Abboud: Local Shippers Have the Wherewithal to Excel
Group Managing Director, Slok Nigeria Limited, Mr. Firas Abboud, in this interview with John Iwori, identified some of the ills plaguing the maritime industry and spoke on the way forward for indigenous shipping firms. Excerpts:
As an indigenous ship owner, what are the challenges in your operations?
The challenges start before operations. Then they continue to management and such interactions with the parasatals in the Federal Ministry of Transport, the regulatory bodies, financial institutions, as well as our clients. So, I will start with the challenges and how I procure a vessel. Under the acquisition stage, we have two categories, namely vessel selection and finance. The challenge starts from the bid requirements from the clients, and how to select the vessel. These are the various stages in vessel selection.
A lot of Nigeria owners have acquired vessel that are suitable for the long run oil and gas industry. There are several challenges that would affect the life span of the vessel. Under the challenges, we have financing, bank loans, high interest rates, and the large equity that they require and the contribution that they need before banks can grant loans. Under operation and maintenance, we have three major categories, namely manpower, logistics and regulatory challenges.
Under manpower challenges, we have lack of experienced seafarers, lack of skilled ill prepared technicians and inexperienced management. The upstream maritime sector has been boasted in 2007. Basically, Nigeria owners were faced with the challenges of trying to occupy the space that was created due to the provisions of the Inland and Coastal Shipping Act 2003 (Cacotage). This Act was created by the Federal Government through the National Assembly to enable indigenous ship owners to take their rightful place in the scheme of things vis-à-vis the dominance of the foreign maritime operators. Therefore, they were faced with the opportunity of owning an asset and how to operate the asset (which is in the long term of course). The average age of a vessel is around 20 to 29 years. So it is important we keep the vessel in shape through proper maintenance. Another challenge, which falls under the manpower segment, is community threat. Here they force inexperience manpower on your vessels and management.
What about the logistics challenges in your operations?
Yes, there are. Under logistics category, this is still under operation and maintenance. We have the transportation infrastructural challenges. We have expensive rentals. For instance, if you want to rent a free space in Bonny, where most of the oil and gas companies are functioning, you will pay a premium for accommodation there and also for the security of your workforce. The yearly rent of a one bedroom is more expensive than a flat in Banana Island, Lagos (which is between $80,000 to $90,000 per annum) for a self contain bedroom, which is N160 million. If you decide to put them away from the Free Trade Zone (FTZ), you will have to face the challenges of bad road, delay in getting to the vessels and getting back to the office.
The third items under logistic challenges are monopolies. This is one of the most critical challenges. Our clients’ needs service, so we are forced to deal with few companies retail spare acquisitions. We do not have a lot of competitors to choose from because they select people and we retail prices. The third category is under operation and maintenance.
The NIMASA fees which is the 2 percent cabotage fees, which they collect from ship owners and indigenous ship owners as well. Everybody knows about the story of the Cabotage Vessel Finance Fund (CVFF). As I speak, we do not know how much is in the CVFF. The funds have been realised to purchase vessels for Nigerian ship operators. The Nigerian Content Development and Monitoring Board (NCDMB) collects 1 percent fees and content development. NCDMB has made serious strides in developing its rules and regulation policy. If you want to trade with the vessels, we need to see the vessel.
Inspections at the oil and gas rich Niger Delta region are three times more expensive than the neighbouring Cameroun or Ghana. This will reduce the ship owners’ margin and the ability to pay back the loans that he owes the commercial banks. Just by paying statutory fees and regular fees, we have not even paid our overheads which are salaries. This also attracts additional challenge because you will not be able to motivate your staff and employee to stay long enough with you.
Against the backdrop that some of these fees are statutory, do you think that they are not necessary for the development of the maritime industry?
As far as I am concern, these fees are unnecessary because of the high value of the amount. I am therefore calling for a review of these fees. Government agencies are collecting fees from ship owners. We want to see where these fees are going. We need to see them get injected, empower and support the system. We need to see more government support. Additional fees include licenses required by some vessels to carry nuclear materials, and establishment of the well. We also have the Nigerian Ports Authority (NPA) fees. Sometimes, the management of NPA delegates their authorities. In fact, the way NPA pushes their clients around is just ridiculous and expensive. This is also monopoly. The other ones are the port concessionaire which is has not been empowered at all. These areas highlighted above, government needs to be transparent about it.
Security threats also fall under regulatory challenges because the Nigeria Navy supposed to protect our coastal waters and the piracy threat exists in several places in the world. But few of them exist when the local navy is empowered to tackle these. We have no doubt that the Nigeria Navy is more than capable if supported properly to tackle these challenges and ensure that the Nigeria waters are pirates free.
The last regulatory challenge is the custom fees. This has affected indigenous shipping companies a lot. It is empowering foreign companies from bringing their vessels into Nigeria under temporary importation.
Forcing Nigeria owners to pay or use their
I am therefore calling for a review of these fees. Government agencies are collecting fees from ship owners. We want to see where these fees are going. We need to see them get injected, empower and support the system. We need to see more government support
assets immediately as it enters Nigeria waters. Therefore, the Nigeria Customs Service has given foreign companies opportunities to do temporary importation (TI). Therefore, the Nigeria Customs Service should offer indigenous companies the same treatment.
At what point do you experience operations and maintenance challenges?
Operation and maintenance forms a different stage in the life cycle of a vessel. This includes securing the contracts and life boats. The challenges fall under three categories. You imagine the jobs, clients, borders, qualifications and regulatory. Under client stakeholders, we have contract duration. This is a situation where a lot contracts have been short term and not repeated, whereby the cash flow and the revenue of the company is a once and for all contract. Contract duration is one challenge. Besides, there has to be transparency in the bidding process. We have seen a lot of portfolio companies securing high profile contracts. Many of these companies do not have asset base or an operating office. This is going against the reasons for the establishment of the NCDMB. It also runs contrary to the enforcement of the provisions of the Cabotage Act and the Local Content Act.
Capital flight is also high in the maritime industry. When you do not have the bid and you are awarding contracts to portfolio companies to secure long term vessels and contracts from the international oil companies (IOCs) and NAPIMS in all oil blocs). If you do not have assets, capital flight becomes the order of the day when you go overseas to get the assets in order to execute the five year contract. Then you do not owe an asset, then you rent an asset from a foreign country. Then you bring into the country without the technical competence to run the assets. Then you hire a foreign management to run the assets. So when your revenue comes in, you have little or nothing left. This is because almost all the revenues have gone into the payment of the assets you procured in executing the contract in the first place.
What is your Parting Shot?
We want the federal government, especially the government regulatory agencies to provide a level playing field for all operators in the maritime industry, be it indigenous or the IOCs. I strongly believe that indigenous ship owners can make a headway and even edge out their foreign counterparts, if they are encouraged and empowered through long term contracts or jobs. It should not be a one-off thing but on a regular basis. If we do that consistently, the high capital flight in the sector will be arrested, jobs will be created for teeming youths presently roaming the streets for non-existent jobs, and dominance of the sector by foreigners will be reversed over time. The federal government should stop patronising portfolio shipping companies. How does government want to grow the economy when it consistently gives jobs to those that cannot deliver at the detriment of the genuine operators which has what it takes to deliver? It should consult widely on the way forward. I am of the view that the government should organise a three-day-forum with the key players in the shipping sector of the economy to chart the way forward. The first day of this forum with the genuine players in the sector should be used to brainstorm on the challenges hampering the sustainable growth of the maritime industry. The second day should be used to strategise on the way forward by itemising them into immediate, short and long term solutions. Once this has been achieved, milestone for attainment of set goals and objectives should be earmarked. On the third and final day of the forum, stakeholders should be distributed into various groups for effective monitoring of the policies and programmes geared towards addressing the numerous ills plaguing the maritime industry. Since implementation is a key factor in the addressing the challenges in the shipping sector of the economy, these various groups monitoring the execution of set goals and objectives should meet regularly, may be quarterly to access the level of progress made. If we can achieve that in the next one year, we are going to make tangible progress. There is no iota of doubt about that in my mind. We have had a lot of talks in the past without concrete action. This is the time for action. Otherwise, we will continue to remain where we are as a nation in the maritime industry while other lesser endowed countries continue to maximise their potentials for their own benefits. The Nigerian Maritime Administration and Safety Agency (NIMASA) should modernize its ship registration unit. It should eliminate the present bottlenecks in the registration of ships by making it electronic the way it has done with the confirmation of seafarers’ certification. Unlike in the past, nowadays it does not take long to confirm whether a seafarer’s certificate is genuine or not. All you need to do is log into portal created by NIMASA to ascertain the genuineness of the certificate. It does not take long. It is easy and not cumbersome as it was the case in the past. The President Mohammadu Buhari’s administration can do it. All it needs to do is to muster the political will to do the right things in the maritime industry and implement them consistently no matter what it takes. It is going to be tough because many of us are very used to the old ways of doing things. However, I strongly believe that it can be done because Nigeria and Nigerians have all it takes to succeed and take our rightful position in the comity of serious maritime in the world. The citizenry of those countries already succeeding as maritime nations such Singapore, Norway, Philippines and Malaysia are not more intelligent than us. They are not angels. They are human beings like us. We can do better than them if only we only we choose to take the right decisions, avoid sentiments and implement them vigorously no matter whose ox is gored.