A Critique Of The Nigerian Cabotage Act
With a coastline of 852 kilometres bordering the Atlantic Ocean in the Gulf of Guinea and a maritime area of over 46,000 km2, Nigeria is no doubt a maritime destination. The advent of the Coastal and Inland Shipping (Cabotage Act)in 2003 and its enactment in 2004; created an expectation among stakeholders that it would herald a new dispensation of indigenous shipping and job opportunities for local ship farers.
Before its enactment, the Nigerian government had made several efforts at securing indigenous participation; The first of which was the adoption and domestication of the United Nations Conference on Trade and Development Code (UNCTAD 40:40:20) Policy in her 1987 National Shipping Act (NSA). However, the intense competition from the foreign operators incapacitated many of the new local operators and facilitated the reign of foreign domination. The Cabotage Act was enacted under the President Obasanjo administration to consolidate indigenous ownership.
Under Section 2 of the Cabotage Act 2003, there are copious definitions of Cabotage amongst which is:
“The carriage of goods by vessel, or by vessel and any other mode of transport, from one place in Nigerian waters to any other place in Nigeria or above Nigerian waters, either directly or via a place outside Nigeria or to any other place in Nigeria and includes the carriage of goods concerning the exploration, exploitation or transportation of the mineral or non-living natural resources in or under Nigerian waters.”
These activities are principally reserved for national flag vessels, indigenous vessel owners, and citizen crewmen. Two Cabotage regimes exist depending on the type that best suits a country’s national interest. The first is the Strict Cabotage laws which are obtainable in countries like the United States of America under the JonesAct; which was enacted to promote, protect, and maintain a US domestic merchant marine. The latter is the Relaxed Cabotage Legal Regime which is obtainable in Nigeria as seen under the provisions of the Cabotage Act, 2003. It makes room for foreign participation, in ownership or building of the ships and the nationality of the operators or foreign ships involvement in a nation’s coastal shipping and trade; through waivers.
As a riparian state, with a host of offshore and onshore oil facilities, Nigerian vessels among other implements should be used in the petroleum sector of the country. The viability of a Cabotage Policy is given stimulus by the existing level of demand for services in the petroleum and agricultural sectors, which has created more opportunities for indigenous ship-owners to partake in coastal and inland shipping. As a result of which the development of shipyards and dry dockyards for build and repairs is now imperative in Nigeria.
The Coastal and Inland Waters (Cabotage Act) 2003
According to Dr. Okey Udeh; “We believe that the enactment of Cabotage in Nigeria would lay a solid foundation for the domestic maritime industry and stimulate and contribute significantly to the Nigerian economy…”
The kernel of the Cabotage Act is to restrict the use of foreign vessels in domestic trade to promote the development of indigenous tonnage and to establish a Cabotage Vessel Financing Fund (CVFF) and for related matters. It extends to the exploration, exploitation or transportation of the mineral or non-living resources of Nigeria whether in or under Nigerian waters.
However, the minister has the power to grant a waiver to duly-registered vessels; also to grant licenses to foreign vessels for one-year. Under Part V, the vessels eligible for registration under the Act were listed. Under Part VI, the minister is required to create enforcement units within the National Maritime Authority and designate officers therein. Offences and appropriate fines are listed in part VII and tried in the Federal High Court. The Cabotage Vessel Financing Fund was provided for in Part VIII.
Inherent Problems with the Nigerian Cabotage Act/Recommendations
The major problem with this Act is that it fails to take cognizance of the capacity building constraints present in the maritime sector, which has created a window for foreign ship-owners to capitalize on the lax conditions for the grant of waivers. Rather it should contain safeguards for local shipping companies and opportunities for technology transfer.
This can be achieved by including cooperation between local shipping lines and foreign counterparts and the consultation of Indigenous Ship-owners Association of Nigeria, as obtainable in Malaysia, as prerequisites for the grant. More so, the waiver should be engendered by the collective interest of Nigerians; decided on a case by case basis.
Better still, there should equally be percentage improvement for joint-venture arrangements. This should be amended to 45% for foreigners and 55% for Nigerian partners. This will encourage partnership between foreign companies and indigenous firms, and it will ultimately improve Cabotage business opportunities for local firms and indigenous ship operators. The efforts of NIMASA towards ending the issuance of waivers are also laudable.
There is equally a need for a major overhaul in the regulatory aspects of the Act; such as the grant of automatic certification to Nigerian-flagged vessels under the Cabotage law regime, offering of the right of first refusal to Nigerian-flagged vessels for both coastal and international trade and sole reliance on a rigorous classification regime by bodies such as the Det Noske Veritas (DNV) for determining the suitability of a vessel rather than the arbitrary 15-year rulesince the age of a vessel is not always the best indicator of its state.
Also, despite the creation of CVVF in the Act, the paucity of funds to bolster efforts of indigenous ship-owners in the sector is another factor. This is owing to the following;
- the imposition of a surcharge on indigenous ship-owners which defeats the purpose of the act, thus it should be expurgated and
- the unrealistic US$25 million cap placed on the loan figure obtainable by ship-owners taking cognizance of the capital-intensiveness of the sector.
It should be increased to reflect current economic realities. There should equally be provisions of major fiscal incentives to indigenous shipping operators to foster the purchase of fleet. Also, Nigerian shipyards and dockyards should be given tax breaks and duty exemptions on the importation of equipment and spare parts. Government efforts at reviving the Ajaokuta Steel Mill and Aluminum Steel Company in Akwa Ibom, to provide needed raw materials are welcome initiatives in this regard.
More so, owing to the history of poor disbursement of funds and lack of special knowledge of the sector by banks, the Act should state measures for its proper appropriation. There should also be provisions for the establishment of a Maritime Development Bank specializing in ship acquisition, development of dockyards and other maritime projects in Nigeria, and creation of a shipping fund to promote equity participation in local shipping companies; this should be managed exclusively by the bank.
Furthermore, the inability of NIMASA to effectively monitor the operation of foreign ship-owners is traceable to insufficient funding. Hence, there should be an improvement. There should also be the utilization of project finance to promote private investment in infrastructure.
Due to the inextricable relationship between the petroleum industry and the maritime sector, there ought to be synergy between the Cabotage policy and the local content policy in Nigeria. NIMASA and other relevant institutions, like the Nigerian Content Development Board, should work together in the areas of research and development, monitoring of the implementation of policies and encouragement of indigenous participation in the maritime and petroleum sectors. Also, the Cabotage jurisdictions in Nigeria should extend to shipping services to and from oil rigs.
It is noteworthy that a well-implemented cabotage law policy will ultimately enhance national economic development through the contribution of domestic shipping and transportation to national gross domestic product. Also, the attendant availability of cargo and passengers for domestic shipping makes these businesses attractive for credit facilities for fleet and business expansion and attracts more investors into the coastal shipping business. It is expected that these loose-ends in legislation are tied to enhance indigenous ship ownership leading to deep-sea shipping.
Oludayo Olufowobi is a penultimate law student at the University of Lagos. He is currently the deputy editor-in-chief of the Unilag Law Review. He has interests in intersections between Law, Finance and Technology and is passionate about youth participation in the achievement of the Sustainable Development Goals. He can be reached at Oludayo.email@example.com.