Ogbeifun: Nigerian-flagged Vessels Should Be Given Tax Holiday
The immediate past President, Ship-Owners Association of Nigeria and Managing Director/ CEO of Starzs Marine and Engineering Limited, Mr Greg Obeifun in this interview with Eromosele Abiodun, stresses the need for tax holiday for Nigerians who acquire vessels. He also speaks on other issues in the maritime industry. Excerpts:
The International Maritime Organisation (IMO) is set to implement its cap on sulphur emissions by vessels but Nigeria and Africa seem not to be ready. How will this development impact the cost of shipping? It is important we understand first what the issue is? It is tied to the desire by the world to begin to pay attention to our environment. We are now talking about the blue economy, which has to do with the sea. Up till now, environmental issues have been limited principally to land. Now we are going to the atmosphere, the air. A lot of emissions in the atmosphere have been hazardous to mankind. There are different emissions, we have those from generators, cars, factories and now ships. I am very conservative when I addressing this issue, I don’t jump on the bandwagon because IMO has come to say they will by 2020 control sulphur emission because of the environment. You control the emission from the ship in the port or in our waters and meanwhile our trucks, factories, and power generating sets and industries are pushing worse solutions into the atmosphere. As a nation, we cannot jump at IMO regulations without ensuring that jumping at regulation will achieve the desired results. We should start also by identifying our domestic and national activities that are contributing towards pollution through emission. Otherwise, we are achieving nothing. We are talking about IMO who is looking at the global space which incorporates nations that have since tidied up their own environment and now they want to tidy up the ship emission environment. Most of the things we do here don’t have average international standards in terms of environmental control. So if you go to London where IMO is headquartered and you look at their vehicles, they are already regulating their emissions. Their factories are already regulating their emissions. Their thrashes are effectively being disposed of. For their waters, there is no open defecation. There is no form of pollution for their rivers, so it makes sense for them to think of controlling the sulphur content of the fuel that their ships are burning. To come to your question, it is the right thing to do however. How do you achieve vision 2020, you have to look at the sulphur content of the fuel you are burning. Right from the fractional distillation process, that is used to produce your AGO, you have to tinker with that process to control the sulphur content of the fuel you are producing. Where do we get our fuel from? It is in Nigeria? We want to talk of the tinkering with the process of producing it too. We have adulterated fuel from illegal refineries that are crudely put together. We have adulterated fuel coming from proper fuel that was manipulated because of greed. When you look that, you ask yourself if we are even near-ready to meet IMO regulation. The answer is No. Unless we now decide as a nation to begin to import the proper fuel from countries that are producing them to ensure that even when it gets here we don’t adulterate them. Our problems are many, I will not worry about IMO 2020, but I will about the fundamentals in the country. Some of these ships are a couple of decade old. Although, in our case we don’t have any global trading ship, so we are talking about ships coming into the country, into our ports. So the onus is on them to regulate their emission and control the type of fuel they are burning so that when they get to our ports their own emission is meeting IMO international standard. But our own activity is negating what they are achieving. We should not worry about IMO regulation; it is principally affecting foreign ship owners. In country, does the IMO 2020 apply to what we are doing domestically? I have not read it so I cannot answer, but if it is affecting what we are doing domestically, then we have a long way to go. I don’t see a roadmap yet in addressing our environmental degradation whether water or land or air.
A decision has been taken by the Nigeria Ports Authority (NPA) to dismantle secured anchorage area(SAA), at the stakeholders meeting in Port Harcourt, some operators complained of having to spend so much on arm guards. The Nigerian Maritime Administration and Safety Agency (NIMASA) collects fees from vessels for protection and the navy is also statutorily responsible to protect the vessel. Why then is the idea of having an anchorage that attracts extra cost. What is your view on secure anchorage and the cost you have to incur to hire private guards when you have statutory bodies that is supposed to man Nigerian waters?
Every country has got its own laws and as much as possible we must operate within the laws of the land. First, does our law allow for the safe anchorage that has been in operation? I don’t think so and I believe that it is on that premise that NPA has taken their position. They have taken their position on behalf of the ship owners who use the anchorage; every ship has to pay $2000 daily. That is a huge cost to be borne by the ship owners and the ship operators. If stopping that dedicated secured anchorage is going to save the ship owner $60,000 monthly, I think what NPA has come up is commendable. Having said that, I will like to believe that Nigeria ports authority is a responsible government agency.
The NPA must have thought it through why in the first place, a dedicated private single anchorage was put in place? They must have been concerned about the safety and security of vessels in their anchorage. NPA knows that if you stop that you are now exposing ships to unsafe environment. I remember reading an article about this issue. The managing director of NPA specially said that they were engaging with Nigeria Navy to improve the safety and security of our general anchorage. She went on to mention that they were acquiring patrol vessels to be able to do this. I will like to believe that like every other developed country.
There are government platforms that are in place to be able to carry out this function. Instead of encouraging the private sector initiative, let’s see how we can encourage this government platform and agencies to up their ante to be able to do the job and I think NPA, Nigeria Navy, and NIMASA shifting their hands, they are doing something in that direction. Let’s encourage them to do it. It is better that ship owners contribute in any way they can to make the government platforms workable. Let’s say you have 30 ships in the anchorage at $60,000 monthly multiply that by 30. If a fraction of that is going to encourage government agencies it will go a long way. There is no need paying money to a private pocket. For me, I think the NPA has done the right thing.
The shipping industry is so huge and makes money for many countries. Why are Nigerians not playing in that space? What are the challenges?
I am sure you are aware of the ministerial committee on Nigeria’s fleet. The committee has been in existence for a long time. The challenge for the committee is that this country doesn’t have an enabling environment for shipping to thrive. Our tax laws need to be reviewed, there has to be genuine desire by government to support private sector initiative to go into global forum, we have to restructure our national registry and flag administration. For instance, I have decided to singularly take the bull by the horn to establish a Nigerian crude oil tanker fleet knowing all the challenges we have identified. I am not going into it because I want to setup a business, I want to highlight the possibilities, the benefits and challenges and get to a point where government will understand this is possible, but because of the obstacle, which are put in place most times by government policies we are losing all these benefits that can change or help our economy.
I believe one day maybe in the next century someone will pick up that document and say, ‘let’s deal with the obstacles,’ that is my mission. It will get to a point where you will realise that this is possible, having an understanding of the benefits and impediments. We are talking, but nobody has come to say this is where are I am and this is the challenge. If my company was to own one BRCC crude oil tanker, that is going to trade globally, every ship is classified into classification society and your class requires that periodically, there are annual surveys that must be carried out, there are bi-annual, intermediate and there is five years. For this survey and inspection to be carried out, your flag administration must have a enough surveyors of international standards that if my ship flagged Nigeria, registered Nigeria has taken off the country’s cargo to Japan, and it gets to Japan the ship is due for annual survey and inspection, the flag administration must have a survivor in Japan to carry that out for class. We don’t have that.
Having been a global survivor myself, I know what I am talking about. I was appointed by the Germanician mess of Germany as a non-exclusive survivor in Nigeria. That meant any ship flagged German in Nigeria waters, due for survey, I will go on board to that ship to carry out the survey, servicing and doing the report, the interim certificate with the stamp of Germanician mess. So Germany doesn’t have to send a surveyor from Germany to Nigeria, China or Liberia to do that job. So one of the things one will expect that our flag administration should be doing is to identify where in the world we are likely to trade and importing goods from and sending experts to and engage those nations’ maritime administration to accredit their surveyors to work on behalf of Nigeria flag. It is global thing and we have to get up and get into the aircraft with the right people and go to the flag administration and sit down with them, let them know what you are looking for.
Most of the countries are looking for that because it is also generating revenues for them and helping you meet your pre-requisite to be able to do global trading. If I am going to buy a crude oil tanker, which I will do by the grace of God, I am flagging it Nigeria and registering it Nigeria. I have to pay full duty.
In our committee we did a global study and we found out that in all key maritime countries, if you are a maritime company and you bought a maritime asset, and you are flagging it for your country, it is zero duty and usually five years tax holiday.
Why do they do that? Shipping is a capital intensive business, so granting that holiday will help the ship owner pay for loan and run the business. Also, you don’t pay any form of national tax for five years in order to help your cash flow and make you succeed. You cannot do business without enjoying financing from some financial institutions. Here we have a system that does not recognise that you need to be helped, because you are employing people and generating jobs. When we talked about tax incentives, they think we are thinking about us. That is why most people buy a ship and register it in places such as Liberia and they start trading. However, I have decided that in my next venture my vessels must be flagged and registered in Nigeria, so that the country will have the first choice of user for every employment on that ship. If you register a ship in a registry, there is what is known as the tonnage tax, what you pay as storage tax is commensurate as the size of your ship. So if I am going to bringing in a crude oil tanker to register, with our law now, my tonnage tax will be very high. In most countries, it is close to zero, so that more people can be employed and those people are paying taxes. So the tax you are losing in tonnage you are gaining from employees who are paying taxes. So there has to be a deep desire by policy makers and people in authority to understand these things and understand that there is a need to help businesses. Yes, government is looking for money, heavy taxes kill businesses. But if you encourage the businesses to grow, the economy will grow and that is the only to get out of the current quagmire.