The 2018/2019 forecast on the maritime sector is of a growth of between 2.5 and 5 per cent. However, red flags are also raised on factors that can stall the growth, writes OLUKOREDE YISHAU.
Dr. Doyin Salami, a lecturer at the Lagos Business School, wore his analytical cap well on Tuesday. Salami found himself reviewing the 2018-2019 forecasts on the maritime sector. The scholar, who noted that forecasts were essential tools for growing an industry, pointed out that the gaps in the sector must be filled by policy makers to realise its potentials. He urged investors, local and international to take the forecast serious as a way of enhancing the growth of their businesses.
The Nigerian Maritime Industry Forecast for 2018 and 2019, the first of its kind in the sector, is aimed at serving as a compass for those willing to do business in the country’s maritime domain. The forecast reviewed developments in the industry last year, shows expected developments in policy and regulatory environment for the maritime sector in 2018 and 2019 and looks at emerging opportunities and challenges for the industry.
The forecasts highlight key drivers of the sector, such as geographic factor, availability of skilled labour force, an efficient and effective regulatory environment, manpower and human capacity development, maritime infrastructural development, globalisation and new technology amongst others.
Salami’s take was not radically different from the Secretary General of the Abuja Memorandum of Understanding (MoU) and former Director-General of the Nigerian Maritime Administration and Safety Agency (NIMASA), Mrs. Mfon Usoro. Usoro, a lawyer, commended the forecast as a great interaction with the industry players to move the sector forward. Furthermore, she also observed that the increased presence of NIMASA activities in the maritime sector of the West and Central Africa sub-region is an indication that the present leadership of the Agency is on course.
The duo spoke of a sector which plays a major role in the exploitation, distribution and export of Nigeria’s ocean resources and boasts of a total annual freight cost of between $5 and $6 billion dollars annually.
Salami and Usoro took their positions in Lagos yesterday after NIMASA DG Dr. Dakuku Peterside presented maritime industry’s forecasts for this year and next year. The highlights of the forecasts are: the maritime industry is projected to grow by 2.5 – 5 per cent; there will be more demands for maritime services in Nigeria; total fleet size will grow by 4.08 per cent in 2018 and 4.41 per cent in 2019; oil tanker fleet size will decrease by 2.23 per cent in 2018 and increase by 1.7 per cent in 2019; non-oil tanker fleet size will increase by 8.15 per cent in 2018 and 8.72% in 2019 and the oil rig count will increase by 27.67 per cent in 2018 and 0 per cent in 2019.
With a coastline of about 853km and about 10,000km of Inland Waterways, 12 Nautical Miles of Territorial Waters, 200 Nautical Miles of Exclusive Economic Zone (EEZ), Nigeria should have no problem achieving the projections. The fact that Nigeria imports over l50 million metric tons of non-oil cargo and approximate 1,500,000 units of containers a year, analysts say, should make meeting the projections easy. They also point at the facts that total cargo throughput in 2015 stood at 195,969,200 metric tonnes showing a marginal increase of 0.8 per cent over the 2014 figure of 194,484,142 metric tonnes. The current aggregate of the cargo throughput exceeds $15,000,000,000 a year through formal import orders.
Speaking at the presentation, Peterside said: “As a regulator, we are driven by values and commitment, as these are the only ways that investors can be attracted to harness the great potentials in our maritime sector. On our part, we will continue to work out incentives and maritime sector specific interventions to attract investments.”
Critical to the realisation of the projections in the forecasts are some bills now in the National Assembly. These include the Anti-Piracy Bill, the establishment of the Maritime Development Bank, Inland Fisheries Amendment Bill, the Deep Offshore and Inland Basin Production Sharing Contract Amendment Bill and the Cabotage Act Amendment Bill 2017.
“All these if passed to Law will help realise the dream of making Nigeria the maritime hub in Africa,” said Peterside.
He added: “Whilst the oil sector remains one of the pillars of the Nigerian economy and is a catalyst for measuring our economic growth, the success of this sector is dependent on the Maritime Sector which continues to play a strategic role in the Economy of the Country.
“A number of factors have contributed to the gradual growth that we have recorded such as the receding crime in the Niger Delta region; the Deep Blue Scale Up of our Maritime Security Architecture is addressing the immediate challenges in this area and is aimed at suppressing the emerging threats on our waters.
“Government’s commitment through initiatives such as the Presidential Order on Ease of Doing Business continues to yield positive results in our Ports. The on-going Infrastructural reforms in the transport sector are all indicators that we are walking in the right direction.”
In a foreword to the publication, Minister of Transportation Rotimi Amaechi said: “The Maritime Domain remains the dominant medium for global shipping and commerce and it holds the key for unlocking the streams of opportunities in the industry in such areas as: renewable energy, fisheries, maritime transport, waste management, tourism, and biodiversity.
“However, International and global economy influence the maritime sector, especially as it relates to defining the trade pattern, standards and international best practices.
“The Nigerian government as regulator of the Maritime sector is committed to partnering with industry stakeholders to ensure economic growth and competitiveness of Nigeria’s Maritime Domain. All over the world Public Private Partnership drive government initiatives in addressing the infrastructural needs of a nation.
“Consequently, the presentation of Nigeria’s Maritime Industry forecast by NIMASA is a novelty geared at bringing to the front burner critical maritime industry issues and best global practices to guide investors and stakeholders in harnessing the potentials of the blue economy in the next two years (2018 and 2019) and beyond with focus on emerging opportunities and challenges in the maritime industry.
“There is no doubt that the maritime sector is highly susceptible to technological dynamics and changes which require huge funding and investment for achieving effectiveness and efficiency.”
Significantly, the publication devotes attention to the Petroleum Industry Governance Bill (PIGB), a subset of the Petroleum Industry Bill (PIB). This bill seeks to bring under one law the various legislative, regulatory, and fiscal policies, instruments and institutions in the petroleum industry. It seeks to repeal the 16 petroleum industry acts
On the likely impact of the bill on the maritime sector, the report noted: “Shipping has always been of strategic importance to the oil and gas industry. Not only is over 70% of all crude oil production transported by ships, more and more oil productions activities are being carried out offshore. This shows that the oil industry relies heavily on the maritime industry for its smooth operations. Whatever happens in the oil and gas industry is likely to affect the shipping industry and vice versa.
“It is estimated that Nigeria has lost over $50 billion worth of investment in the oil and gas industry since the last 16 years which could have culminated in additional 1.5 million barrels per day crude oil production for the country, which has continued to heighten the agitation for the passage of the PIB.
“With full implementation, the PIGB will ensure: Increased Cabotage Activities: An increase in investment in the industry, means more production activities and more production activities means more shipping logistics requirement. The Cabotage trade in Nigeria is 95% within the industry, so we are likely to see an increase in investment if the act meets the expectations of industry practitioners.
“Increased Demand for Crude Oil Tankers: If there are more investments in the oil and gas industry, there will be more oil production and more oil production means more crude oil tankers for export. Nigeria exports 100% of its crude oil by sea, so, an additional 500bpd of crude oil production in the next one or two years will amount to 182,500,000 barrels per year or 25,347,222 MTS of cargo per annum. This volume of cargo will require a minimum of 91voyagies of a very large Crude carrier (VLCC) vessel to lift, which will generate a lot of activities in the maritime industry.
“The immediate impact of an increased investment in the oil and gas industry is the massive importation of equipment for oil and gas production. This will see more vessels calling Nigerian ports, more revenue for the government and more business for auxiliary services providers in the industry.
“It is also believed that the passage of the PIGB will attract multinationals into the downstream sector of the industry leading to the setting up of refineries which will eventually lead to Nigeria being a net exporter of refined petroleum products. If this happens in the next one or two years it will lead to the demand of refined petroleum tankers and more importantly it will create a very robust bunkering business in the maritime industry, which is capable of generating over $3 billion per annum.”
The publication also pointed out challenges capable of derailing the growth. These include security, financing, efficiency of ports, labour services and more.
On security, it noted: “The high number of incidents of piracy and armed robbery against ships in the Gulf of Guinea has become a growing concern to the maritime industry, which is heavily affected by these incidents. Although the acts of high sea brigandage have been controlled to some extent, the economic implications of piracy still remain enormous, cutting across all other sectors. Ship owners use private armed security guards on their vessels, while commuting the dangerous pirate zones in Nigeria. These incidences disrupt business and hamper the growth of the maritime industry.
“As a result of this appalling situation, it has become more expensive for ships to come into Nigeria. While some of the pirates are heavily armed with sophisticated weapons and sometimes hold victims hostage, others are robbers with minimal weapons and hackers. The solutions to these attacks include the utilisation of surveillance facilities, deployment of security personnel able to identify and man flash points (entry and exit points in Nigerian waters) and installation of facilities that can take snapshots of real time.”
The publication observed that the labour market in the industry presents a significant challenge to maritime business services and activities.
“The growing demand for seafarers in Nigeria could mean that even a successful maritime education division in the country might not produce enough Nigerian-based seafarers to support the continued needs of the maritime industry,” the publication noted.
It added that increases in vessel size present challenges for ports and shipping companies. “The need to accommodate greater numbers of larger vessels creates challenges for ports if they do not have the capacity to accept such ships,” the publication said.
Over the years, the report said, the maritime industry has been stunted by insufficient funding. This has led to gross inefficiency and lack of effectiveness in the management of shipping and maritime industry services.
“These have, indeed, affected investments in maritime infrastructure and equipment, which are critical to the efficient delivery of services in shipping and maritime operations. With the ocean economy projected to be significantly larger than the traditional maritime economy, there are clear imperatives for greater focus on key growth areas,” it said.
Other critical issues germane to achieving the projections are: promotion of tourism, development of related economic activities, enhancement of industrial growth and development and socio-political harmony.
Critical to the expected growth is the challenge of the transition from the Free On Board (FOB) trade term, which favours foreign ship owners in crude lifting to the Cost Insurance and Freight (CIF), which will enable indigenous ship owners to begin to lift crude.
Speaking at a forum to address the challenge, Minister of State for Petroleum Dr. Ibe Kachikwu said the issue had lingered too far and urged participants to fashion out resolutions that would help the country.
Peterside, in a paper titled “The Imperatives of Changing Nigeria’s Crude Oil Affreightment Trade Terms From FOB to CIF”, said the CIF if implemented will “encourage indigenous fleet expansion, lead to massive job creation for qualified Nigerian Seafarers, create opportunities for mandatory sea time experience for Nigerian cadets and build expertise and competence in international shipping trade”
He went on: “Nigeria is one of the major exporters of oil and gas resource in the world, and she averages an output of 1.92 million barrels of crude oil per day so this volume generates huge freight for carriers. Regrettably, Indigenous shipping operators have insignificant share of the freight earned from the carriage of Nigeria’s crude compared to foreign counterparts”.
Unlike the situation in Nigeria, its OPEC colleagues, such as Iran, Indonesia, Algeria, Kuwait, Angola, Venezuela, UAE and Libya allow indigenous operators to ship crude oil.
NNPC Group Managing Director Dr. Maikanti Baru stated that the corporation had no reason not to allow Nigerians lift crude. He, however, added that processes have to be followed in opting for the CIF trade term.
It is hoped that all hands will be on deck to address the challenges so that the expected growth will be achieved.
