inflammable oils and liquids (Cf. section 9 (1) (e)). The distribution of petroleum products in Nigeria as already revealed through data got from the NNPC/PPMC involves carriage of such cargo by tanker vessels along the Nigerian coasts. Being a part of cabotage trade, there is a need for the harmonization of the laws in order to prevent conflicts.
Section 2 (b) Act 113 of 1993 provides that, section 6 of the principal Decree is amended by inserting immediately after the existing subsection (9) a new subsection (10) as follows:
The provision of the National Shipping Policy Decree 1987, as amended the regulations made there under shall not be applicable to the company, its contractors sub-contractors customers or shipping company referred to in subsection (8) of this section.
Consequently, none of its objectives, functions or power under Cap 297 can be applied or exercised in respect of the Nigerian LNG Ltd (even though it is a limited liability company incorporated under the laws of Nigeria) or its shipping company. In particular the NMA cannot take into consideration in the application of its cargo support programme, or Cargo Control and Allocation Programme, Nigeria LNG Ltd or the LNG it produces or any shipping company owned by Nigerian LNG Ltd, nor even obtain data from it or its contractors for purposes of research, development and the planning even though the company, its shipping and vessel operate within Nigerian ports and territorial waters and the company produces LNG cargo that indigenous shipping companies ought to be carrying.
The danger in this to national security, economic growth, political independence especially where there is no stated duration for the exemption of the company from the Act, is that it runs counter to national commercial and shipping interest. A lot is also being lost by the nation in terms of freight, insurance premiums and the two percent of the shipping companies’ earnings accruable to the Federal Government as required by section 17 of cap 279 (Asoluka, 2003 pp.130-131).
2.12.2 The Role of NMA in Respect of Cabotage Under the Coastal and Inland Shipping (Cabotage) Bill 2001.
There is a pending bill before the national assembly on the Nigerian cabotage policy known as “coastal and inland shipping (cabotage) bill 2001” hereinafter called “cabotage bill”. However, with due respect to the drafters, apart from the many typographical errors and the inelegant drafting of certain provisions of the cabotage bill, it is here submitted that the bill is inadequate, inconsistent and problematic in the following respects (Asoluka; 2003 p.131).
Notwithstanding the objectives and functions of the NMA, especially as the coordinators of the implementation of the national shipping policy as formulated by the Federal Government from time to time and all the support which the NMA had been giving to the promulgation of the Nigerian cabotage law, there is no specific role given to the NMA under the cabotage bill. This seems to be a serious oversight on the part of the lawmakers or sponsors of the Bill and hence needs to be corrected before it is passed into law. (Asoluka, 2003 p.130)
Moreover, a part of the statutory functions of the NMA under the national shipping policy Acts that is to say, the Ship Acquisition and Ship Building Fund (ASSBF) and its administration (section 13 of cap. 279), which states among other things “to assist Nigerians in the development and expansion of a national fleet” appears to have been taken away from the NMA with the creation of a Cabotage Vessel Financing Fund under the Cabotage Bill for the purpose of promoting “the development of indigenous ship owning capacity by providing financial assistance to Nigerian operators in the domestic coastal shipping” (section 29 of coastal and inland shipping (cabotage) bill 2001). Even though the SASBF is meant for all Nigerians engaged in shipping and the cabtage vessels financing fund is to assist only Nigerians engaged in domestic coastal shipping basis for conflict and avoidable duplication of efforts between the NMA, which is already administering the Ship Acquisition and Ship Building Fund under the National Shipping Policy Act and already had a structure in place for it. It should also be borne in mind that even though the Ship Acquisition and Ship Building Fund was suspended until re-organized, it was not abrogated and so, the legal basis for its administration by the NMA still exists in our statute books.
There are many powers to be exercised and duties to be performed by the Federal Minister of Transport in the implementation of the requirements of the Cabotage Bill.
The Minster may by an instrument delegate any of his powers, duties or functions under the Act to any person to be exercised or performed by such a person, as the case may be, and, if so exercised or performed, shall be deemed to have been exercised by the Minister, although the Minister may also revoke the delegation.
It is reasonable to belief that “any person” is intended to be either an artificial or a natural person. The delegation of the Ministerial Powers, should, however, be to an artificial person with power of perpetual succession so as to avoid the unnecessary bottlenecks that may arise should an individual delegate become indisposed or dies or is not within reach for whatsoever reason since a delegated power cannot be redelegated under the doctrine of “delegatus non potest delegare”. Because of the problem of continuity and in order to avoid time consuming and distracting struggles amongst government agencies or officers (over whom the powers/duties of the Minister shall be delegated), it is necessary for the Cabotage Act to be specific and clear as to who or which parastatal or agency the Minister’s powers and duties shall be delegated in view of the function of the NMA as the coordinator of the National Shipping Policy as formulated by the Federal Government of Nigeria from time to time. NMA’s facilities and necessary funding and manpower to implement the Cabotage Act and in line with the procedure in Malaysia, (where the Domestic Shipping and Licensing Board is in charge of the Licensing of Cabotage vessels, as distinct from the registration of vessels) the Minister’s powers should rightly be delegated to the NMA. Though the Minister is to create and maintain in the office of the Registrar of ships, a separate register for Cabotage vessels (section 18 of the Coastal and Inland Shipping (Cabotage Bill) 2001), it does not follow that his powers and duties should be delegated to any other person other than NMA.
This is because the licensing of Cabotage ships is totally different from the registration of (Cabotage) vessels. The Registrar of ships first registers a vessel as a Nigerian vessel, and thereafter its owners must meet other requirements in the Cabotage Act before the vessel can qualify to be licensed by an organization like the NMA to participate in Coastal and Inland Water Shipping.
Another worrisome provision of the Cabotage Bill is its section 36 which provides as follows:-
All of the provisions of the Merchant Shipping Act and other relevant legislations and regulations that is (Sic) in force immediately before the commencement of this Act shall, so far as it is (Sic) consistent with this Act, continue to be in force.
It is submitted that, one of the effects of this provision is that, the National Shipping Policy Act being legislation relevant to the Cabotage Bill and in force before the commencement of the Bill, so far as it is inconsistent with the Cabota