Home News Non Enforcement of the Cabotage Law Bane to Shipping in Nigeria – Akinpelumi         …arbitrary issuance of waivers to foreign vessels decimates local ship operators

Non Enforcement of the Cabotage Law Bane to Shipping in Nigeria – Akinpelumi         …arbitrary issuance of waivers to foreign vessels decimates local ship operators

by timenews
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Captain Taiwo Akinpelu is the Managing Director of Oceanic Energy
Limited, an indigenous shipping Company. He is an experienced maritime
expert with a vast knowledge of and expertise in shipping. In this
interview with TimeNewsreporter, he spoke extensively on the challenges which
local operators have had to grapple with over the years, stating that
a full enforcement of the Cabotage Law without an abuse of the waiver
clause will save the industry. He gave a wakeup call to the government
to realise and appreciate the enormous benefits of shipping as way of
boosting the nation’s GDP while also calling for a policy
pronouncement to address the challenges in the Shipping sub-sector.


Your introduction Sir

I am Captain Taiwo Akinpelu, the Managing Director of Oceanic Energy
Limited, a member of the steering committee steering the affairs of
Nigeria Ship Owners Association.

There was a report that members of the Senate joint Committee
on local content, downstream petroleum and legislative
compliance expressed bitterness over the influx of foreign vessels
operating illegally on the nation’s territorial waters. How do you see

This is well long overdue. We have been making a noise, we’ve been
writing, we’ve been protesting and if members of parliament are now
coming in,  it’s a good development. I’m aware that late last year,  the
Senate actually wrote to some organisations and mine inclusive urging
us to come forward to make a presentation on our waters and the
challenges of the implementation of Cabotage Law. We’re all aware that
the Cabotage Law was enacted in 2003 and from 2003 till date, will be
17 years. And the intendment of the Law was actually to serve as a
professionist mechanism to enable the indigenous operators the leeway
to operate and grow overtime but unfortunately since the enactment
nothing has really changed. The foreign ships still fester our waters
unabated, in fact the situation is so severe to the point that when
the mother vessel bringing cargo designated for Nigeria will now have
to drop anchor and stop at Lome offshore. Well according to them, this
is just to legitimise the fact that the foreign vessels are on
international trade which is abnormal anyway because before a bill of
laden is raised in international trade it must have the port of
loading and port of discharge, so a situation whereby a cargo is
dropped midstream of Lome is abnormal because midstream is not a port
of discharge and if we have to investigate those cargoes, if not all,
majority of them are destined for Nigeria. But because they want to
legitimise the fact that the foreign vessel is on international trade,
mother vessel will anchor at Lome offshore then another bill of laden
has to be reissued at Lome which is very wrong.
You know what that does: 1 – there’s no Customs rummaging that ship;
for instance when a vessel gets to the port of discharge there’s what
we call breaking on board where Customs will visit the vessel to check
and ensure that the cargo is not tampered with and as well we are
talking of proliferation of arms, we’re talking of human trafficking,
we’re talking of drug smuggling and all that. If a vessel is anchored
midstream, who will conduct checks on it, so that is the security
aspect of it. Like I said,  it is just to provide job for these foreign
vessels because at the end of the day the mother vessels have this
on-sensors rejection of local vessels. I cannot imagine where NIMASA
will give certificate of sea worthiness, certificate of class, clean
bill of state to a foreign vessel and by the time it gets to mother
vessel they will say no, no, no, it’s not seaworthy and all that. So
all these have been going on and we have been shouting about it,
protesting and writing and all that over time and instead of it
getting better it is getting worse. So, we’re happy the parliament in
their wisdom now deems it an issue of utmost importance and urgency
for them to wade into the matter because it has lingered for too long.
Of course it’s our desire to get to the situation whereby most of
these foreign vessels are actually rid off our waters. Again it is a
complex situation because if a foreign vessel gets to Nigeria; maybe
you have heard of temporary import license for such vessels, if
Customs did not grant them this license of course, there will be no
room for them to trade because if we ask ourselves; when we say
temporary it means to just come, stay for a short period of time
and that ends it; it’s not supposed to last more than six months,
worst case scenario one year.
Also temporary import license is against the intendment of Cabotage
Law because if a Nigerian buys a vessel such vessel is subjected to
import duties; import duties will still be paid full though we’re
still canvassing for the abolition of import duties so that we can
compete favourably with our foreign counterparts. But the point I was
trying to make here is that if import duties are paid you pay it once
and when you look at the amount of the import duties that are to be
paid,  it is another problem; there was a time that Nigerian Customs
wrote to say that import duties were reduced to 10 per cent of the
amount of the value of a ship compared to a foreign vessel that gets
here and pays probably $10,000 maximum $20,000 as temporary import
duty. You see that indigenous operators are at disadvantage so what
we’re trying to say here is that the Nigerian Customs should also stop
issuing temporary import license to foreign ships. The coming in of
temporary import duty is for instance,  if there’s need for a vessel and
no local operator can actually provide it or you now say let’s seek
foreign assistance or that the local operators can charter a foreign
vessel to bridge in pending when you have the capacity to meet up.
That is when you seek temporary import and that is not what you should
hold unto in perpetuity. I’mt’s not something that has to be renewed and
renewed; then it’s no longer temporary if it has to be renewed, so all
these things have to be looked into holistically. We believe that
ordinary policy pronouncement will go a long way to curb all these
things. So, we thank the honourable members of parliament for wading
in at this critical time and we believe they will do justice to it.

I want to know the provisions of this Cabotage Act and is there any
kind of waiver provision in the Act? If yes how do you benefit from

Well, of course you know that Cabotage Law is actually saying that the
Ship should be owned by a Nigerian, manned by a Nigerian crew,
registered in Nigeria and built in Nigeria. Of course when you look at
these four conditions you see that we still do not have the capacity
of ship building in this Country so it means that for us to be able to
meet the requirements there must be provision for granting waiver to
the built requirement. For instance, how many tanker ships are built
in Nigeria? None. So, if I need to own a tanker, then that means I
have to buy it from abroad and as a Nigerian that means the waiver has
to be granted. Unfortunately, waiver clause was embedded in the Law
but ordinarily we felt there should be waiver concerning place of
built because we do not have capacity yet. Okay let’s say that the
clause was anticipatory of a situation where Nigeria will gain that
capacity to start building, that was why we considered it that we can
always seek waiver. I think that’s the only legitimate waiver as far
as that Law is concerned. The intentions of other waivers when you
actually critically study the Law is not about to encourage foreign
dominance in our waters but it is just for instance if a charterer
needs a vessel and he goes to NIMASA to say I need a vessel, the Agency
will look at the list of all the shipping companies they have and make
a referral. If such a charterer is unable to actually get any of the
operators in Nigeria that owns such a vessel then he can seek the
permission from NIMASA to say can I charter such a vessel for a
specific period of time, but what it means is that the local operators
must have that first right of refusal. It must be dissected that after
they have gone through the length and breadth of this Country; the
Shipping Industry they discovered that none of the operators in
Nigeria has the capacity to provide such a vessel and that is when the
waiver could be reissued for the vessel to come but it must be for a
short period. Most times it also provides room for local operators to
either go and hire such a vessel on long term lease or ‘be able
charter’ with the option to buy it on the long run or you enter a long
lease with a foreign ship owner and bring such a vessel to Nigeria. If
such a vessel is brought to Nigeria through a Nigerian operator then
such a vessel has to be registered in the special register of
Cabotage; there’s a special register put in place by the Cabotage
regime. So what it means is that the vessel fully complied with the
provisions of the Cabotage Law but what we have these days is that
foreign owners just come from nowhere and they apply straight to
NIMASA, they apply for waiver, after looking at the requirement and
the filling form and application fees for waiver is paid they start
trading and they start trading without the Minister’s approval because
the Minister has the sole responsibility of granting waiver not
NIMASA; though waiver clause is actually provided for it has to go
through a process. This waiver is not actually to enable foreign ship
to come to our waters, it’s not to vessels that our local operators
can provide. Waiver is only for specialised vessels that the local
operators cannot provide, waivers can be granted only in such a
We also have waiver on crew; of course we know that Nigerians show
capacity of manning ships but these days what we have is foreign crew
littering the ship. You know that foreign vessel of course, will like
to put their own on board, no foreign operator will come to your
waters to empower your people, so that is why it is inimical to the
intendment of the Cabotage Law. So we actually appreciate the
parliament coming in, probably if they have to scrutinise the Law
rigorously although there’s no proof law anyway. But if there’s
anything they can thinker way to make sure that this foreign dominance
is actually curtailed it will go a long way.

Do we have ships owned by Nigerians?

Yes we have ships owned by Nigerians but they’re very scanty. Scanty
in the sense that for instance the NNPC established a shipping company
domiciled within the NNPC subsidiary and they deal directly with
foreign ship owners. In fact things that your indigenous operators
could easily undertake that is what they give out, they go out there,
charter vessels and the vessels come and take over our jobs. Overtime,
that has been what is decimating indigenous operators.

Is there no penalty for such diversions?

That is why we say political will.

Even in the Cabotage Act?

The noise we’ve been making before was effective and full enforcement
of the Cabotage Law; if it is properly enforced this should not be
happening. It is just like you have a government that says there
should be legislature, judiciary and executive and why was it so? It
is for check and balances; for the legislative is to check the
judiciary and the judiciary to check the two arms. But a situation
whereby the law makers are not doing their bit  then there can’t be
checks and balances. It is said that power corrupts, and absolute power
corrupts absolutely. So you cannot blame the Law for that because the
Law already provided for that principle of checks and balances but a
situation where an arm of the government is not doing their own bit
you cannot blame the law. So, that is the same with Cabotage Law if it
is properly enforced things shouldn’t be this way. The Law says that
any vessel that will partake in our domestic trade must be owned by
Nigerian, must be manned by Nigerian crew, must be built in Nigeria
and must be registered in Nigeria. It is explicit. So if Cabotage Law
now made waiver provision what the Law was saying is that there are
exceptional situations whereby the indigenous operators don’t have the
capacity to provide certain categories of specialised vessels then you
can grant waivers to foreign vessels to come in. But before waiver is
granted, you must ensure that you have given the local operators that
first right of refusal. If you go to them and say I need a certain
vessel and I say I can get it, your don’t entertain any foreign vessel
at all. It is only when I say I cannot entertain then you now give the
charterer the go ahead to get a foreign vessel that will be given
waiver so that they will do the job for a short period of time. Then
in this waiver we must make sure that a Nigerian is attached to
understudy so that they can take over at the earliest possible time.
You see there is no perfect law, the Law has not been tested, it has
not been put into use yet, and we’re not even supposed to be talking
of the amendment but of course if the law makers want to block all the
loopholes, fine. If the waiver clause is being abused then we do away
with it.

With all these do you now agree with some school of thought that the
Cabotage Law was actually designed not to succeed but to fail?

Well, I won’t actually subscribe to that belief because of course
government is a continuum, the person that enacted Cabotage Law is not
the same there now. When you look at the Law itself it has good
intentions. All over the world, at one point or the other, because they
started this noise of globalisation, free trade agreement and so on
and so forth, there has been protectionist law to empower their own
people. The United Kingdom started the Cabotage Law first though long
time ago, the Greek people too they did. What that does is to empower
your people; make sure that you prevent foreigners from coming to
partake in this trade so that over time you can build them up, they
can make money, improve their operational capabilities so that as time
progresses the local operators who were so much focused on cabotage
trade will like to go on international trade. So, once they come at
par with that international capacity you can now say let’s open up
because they can now compete globally and that is the essence of
Cabotage Law. It’s just like you have a nursery, fence your nursery
round so wild animals would not come to attack the innocent ones until
they have grown to a level,  then you release to the open sea when they
can withstand any form of peril and that is the intention of the
Cabotage Law. But what do we have? We have people that do not have
political will; some rely so much on what they get from foreign
vessels. So we’ve gone a long way, we even formed a marshal going about
trying to get the vessels arrested, even at a point our boys were
arrested, they said they are sea pirates; they connived with the Navy
to embarrass us. You see it’s been a long walk. It is unfortunate. So,
reading the intention of the law makers today, well it’s just ‘sit
done look’ approach; let’s hope that something good comes out of it.

What is the reason we have just few local ships?

It is very straight forward because no matter the size of your tonnage
if there’s no cargo it’s complex. If your indigenous operators do not
have access to cargo how will it work like I told you the NNPC will go
directly to get foreign vessels so that means that cargo is not
available. Secondly, you must have heard that most local operators are
seriously indebted to the banks because when you buy a vessel it is
meant to generate money to pay itself and pay the workforce. For
instance, this our local transportation companies you buy a brand new
Hiace bus and were supposed to use it for commuters from Ibadan to
Lagos and you’re getting just two to three passengers second month,
third month, even to two years, etc. You’ll be struggling initially to
keep the bus in top shape and at a point you’ll be borrowing money so
much to maintain the vehicle with the hope that market will come one
day. It will get to point you’ll not be able to continue borrowing and
the vehicle will start deteriorating because the initial maintenance
regime you cannot keep to it and the workers you cannot pay. To train
and retrain your workers to be at par at global dynamism you cannot
attain, and then at that time they will be saying look at your vehicle
it is rickety and no more road worthy, because there’s no access to
cargo (passengers). Then the next factor is that shipping is highly
capital intensive and our banks in Nigeria do not have the required
expertise to vessel financing and acquisition; they want to lend you
money today and get it back tomorrow. Even some banks they’re afraid
to put money on a ship because according to them it’s a mobile asset;
that ship can go and disappear because they have limited knowledge in
shipping. But compared to foreign vessel owners where their banks
understand these, money is available for them to buy these ships. Also
interest rate too; our banks here, their interest rate is double digit;
cut-throat, almost one third of what you’re borrowing; how can we then
compete favourably with the foreign operators.  Foreign operators have
access to fund; the interest rate is good, sometimes they get at 5%
while we get ours at 27% almost 30%, so you see they have enough money
to maintain their vessels and the cargo is there for them so we’re
already disadvantaged.

Could it be the reason why the government came up with the idea of
Cabotage Financing fund  for distribution to help indigenous operators?

The Law provides that there will be a Cabotage vessel financing fund
to help develop indigenous vessel acquisition; it is explicit. The Law
created that and the Law actually said that 2% of the contract sum of
any job undertaken by the operators must be paid into that fund to
help them. So Cabotage fund is not an intervention fund; it is money
contributed by ship owners or the operators to help themselves; that
is the essence of the CBFM but since inception till today no money has
been disbursed and no ship owner has been a beneficiary of the CBFM.
The Act was established in 2003 and let’s say they started collecting
it in 2004, since then till date no money has been disbursed.

Then, why is the government coming into it since it is money contributed by you?

You know the government made it mandatory; the intention of government
was to manage it. It is just like trite where an external person (a
neutral person) collects money (contribution) from different people,
then he disburses to somebody to utilise it and also make it available
at a particular time for other contributors to benefit. That is the
essence of the government coming in. Government comes in just to
administer and manage the fund because the Law has made it mandatory
that you ship owners you have to pay this from your contract sum, put
it into that pool. The Law also says NIMASA will be the one to
administer and manage the fund so it is explicit that it is for
benefit of the people that contributed it.

Then, why the delay in sharing of the fund?

There’s no political will to disburse; there’s no reason whatsoever
why local operators shouldn’t have benefitted from this fund. Shipping
is highly capital-intensive so we need as much money as possible to
stay afloat in the business and don’t forget that shipping is
humongous. You’re aware that in Singapore their economy mainstay is
shipping; so shipping is able to generate 7 trillion and we’re always
talking of budget deficit. If shipping is actually done in the way it
should in this Country you can imagine the revenue that will accrue to
the government unlike what is obtainable with this foreign operators;
the resultant capital flight that is associated with foreign
dominance. You know that the foreign operators their own is to collect
money and repatriate to their Country but here we’re to collect and
use it to better our economy and talk of the employment it will
generate, the ripple effect; the shipping value chain down the line.
For instance, I used to have three ships if I multiply it to five I’ll
employ more Nigerians; there are people that will supply bunkers,
there are people that will do the chandler, there are people that’ll
supply the mooring ropes and other things, look at the ripple effect.
This is the problem we are facing; the fund would have gone a long way
no matter how little if it had been released and we’re even saying it
is shipping that government did not actually put intervention fund for
whatever reason. I can’t explain that, even NollyWood has intervention
fund how much more shipping that is a global business, so it shows
that government has not come to the realisation and appreciation of
the benefit they can derive by ensuring shipping is practiced the way
it should be. Shipping is capital intensive and the return is also
impressive. It is capital intensive in that to buy a vessel is as much
as $18 million and you know what this will amount in naira terms. Of
course if I invest $18 million you can imagine what my profit margin
will be if I put the vessel into use. So shipping is a good and
lucrative business but unfortunately if you buy a ship and there’s no
cargo to load in it, it doesn’t make sense; the essence of buying a
ship is that there is cargo to load. Even if we consider our daily
consumption of gasoline, let’s even put it at 30,000 metric tons per
day if you multiply it by 30 it’s about 900,000 metric tons per month
and if you convert it to litres of course it’s above 1,000,000 million
litres. Let’s even say the freight element is only two naira (N2); N2
is how many millions? So it’s capital intensive and will go a long way
to actually cushion our GDP. That is what we are preaching that we
want to be major contributors to Nigeria’s GDP. You’re saying NIMASA
must improve on its revenue and we are the people NIMASA suppose to
get this money from and mind you NIMASA is not supposed to generate
revue but to regulate and through their regulation; issuing of
licenses and penalties, money will come. For instance, if I have three
ships and I have to survey them, I have to class them, I have to get
certification and so on and so forth it is still NIMASA that will do
it and that is more money for them. But the primary responsibility of
NIMASA is not to generate revenue, it is to regulate and develop. When
you develop then when the business grows NIMASA will grow with it.

Has your quest for the abolition of import duties to enable you
compete favourably with your foreign counterparts yielded any result?

That is one good thing the new leadership of NIMASA is doing. I must
commend the leadership for their move in that direction. Even just to
ensure that Cabotage fund is disbursed in the areas of capacity
building and shipping development they have been very proactive. We
just hope that the tempo will be sustained, we just hope that the
leadership will be given the required cooperation t to achieve what
they have set out to do.

So, what’s your final word because I know even in the Cabotage Law
there is a provision that if foreign vessels or foreign companies must
do business in Nigeria, that certain percentage of their employees must be Nigerians.

Yes, that is true, for instance, Mr. White has a ship and me I do not
have a ship, then Mr. White sees that Nigeria is a thriving place for
his business to operate he will come and say let’s enter into
partnership. The Law says my equity in that business should not be
less than 51 per cent so what it means is that I must have a
controlling share. In Ghana you cannot just take your ship to say you
want to operate they’ll say who is the Ghanaian that is behind this
idea? They want to see what controlling share he has. That is how it
should go. All over the world that is how it is done, it is only in
Nigeria that a foreigner will just come they get a Nigerian as a
cover-up and say they give him 2% then they’ll be using that Nigeria
as a front because the agency responsible to check this is not vetting
them enough. That is why they are able to go uncensored; they go away
with all these atrocities otherwise it’s not difficult to do the right
thing in this industry. It all boils down to corruption like when I
said we formed a marshal to be chasing foreign vessels about, we
called them Nicer Marshal. Their job was once they see a foreign
vessel they go on board, that’s alongside the jetty in any of our
ports to say do you have permit to come for this job? If you can show
waiver and okay waiver was validly granted and all that, fine. But in
those days nothing (no waiver) and we will go on board and report to
NIMASA and NPA that this vessel actually did not come legally to do
this job and the vessel will be detained but at a point NIMASA said
we’re abrogating power that is not ours, that it’s not our
responsibility to arrest. We said yes, it’s not but it’s our
responsibility to bring it to your notice so that you can do the
needful. You know those guys under the guise of paying waiver they
will pay $10,000 to $20,000 unaccounted for. That was what they were
doing over time. There was a time we booked freedom of information
bill compelling NIMASA to give us the number of waivers granted so
far, we got a lawyer and they gave us a list. We went to the Ministry
of Transportation and the Minister then said he had never granted a
single waiver.

Except on the ground of waiver, are there foreign vessels designated to
operate into Nigerian waters?

You see there are two types of trade; you have International Trade and
Cabotage Trade. Under International Trade a vessel from Brazil can
bring cargo to Nigeria but it’s not undertaking any local trade; just
to bring cargo into the Country, discharges and off the vessel goes.
But any vessel that wants to carry cargo from point A in Nigeria the
point of origin of that cargo is Nigeria or a place outside Nigeria
but will pass through Nigeria, stop over one jetty and go over to
another jetty so on and so forth, that is Cabotage Trade. So if you
are taking part in that local trade; what the Law says is that the
ship must belong to a Nigerian, the ship must be manned by a Nigerian
crew, registered in Nigeria and built in Nigeria and of course we
don’t have the capacity for building. We can say okay, we’ll grant
waiver for that until when we have the capacity to build but the other
three must be strictly enforced. So of course all these screwliners,
carcarriers they come in, those are international trade. It’s just
like we Nigerians I have a ship I carry crude oil to Rotherdam I
discharge it and come back.

So what’s your final word?

My final word is I am happy the parliament are coming into this; I
want them to be diligent, proper investigations must be conducted to
ensure they’re abreast of the problems because the problems are
seriously endemic, they have also protracted, they’ve been ongoing for
years. They should appreciate the fact that the indigenous operators
we have more than enough capacities to take over these jobs; it is
said they call a dog a bad name just to hang it. They will always say
Nigeria vessels are rosbuckets. Why won’t they be rosbucket when you
have a ship you don’t have a cargo to go with it, why won’t they be
rosbucket when our banks don’t have the full appreciation of what it
takes to finance vessels. Nigerian banks want to lend you money today
and get it back tomorrow; so for someone who borrows money today and
pays tomorrow is just like someone who buys a car to run transport
from Lagos to Aba and you know that the transport fare to Aba is not
too much; maybe it is N800.  You know that if you buy a brand new
vehicle it’ll be very expensive, maybe you buy a brand new vehicle for
N15,000,000 and for you to get N800 in multiples to pay back it’ll
take time. Because the bank you’re getting this money from is not
giving long term lease like 10 years so you can have enough time to
pay back but because you want to do the business the bank can say if
we give you this money you have to pay back in two years. You don’t
want to stay idle so that will now make you to go and look for fairly
used vehicle with the hope that if you get passengers you keep on
improving on the vehicle till the situation stabilises but by the time
you get fairly used vehicle and the passengers are not coming again
you know it becomes complicated that is how the bank treats ship
owners in this Country. What stops NNPC for instance, you have this
cargo and you come to Nigerian operators to say that this our
specification and requirement for any vessel, we’ll give you contract
don’t worry for this vessel we use it for three years and we can
renew. Just go to any of your banks get this vessel we’ll take it. At
a point they stopped giving contract. You cannot see any Nigerian
operator that buys a ship who could get contract from NNPC or any of
these blue chip companies. They don’t give it out, they’ll say bring
the vessel before we sign the contract and it doesn’t work that way.
God has been helping us but I’ll tell it’s very difficult, it’s very



Photo:    Capt. Taiwo Akinpelu

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