Transport Ministry’s ambitious revenue target for maritime agencies

20 March 2016, Lagos – With the revenue target of N500 billion each for the Nigerian Ports Authority (NPA) and the Nigerian Maritime Administration and Safety Agency (NIMASA), including one N1trillion from the Nigeria Customs Service (NCS), the maritime industry appears to be the hope for the government with the dwindling fortunes of oil. But industry stakeholders argue that the target would be far from being achieved considering the economic policies and crises that have affected the sector. Francis Ugwoke writes

Apapa-PortThe past few months of the former Rivers State Governor, Rotimi Amaechi, as the Transportation minister speak volumes of daring efforts to get the transport sector, particularly the maritime sector, to take its right of place in the national economy. Amaechi, on assuming office last year, said the sector has not contributed enough to the Gross Domestic Product (GDP).

He described the 1.41 per cent aggregate contribution as unacceptable. According to him, “Countries like South Korea and Singapore have built their economies around a vibrant transportation sector. Although Nigeria is blessed with multiple modes of transportation that is the envy of many, these potential have largely remained untapped. The President Muhammadu Buhari administration is determined to fully exploit the potential in the transportation sector.

“As a first step, the government will pursue the enactment of legislation that will open up the sector to new investments that will lead to economic prosperity. Among the bills that is ready for legislative action is the National Transport Commission Bill – an act to provide for the establishment of a National Transport Commission as an independent multi-modal economic regulator and other related matters. He said the bill among others have been approved by the Federal Executive Council (FEC) in March 2014.”

Revenue Targets and Industry Health

In an apparent effort at improving the sector’s contribution, Amaechi appears to have taken the bull by the horn. He is taking on all fronts at the same time. Few weeks ago, he set N1trillion revenue targets for the Nigerian Ports Authority (NPA) and the Nigerian Maritime Administration Safety Agency (NIMSASA). That is N500 billion each for the two agencies this year. Incidentally, the annual budget of each of the two organisations is not known to have been up to N160billion in the past. In 2014, NPA budgeted N144.5billion while NIMASA budgeted N86billion.

The minister said “the only way we would not change officers in the sector is if we achieve the N500billion, we cannot achieve it without a proper reform,‎ Nigerian maritime sector must bring part of the money we would use in replenishing the nation, if they cannot meet the target I will tell Mr. President to allow me hire new persons who can help me achieve it. If you think the corruption in the maritime and transport sector has stopped with the emergence of the new government, the answer is No!‎ We all need to sit and think of what to do to allow those who can make legitimate money to come into the system”.

He added: “Statistics has shown that over 80 per cent of global oil trade is transported by ships, while in the case of Nigeria, it is 100 per cent. The shipping sub-sector of the maritime industry is estimated to be worth over $3 billion annually. It is therefore expedient to stress that transport is demand-driven and government in its commitment to shipping, will consider growth and development of the industry”.

The minister has also indicated readiness to audit the port reform exercise, including the merger of associations of major stakeholders and professionals in the industry. He believes this will have positive impact on improving on the fortunes of the industry. But as sincere as the minister has demonstrated, industry experts quickly point out that how much the sector contributes to the national economy will depend largely on the ship and cargo traffic at the ports.

In other words, how much the government realises from the maritime sector would depend on its economic policies that will either encourage international trade that will increase traffic in the ports or reduce it. For instance, the list of 41 products, which will not benefit from the foreign exchange official allocation will play a part on how much traffic to expect in the ports. Definitely, it will reduce ship and cargo traffic and to a large extent revenue generation. Already, there has been lamentation by customs brokers that many importers have not been in business since the forex crisis started with One US Dollar exchanging for N400 and now down to about N315.

Secondly, the number of oil marketers involved in importation of refined products has come down because of the decision of the federal government to stop payment of oil subsidy. This will affect the traffic and revenue at the ports. As the minister may be aware, many have already lost their jobs as a result of the downturn in the maritime industry. For instance, some terminal operators have had to lament that the poor economic situation has hit them to the extent of opting for mass sack.

The RORO port under concession with Grimaldi Group was among those that have suffered the economic policies of the government with reduced traffic on ships bringing in vehicles. Importers of vehicles, customs brokers and freight forwarders have all been hit by the government policy. Many have reduced their workforce by more than half, it was gathered.

It would be recalled that one of the biggest terminal operators, APM Terminals Apapa, had last year November also said it was planning to reduce its workforce as a result of the falling cargo traffic. The General Manager, Communication & Sustainability of the company, Mr. Austine Fischer, had in a statement explained that fall in cargo traffic has forced the company to reduce staff. APMT was not alone as many other terminal operators were believed to have reduced their staff strength.

Early this year, the APMT Customs Command confirmed the poor state of traffic at the ports with just N63.18 billion for the whole of last year. The revenue according to the Customs Public Relations Officer in the Command, Mr. Steve Okonmah, fell by 32 per cent compared to the figure in the previous year which was N91.45billion.PTML which is a Roll On Roll Off (RORO) vehicle port recorded 172,174 vehicles in 2013, 129,361 vehicles in 2014 and 66,823 vehicles last year. Although some customs commands in Lagos, have recorded impressive revenue for the months of January as records showed, freight forwarders said this was because some importers who have had difficulty clearing their goods last year had them cleared early in the year. For instance, the Apapa Customs Command recorded N24billion in January, but the figure fell in February with N19.7billion. In effect, to observers, the revenue target set by the minister will be a big task for the parastatals considering the state of the economy generally.

Port Concession Audit

In an apparent move to ensure that more revenue is generated from the maritime industry, Amaechi had also announced government’s readiness to carry out a performance audit on ports concession. After directing the NPA to ensure that all payments are made in United States dollar, the Transport minister disclosed that government had engaged auditors to examine the gains of port reform. He said the port reform exercise had not benefitted the government commercially.

As a follow-up to the directive of the minister, the Managing Director of the NPA, Mallam Habib Abdullahi, said in Lagos recently that the concession agreement with the terminal operators would be reviewed. According to him, “We are calling for a review of the concession, so that we can look at the agreement and move forward. It has always been undergoing scrutiny”.

Cabotage Shipping

One area that may be of serious concern to the Transport minister is the Cabotage Shipping policy which has failed to achieve its objective. Cabotage policy which is under the administration of NIMASA was introduced in 2003 to develop indigenous shipping. Under the policy, only indigenous shipping companies are supposed to be involved in the carriage of goods within the nation’s territorial waters except where Nigerians do not have such capacity. But the trend has been the domination of the nation’s territorial waters by foreign vessels violating the policy provisions. Many of these vessels include some which obtained waivers fraudulently and those without waivers.

NIMASA has not been able to address this problem, leaving indigenous shipping companies to their fate. The other issue is the refusal of the NNPC and oil majors to consider many of the indigenous shipping companies in contract of affreightment of cargo within the territorial waters. They prefer foreign firms instead, a situation that has impacted negatively on the national economy. Successive administrations have failed to address this issue, and with the change agenda of the government, one expects that the minister should be able to come to the rescue of the local ship-owners. One also recalls the Cabotage Vessel Financing Fund (CVFF) which had reached $200million for disbursement to local operators.

Reports have it that the fund has since been depleted with less than a quarter of it remaining. If the fund had been well-utilised, it would have led to acquisition of more vessels and employment generation. To industry stakeholders, the way forward on CVFF is for the Transportation minister to determine.

 

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