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MARITIME NEWS

INTERVIEW OF OTUNBA KUNLE FOLARIN, A GURU IN NIGERIAN SHIPPING INDUSTRY.

“So, if you are going to raise funds, the bank manager knows that what is going to generate returns for the money he is lending you is there.” Folarin.

Otunba Kunle Folarin is an ace shipping man and for many years worked for Alraine Shipping Company at Apapa in Lagos. Since retiring from this stint, he has been a formidable voice for the nurturing of the Nigerian indigenous sea trader. He has served on the board of the former Joint Maritime Labour Industrial Council (JOMALIC) at the time that organization was underlying reforms, and continues to be at the beck and call of the Federal Government on resolving maritime and transport related issues. Otunba Folarin is one of the brains behind the formation of the Nigerian Shipping Roundtable which seeks to champion indigenous shipping causes. In this exclusive interview, he discusses the history of Nigerian shipping development and the decline of Nigerian participation in that trade. This is a stuff for practitioners, researchers and academicians and indeed all who will want to know the fledgling ramparts of Nigerian indigenous shipping as it stands today. Excerpts:

DDH: We are talking about the collapse of all the Nigerian shipping companies. Can you describe this phenomenon?

Folarin: I was thinking of describing a wider frame, then we begin to deposit (issues) into the wider frame. This could be seen as Nigerian maritime opportunities as an economic agenda. We can look at it by items like international shipping opportunities, coastal shipping opportunities, that’s on the shipping side which forms part of the maritime. Then we go over to safety, then Nigerian maritime economic zone: how was it exploited? Under this I would discuss the trawling aspect. Then we go down to human capacity building. Then we shall talk about seafaring, shipbuilding and Nigerian agencies charged to develop these opportunities and possibilities. They will be discussed in a whole frame like the roles of the Nigerian Ports Authority, NIMASA, NIWA, to mention a few, within that framework. At the same time we look at the Acts on the ground, the legislations and legal regime and look at the solutions whether it lies in legislation, management or in entrepreneurship.

DDH: The Nigerian maritime sector, how do you see the opportunities and over time, how have we managed it?

Folarin: The Nigerian maritime opportunities derive from the natural situation of the country itself: a country with over 800 nautical miles of coastline; a country which is a coastal state with opportunities of managing or handling the resources that are bound within this territory; a country with an exclusive economic zone of over 200 nautical miles obviously possesses the potential of becoming a maritime nation in the area of international and coastal shipping, for example. Over time, Nigeria has tried to manage the opportunities brought about by the size of her international trade and also by the activities of the opportunities within the coastal areas of the country itself, for instance, the oil and gas activities, fishing and many other aspects that can have plural effects on the country. Because by exploiting the opportunities of Nigeria’s international trade, Nigeria will be consciously taking part in a huge environment: opportunities to develop cadres of sea farers, opportunities to develop a maritime fleet, with potential for Nigerian entrepreneurs to take part. Over time, we have tried to handle this through the establishment of the Nigerian National Shipping Line; through the promotion of bilateral trade, even at a time, counter trade with Brazil; generating cargo which could be carried by Nigerian shipping lines; and many other instances. Then again, we have also the potential by the size of our export trade through agricultural produce, minerals, oil and gas production, to develop a huge regime of export trade that will translate into building fleets of vessels; that will lead to the establishment of shipyards to support the demand for tonnage; and, consequently, a deliberate policy of human capacity building that will man these resources that will be so created. These opportunities were lost but could be revamped.

DDH: How can you summarize your thoughts on the opportunities lost and gained and the process of the revamping?

Folarin: First of all, I gave you the size of what was lost. I was talking about Nigerian agencies and institutions that were there to manage this process; this process of creating opportunities for Nigeria to be in international shipping, this process where we have comparative advantage in the area of export. And I gave you the size of the market, at least more than 3 million tons of agricultural produce was being shipped from Nigeria through the establishment of the Nigerian Marketing Boards and through the Nigerian ports. Why I am deliberately making reference to these two is to say that comparatively today, at least we have agencies of government, we shall see how they have fared vis-a-vis their predecessors who managed these resources and made sure that Nigeria took part in international trade 30, 40 years ago, which resulted into Henry Stevens having ships, into S.B. Bakare having ships, into S.O. Osoba having ships, into S.N. Okafor of Continental Shipping taking part. So they had guaranteed cargo so that when they planned to be in shipping, they already knew that the cargo to sustain the traffic was there for them, guaranteed. I have also talked about the Nigerian National Shipping Line which was established later to take part in this trade. We lost all those opportunities. What we have to look at is the development comparatively from the time when these resources were there and we had Nigerian entrepreneurs taking advantage of these resources by being part of Nigerian international trade. Now, you have other agencies, comparatively doing, in a way, what the Nigerian Marketing Board was supposed to do…a function which was later spread into various other cargo units like Cotton Board, Cocoa Board, Rubber Board, and so on. And don’t also forget, as I said earlier, that the plural effects of Nigeria being able to take part in international trade created other opportunities… the rubber farms were growing. Primary industries sprang from the rubber because it was being converted into latex and being sold at a higher premium. The cocoa farms were growing and also secondary and primary products were coming out because that’s why you had the Vom producing cocoa powder which were used by local industries. And the palm kernel, apart from the palm oil that was being produced, when crushed, they were also producing palm kernel cake which was being exported as a primary and secondary product. So, it created several bands of employment because Nigerians were taking part. Employment increased in the ports because government had a serious agency, the Nigerian Marketing Board in charge, which the Federal Ministry of Commerce should be doing today.

DDH: Can you say that in 1987 when Nigeria established the National Maritime Authority Decree 10, that it was a good stride, a positive addition to the quest for better participation in our international trade and shipping? Was it a milestone that is now at risk of being lost?

Folarin: Certainly, the National Maritime Authority as it was then created was aimed at implementing a shipping policy. And the shipping policy was predicated on the United Nations 40-40-20 formula to encourage developing countries to take part in their international trade. So, it was Nigeria implementing a convention, an international agreement, with very clear and precise goals. It was definitely a welcome development. And the policy was very clear: encourage Nigerians to take part in carrying cargoes generated by Nigerian international trade. It has elements of cargo rights for Nigerians, cargo guaranteed for Nigerian carriers, just like earlier the Nigerian Marketing Board made sure that export cargo was guaranteed for Nigerians. They managed it properly at that time. Why was it mismanaged at this time? Government somersaulted by withdrawing cargo allocation. That means that there was no guarantee for cargo.

DDH: In the heyday of the defunct NMA, it led to some good things for Nigerian shipping. Can you tell us what you think these are?

Folarin: Some Nigerians came up. You have Genesis Worldwide Shipping, you have Globe Shipping Line, Nigerian Green Lines of Yinka Folawiyo, Bulkship, Africa Ocean Lines and many many others. They came because there was definite policy guarantee that your enterprise will be supported. Then midway, it changed.

DDH: Give us your own view of why you think those shipping lines failed. Is it simplistic?

Folarin: I don’t think so. First of all, the success of an enterprise will depend on many variables. There must be capacity to manage the enterprise. Skill, finance and will. That’s on the part of the entrepreneur. On the part of the environment, which includes government agencies, government policies, they must be consistent in those policies that encourage the entrepreneur to venture. Thirdly, the government must believe its own objectives. Its objectives of achieving fleet expansion, Nigerian participation in its own international trade by continuous support (of its citizens), continuous monitoring which is slightly different from regulation. Because the concentration has been regulating the industry, not encouraging the industry. Regulating the industry for compliance with fiscal policy, tax laws, environmental laws without monitoring the problems and challenges in the industry and finding solutions to them. It might be lack of cargo rights. It might be the need to sign bilateral agreement with the origin of cargo coming into Nigeria…we share part of it. It has happened before. The Ajaokuta (Steel Rolling Mills) cargo was carried by the Nigerian National Shipping Line (NNSL) and also the Russian shipping lines. It was very precise in the Ajaokuta steel factory project that 50% of the cargo must be carried by the Nigerians. So from the beginning, NNSL had cargo that could last them a whole year. So, if you are going to raise funds, the bank manager knows that what is going to generate returns for the money he is lending you is there. So, there will be no question that you will get it. It was a good policy to answer your question. They have to put three administrative instruments in focus. One, there must be monitoring. Two, support. And thirdly, regulation. But it seems only one of the tripod essential for the development of that enterprise was applied, which is regulation.

DDH: And which in your view is not sufficient manure to achieve the target. In other countries, they still have the support you are talking about…?

Folarin: Let’s take the example of a developing country like us, India. India has a policy that in a way supports Indian entrepreneurs in shipping. They have a type of fiscal policy that encourages the entrepreneur: tax exemption, lower port rate charges and so on. The same with Malaysia. For export vessels leaving Malaysia, it’s almost a zero port charge. So that they will be competitive with other countries. I know of a Nigerian agent that was involved in the export of palm kernel products to Portugal. Because of Nigeria’s nearness to Portugal, it was an advantage to that company because the total freight was lower with the cargo also coming from Nigeria, compared to the Malaysian who was a competitor to the Nigerian enterprise. When Malaysia found out that there was no way, that the ocean freight will always be higher because of their distance to Portugal, they now created an almost zero port charge for export cargo going to Portugal. Of course, the Nigerian enterprise lost because he was not able to match the delivery cost to the importer in Portugal any more. Prior to that this particular Nigerian agency was handling 80 vessel calls from Nigeria to Portugal annually. I doubt whether he handles 10 today! It was not only the shipping that was lost. The cargo that was being produced for Nigeria, the suppliers also lost the business. The Nigerian Ports Authority lost the harbour dues and other charges for ships coming to load that particular project from Nigeria. You can see there is a kind of spiral effect when Nigerian international shipping falls.

DDH: And all this can be traceable to poor policy framework?

Folarin: Sustenance of policy and monitoring of performance. Because if you have a policy that we are going to develop a shipping fleet, and along the line, you are not achieving the policy, the agency of government must be interested to find out why. For example, they must find out why 20 vessels that were calling annually to load exports from Nigeria reduced to two. Because they (the agencies) are custodians of the statistics. Because the ships register with Nigerian authorities when they come here. And there they will discover that it’s because the competitor is offering a lower tariff than the Nigerian ports. And the Federal Ministry of Commerce must therefore say that ‘look we cannot lose this opportunity, we cannot lose this business’. Forget about the individual. The Ports Authority must be interested that it cannot lose 18 ships that were calling. Why not charge lower port dues and have not just 20 as before but 40? By economies of scale, you will come to the same revenue base. We must be people who are monitoring the trade.

DDH: You are saying the Nigerian maritime and port authorities were insensitive to these intricacies of the international business?

Folarin: They were not even conscious of it. You must have people who are conscious of the objectives, that something is hampering the objectives of government. They should stop looking at it as A is losing business. The way people are looking at it is ‘well, Mr Xeno is no more having export ships from Nigeria’. They have not looked beyond that to say Nigeria also is losing port charges, is losing harbour dues. They have not come to see that the stevedore companies are losing business. They have not come to see that the chandler is not having any ships to supply vegetables. They have not looked at it that the dock worker is not having a ship to work on. They have not looked at it that the produce contractor bringing in produce for the country to ship is not having any job. They have not looked to see that the suppliers’ farms are dry now. They are not looking at it that even the NIMASA is not having any 3% to collect because there is no freight. You must look at it first as a government policy. They just narrow it down that an individual has lost business. No! A number of agencies have lost revenue. They have lost patronage. The country has lost employment for the youths.

DDH: But the most unfortunate part of the story is that that the business is still here; only it has just changed hands. How do you analyse that?

Folarin: The business has not left here. The palm kernel has not stopped growing in Nigeria. The importer in Portugal has continued to demand the produce but he wants a lower cost. The competitor offered a lower cost. So the demand is still there. The market is still there. The produce is still there. You only need a single policy to bring ........

 

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1st Quarter 2009

 
 

 

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