Wearing shades in Nigeria

NIGERIA has just made an historic turn from the past. Fifteen years of continuous and damaging military rule literally destroyed the country's social and political institutions, forcing a large part of the population into poverty, and seriously damaging the economy.

A dominant enclave oil sector, a financial sector out of touch with the developmental requirements of a poor economy, a rapacious public sector and a tired agricultural sector characterised the Nigerian economy during the many years of military rule. In spite of its vast natural and human resources, the Nigerian economy in the past ten years has recorded abysmal performance and little growth. Population growth has far outstripped real output growth. Nigeria's true gross domestic product (GDP) growth fell short of four per cent in 1997 and 1998. Currently, over 65 per cent of Nigerians live below the poverty line, in contrast to 43 per cent in 1985 and 48.92 per cent in 1992.

Shipping has fared no better than other sectors of the economy, being dogged by inconsistent policies and controversy with regard to port reforms, local shipping charges, inspection of imports and the efficiency of regulatory authorities.

Nigeria hopes that the return of democracy will facilitate a permanent break with the past and release Nigeria's resources for sustained economic growth.

The Nigerian shipping industry

Nigeria, like most other nations, regards the maritime sector as a key factor in the country's pursuit of economic and political independence. Successive governments have put considerable financial resources into establishing and maintaining a merchant marine and acquiring the necessary expertise in maritime operations through the state-owned Nigerian National Shipping Line (NNSL).

The NNSL, established soon after the country attained independence in 1960, owned a fleet of 24 oceangoing ships by 1979, nineteen of which in that year were newbuildings. Despite a boom in the 70s and 80s, and despite being able to point to membership of five conference lines, the government's massive investment in shipping failed dismally. The NNSL, beset by crippling debts, went into liquidation in September 1995, ending Nigeria's earliest and longest implementation of a major policy initiative in shipping. However, another shipping line was set up later that year to replace the NNSL - the National Unity Line, which owns one ship, the Abuja.

Shipping trade in Nigeria has been dominated for the most part by foreign shipping. Statistics show that, even during its glory days, the NNSL, together with a few other Nigerian carriers, carried a mere eleven per cent of the total volume of Nigerian traffic and earned less than nine per cent of the total freight revenue between 1978 and 1980. This was in spite of Nigeria being responsible for seventy per cent of the total trade traffic of the West and Central Africa sub-region. Even now, Nigeria does not carry any of its wet crude petroleum. In 1993, exports (cif) to its main trading partners stood at $826.2m - $807.3m of which was attributable to the carriage of crude oil.

Significant revenue is being lost by Nigerian shipping to foreign shipping as a result of the latter's superior capability. The need for a well-articulated and properly implemented shipping policy is becoming critical. All the players in the industry, local and foreign shipowners and charterers, importers and exporters, the ports, and their respective agents must be provided with clear guidelines on what is expected of them and what incentives are available to them within the context of the country's shipping goals.

The new democratic government has embarked on an economic reform programme based on political stability, a corruption-free environment, monetary stability, adequate infrastructure and a good investment climate.

Policy in shipping

Pronouncements and guidelines

The shipping policy in Nigeria can be found in one piece of legislation and in various pronouncements and guidelines issued by the shipping industry's supervisory government department, the ministry of transport.

Most policy initiatives have more recently been focused on the ports. As major revenue earners for the country, their influence on the country's balance of payments cannot be over-emphasised. However, a lot of revenue has been lost in the last decade due to bureaucratic bottlenecks causing expensive delays in the clearance of goods. A lack of adequate facilities in the ports has forced shipping companies to acquire their own landing and loading gear, increasing importers' costs. The clearing process was even further complicated by the presence of too many regulatory and security government agencies from whom importers were required to obtain clearance and which, by 1998, numbered 32.

High shipping and clearing costs and poor infrastructure resulted in shipowners preferring to carry Nigeria-bound cargo to the more efficient West African ports of Cotonou, Tema and Abidjan and transhipping them to Nigeria in leaky rustbuckets, resulting in loss of revenue to the ports. All this led to a policy shift and a reduction in port charges. A 25 per cent rebate on import duty was also introduced in 1995 to ameliorate the adverse effect of inflation but, by January 1999, the rebate was abolished to provide "a level playing field for all operators in the economy".

Other major reforms introduced in 1996 included the expansion of the mandatory pre-shipment inspection of imports to all imports destined for Nigeria accompanied by Import Duty Reports (IDRs), regardless of their value or source of funding. Pre-shipment inspection of imports into the country had been introduced in 1979 to check over-invoicing of imported goods, which was employed as a means of transferring foreign currency out of the country. It was also to curb under-invoicing, used to avoid the payment of appropriate import duties and other taxes on imported goods and to ensure that goods imported into the country met the specification on the pro-forma invoice and satisfied the country's import requirements.

The pre-shipment agents appointed to carry out the inspections were required to inspect and provide IDRs only for imported goods valued at $1,000 and more. The IDR, which states among other things the origin, value and duty assessed on imports, is supposed to be tendered at the port of entry and the import duty paid before goods are cleared and released to importers. The new policy simply overwhelmed the inspection agents as IDRs had to be provided for every trivial import.

Shippers and carriers alike complained that pre-shipment inspection involved complex documentation processes, and inaccurate duty assessment claims were not addressed promptly, causing delays. By January 1999, the pre-shipment inspection scheme was discontinued. The contracts of all the inspection agencies were more or less terminated by the last outgoing military government by April of the same year.

A destination inspection scheme was introduced which meant that goods were to be inspected at the port of discharge. However, this initiative failed as the planned support ,such as the computerisation of the ports and installation of scanners, was not put in place effectively. In September 1999, three months after coming into office, the new democratic government dumped the destination inspection scheme and reintroduced pre-shipment inspection.

Legislation

In designing a national shipping policy, the interests of Nigeria and its economy would have to be paramount. The National Shipping Policy Decree No 10 of 1987 created the National Maritime Authority (NMA) as the regulatory and implementing agency of the government's policy on shipping. By this law, Nigeria adopted a protectionist shipping policy that has, among other things, given effect to the implementation of the cargo reservation provisions of the UN Code of Conduct for Liner Conferences.

Other significant protectionist provisions in the shipping policy law include the reservation of a minimum of fifty per cent carriage rights in favour of Nigerian carriers and the establishment of a Ship Acquisition and Building Fund to assist Nigerians in the development and expansion of the national fleet. The law states that the objectives of the NMA include correcting any imbalance in Nigerian shipping trade in order to apply the UN Code of Conduct for Liner Conferences' ratio of 40: 40: 20 in respect of goods carried into Nigeria, encouraging an increase in indigenous ownership of ships and achieving indigenous skills in maritime transport, promoting the acquisition of shipping technology, and ensuring the training of Nigerians in maritime transport technology and as seafarers .

The efforts of the NMA in implementing the provisions of this decree include establishing a new national shipping company to replace the defunct NNSL. The authority also administers the Ship Acquisition and Ship Building Fund, which has so far disbursed a total of $87.9m to a few Nigerian shipping companies. However, the fund was suspended in 1996 when beneficiaries were unable to repay the loans on schedule. The consensus has been that the fund may not have been properly managed and should be revived with appropriate professional expertise obtained to manage the fund efficiently.

Under recently released guidelines, in order to be eligible for national carrier status entitling a Nigerian shipping company to benefit from the cargo reservation provisions of the shipping policy law, Nigerians must own a minimum of sixty per cent equity interest in that company. This makes joint venture arrangements between Nigerians and foreign investors possible, and is actively encouraged by the NMA. The Ministry of Transport has also recently let it be known that the National Unity Line is looking to interest foreign investors in the company.

Economic reform, foreign investment and other developments

As part of the drive to achieve a new orientation in Nigeria's economic management, the new democratic government has embarked on an economic reform programme based on political stability, a corruption-free environment, monetary stability, adequate infrastructure and a good investment climate.

At the moment, the buzz word in Nigeria is privatisation. In the maritime sector the government is striving to create an investor-friendly climate to enable Nigeria and its foreign friends to reap the benefits of what is potentially one of the largest and most vibrant private sectors in Africa.

The minister for transport has recently informed the nation that a new shipping policy for the country will be announced in February 2000. At a recent press briefing she said her goals include preparing a comprehensive master plan and layout of Nigerian ports preparatory to involving the private sector in port development. She also plans to increase the tonnage of local shipping companies and facilitate their carriage of the country's wet cargo, achieving efficient cargo discharge and delivery in the ports by ensuring good turnaround for ships in accordance with IMO standards.

The adoption into law of international conventions already ratified by Nigeria, one of which is the Convention on Safety of Life at Sea (SOLAS)1974, is also on her list. In this respect, the Memorandum of Understanding on Port State Control for the West African Region was finally signed last October in Abuja, Nigeria.

Nigeria is making a determined break from the past. The building blocks for a bright future are being steadily put in place and a better investment environment is emerging. If the momentum is maintained and the new administration pursues its policies with diligence, the country will be launching itself on the path to economic growth.