Local shipping business suffers as NNPC dominates downstream sector

The fortune of local shipowners has gone from bad to worse following the Nigerian National Petroleum Corporation’s domination of the downstream petroleum sector of the economy.

Our correspondent gathered that business has been dull for local operators in the local shipping sector since the NNPC moved from importing 90 per cent of petroleum product to being the sole importer of the product.

In the past, independent oil marketers belonging to the Major Oil Marketers Association of Nigeria; Independent Petroleum Marketers of Nigeria; Depot and Petroleum Marketers Association; and Jetties and Petroleum Tank Farm Owners of Nigeria, and the NNPC imported the shortfall of petrol that the inefficient local refineries in Nigeria couldn’t produce.

The associations shared the fuel importation quota with NNPC on a 60-40 per cent basis.

These association members mostly engaged the services of local shipowners to lift their product, but that ended when the NNPC took over, our correspondent gathered.

“The NNPC uses its own vessels which are usually foreign-owned vessels to lift products,” Aminu Umar, the President, Shipowners Association of Nigeria, told our correspondent.

He reasoned that according to the cabotage law, only Nigerian-owned and flagged vessels were permitted to operate in the country’s territorial waters, lamenting that foreign vessels had taken over both the coastal and cabotage trade.

On the importation quota that has been taken over by the NNPC, he said, “We are hoping that the Federal Government will reverse the importation formula after May 29, because the current situation is killing local shipping business.”

During a stakeholders’ meeting recently, a maritime and logistics expert and the Chief Executive Officer of Starz Investment company, Mr Greg Ogbeifun, said the local shipping sector suffered a demise owing to the poor implementation of the cabotage Act and the lack of disbursement of the Cabotage Vessel Financing fund to the operators in the sector.

The cabotage fund was established in 2004 and is drawn from contracts awarded to local shipping operators.

The fund was set up to provide finance for the operators to buy new vessels and maintain existing ones.

But Ogbeifun observed that for over 15 years since the fund was established, no local operator had  been able to access it.

He said this had undermined the ability of the operators to expand their business and build capacity, and resulted in foreign shipowners having an edge over the local operators.

He lamented that at a point, international oil companies had stopped employing the services of local shipping companies.

A local shipping line operator, Taofik Adegbite, pointed out that the reason firms stopped employing the services of local shipping companies was that local shipping firms lacked the capacity to execute contracts given to them.

According to Umar, the Cabotage Act aimed to develop the capacity of the Nigerian shipping sector to 95 per cent.

He said, “But you cannot build capacity when you don’t have business. The person that has capacity, his country gave him enough support. It means that even if you have capacity and there is no business and you are not making money, the capacity will diminish.

“If you are not able to develop in your own country, how can you go and compete in the global space?

“Eventually all the assets one spent money on will decay because there is no work and they will say one has no capacity.”