Nigerian Shippers Council: The Transport-Sector’s Emerging Super Agency
By Dr. Edmund Chilaka
The adage that history makes great men just like great men make history may become true of the transformation of the Nigerian Shippers Council (NSC) to a Grade A parastatal and regulator of the port industry. With the passage by the House of Representatives of the National Transport Commission Bill in March, the stage is set for the Council to transmute to the long-canvassed role of port economic regulator after Senate concurrence and signing into law. So many other developments in the recent times are propelling the former custodian of shippers’ rights to the leading edge of Nigeria’s growing maritime industry. Since April last year, the Council’s Executive Secretary, Mr. Hassan Bello, has been saddled with the task of midwifing the renascent national fleet for Nigeria after the inglorious exit of the defunct premier national carrier, the Nigerian National Shipping Line (NNSL). He leads a committee of 16 drawn from stakeholders in the indigenous maritime industry with a turnkey term of reference to deliver the shipping line afloat and viable. Nevertheless, this huge project does not command the whole energy of the Council as others such as the truck transit park and the inland container depots have been pursued vigorously.
Origins of Shippers Councils
Maritime historians trace the origins of Shippers’ Councils to the Royal Commission on Shipping Rings set up by the British monarchy in 1906 to treat the petitions against Elder Dempster Line, other shipping lines and their conferences which controlled cargo shipments around the world. The petitioners were shippers from Australia, South Africa, South East Asia and Great Britain, with African colonial trade in good coverage. Both the majority and minority reports indicted the shipping lines and their groupings for unfair monopolistic trade practices and recommended remedies for the protection of users of shipping services. When the UNCTAD Code of Conduct on Liner Conferences was passed in 1975, it also prescribed the formation of Shippers Councils in all jurisdictions where the users of shipping services faced unfair trade conditions from carriers, especially in the newly independent African and Asian countries where indigenous shipping lines were yet to take root. Thereafter, many African countries formed Shippers Councils. Nigeria followed suit in 1978. Their functions were fairly uniform though local conditions could dictate slight variations. However, Shippers’ Council were formed to ensure timely and efficient delivery of shipping services to importers and exporters; for the moderation and bargaining of freight rates, port charges, local shipping charges and haulage charges; for education and enlightenment of shipping stakeholders and for other liaisons between political jurisdictions and the providers of shipping services. The Nigerian Shippers Council functioned in all these categories since its inception.
However, in Nigeria, the absence of a regulatory agency in the port industry began to be highly felt after the port concession programme was consummated in 2006. Who is to sanction erring operators or maintain best practices? When this issue matured after long periods of argumentation, the Federal Government, using two executive orders of 2015, appointed Nigerian Shippers Council as the Port Economic Regulator, charged with the control of tariff, rates and charges and to sanction offenders of port industry rules and guidelines. In this capacity, a lot more activity has been noticed in the schedules of the NSC. The recent progress being made by the National Assembly to pass the National Transport Commission Bill into law would codify the agency’s functionalities in a new dispensation of progress for Nigerian maritime trade.
The Truck Transit Parks and Inland Container Depots
The proposed establishment of Truck Transit Parks (TTP) around the country and the Inland Container Depot project speak to the problems of road carnage and other losses attributable to fatigue and human error. The TTPs are designed to offer rest and re-stocking areas along major highways in the country for the use of long-distance truckers and other road users. They are modeled after similar facilities found in the advanced countries of the world which enhances refreshment of road workers on-the-go. With a concept based on private-public partnership, such parks will run restaurants, motels, servicing and repair workshops, fueling and spare parts and similar marts or conveniences which offer road users hospitality on the highways and offer short-term or long-term parking services as well. When well-established, the guidelines for their operation would be incorporated in some form of laws that stipulate, for example, the maximum hours of driving at any single stretch, perhaps enforced by road marshals. The Council has been in talks with private organizations which could furnish the land.
In the particular designs the Council has canvassed, the following dedicated services will be provided: fueling station, hotel and motel, restaurants, mechanic workshop, fire station, police post, and automated cargo tracking system. According to the NSC, the project aims include the promotion of safety and security of cargoes and haulage vehicles while in transit, reduction of pilferage and theft of cargoes while in transit, adoption of a cargo tracking system so that cargo owners can monitor cargoes in transit. The Council’s target is to arouse confidence in Nigerian transportation so as to capture transshipment cargoes and improve trade with landlocked North African countries. Currently, locations being considered for this facility include Lokoja in Kogi State, Obollo-Afor in Enugu State, Jebba in Kwara State, Ore in Ondo State, Ogere in Ogun State, Porto Novo Creek in Lagos state, Onitsha in Anambra State, and Mararaban Jos in Kaduna State (see location map below). In fact, the project of the TTPs is so surefooted that adverts have already gone out for interested private sector participants to contact the Council to take the project to execution level. It promises to create a pool of employment generation around a major nexus of the economy, transportation, in line with the federal government’s policy of reducing the infrastructure deficits in the country.
On the other hand, the inland container depot (ICD) project provides the multimodal complement which promises to decongest the river ports along the coast, provide employment for teeming masses in the hinterland areas of the country and create a robust circulation of the potentials of sea trade for the entire country. An ICD usually receives cargoes by road or rail for examination and clearance by customs before release to consignees. Although the ICD project in Nigeria, also called dry ports, has been under gestation for a long time, its consummation may be in the offing following the groundswell of support being proposed by many important stakeholders. Recently, the Chairman of the House of Reps Committee on Ports, Harbours and Waterways, Hon. Patrick Asadu, lent his weight behind the efforts of the NSC to kick-start ICD operations and promised more budgetary allocations to facilitate the venture.
Ordinarily, the idea that shippers need not leave their domiciles or business locations thousands of kilometres from the coastal ports to clear their cargoes sounds far-fetched for Nigerian conditions. However, the prospect is real because if the essential intermodal linkages are synchronized between the Nigerian Railway Corporation and the NPA, consignees can clear their containers or other cargoes in the dry ports conveniently located in the six geopolitical zones of the country. The NSC has been working on these container freight stations for decades. In fact, the ICD Implementation Committee of the Federal Ministry of Transport has organized a successful concession of the approved six stations nationwide to private sector operators. They are located at Isiala Ngwa, Aba; Erunmu, Ibadan; Heipang, Jos; Zawachiki, Kano; Zamfarawa, Funtua; and Jauri, Maiduguri. Other proposals for additional centres have been received from interested would-be operators. To coordinate all these initiatives, the large spread of NSC branch offices, as shown in the map below, provides a handle for communication and administration.
The National Transport Commission Bill
Perhaps the well-established administrative structure of the Council and its experience in the gamut of nationwide shipping activities account for some of the high-profile assignments being issued it in recent times. Therefore, some now talk about the rise of the NSC to fill the yawning gap of port regulator for Nigeria. Why? Well, despite the huge success of the 2001 port reforms and concession programme which delivered brand new concessionaires in the port industry nationwide, the lack of a port regulator to call the shots has elicited reasoned arguments about a game without an umpire! Who, for instance, should sanction erring operators which fall short of the admiralty laws, the concession agreement or the general practice of shipping in the new dispensation? Would the Nigerian Ports Authority (NPA), the landlord of the ports, equitably rise to the occasion? Would she not be accused of being a judge in her own case? Although the Federal Ministry of Transport (FMOT) had filled the gap in the interim, but this measure is below the threshold of international best practices as the ministry lacks legal foundation for the role. Nigeria’s port concession programme, just like the telecom concession of the same era, involved an internationally-anchored bidding round which produced world class operators such as A P Moller Terminals (APMT) (and Maersk Line), Intels and Grimaldi Ports as well as eighteen others.
Thus, regulation of such a vast dollar-denominated sector which carry ample chances of diplomatic interactivity cannot be complete without a legally well-established regulator to assure confidence and good corporate governance. This formed the argument for the setting up of a National Transport Commission (NTC) and the associated Port and Harbour Bill: the legislations would establish a port regulator, the NSC being roundly favoured to perform this role. Nevertheless, when the NSC transmutes to the NTC with all its assets, liabilities, debts, offices and mandates, etc, would its former portfolios align without hitches to the new or how would conflicts of interest be managed? These are some of the posers to be resolved in the new dispensation.
Of additional interest is the NSC’s role in Nigeria’s quest to improve secure information database about her shipping trade. This is an area of constant disparity of figures amongst the regulatory and the port agencies vis-à-vis traffic and revenue information recorded by the Customs, NPA and NIMASA. The search for solutions gave rise to the Cargo Tracking Note (CTN) project, an advanced cargo declaration programme which is geared to promote transparency, accuracy and speed of information relay between the MDAs responsible for administration, revenue generation, policy enforcement and the operators across many platforms. Again, the NSC has been identified as the appropriate agency to manage CTN, especially because of the security implications of the programme’s software. However, CTN could become a hard technological nut for the Council to crack due to the high-level of computerization and cybernetics required to mount a secure platform for verifiable data exchange and automated money transfers, all done in real time. One of the hurdles is the poor power situation in the country which could fail the electronic infrastructure of the operating network.
Floating the National Fleet…
Regardless, there is no gainsaying the fact that the well-established administrative structure of the Council positioned it for many of the new assignments it has been given. It might have boosted the confidence of the Hon. Minister of Transport to appoint the NSC CEO, Barrister Hassan Bello, to chair the National Fleet implementation committee. No doubt, refloating a national fleet for Nigeria is no mean task, going by the nation’s previous experiences in running two failed merchant shipping parastatals, the NNSL and the Nigeria Unity Line (NUL). Thus, skeptics who query whether the committee is up to the task can be pardoned, especially, after the liquidation saga of the NNSL and the limbo of the NUL till date. What failsafe novelties are being introduced into the planning and corporate design of the new line to ensure that it is robust and versatile to perform where other African carriers have failed? Will this new carrier lift crude oil, fertilizer and other lucrative project cargoes that had eluded generations of indigenous shipping lines since the 1940s? These and many more questions informed this special supplement devoted to beaming the searchlight on the second effort by the Giant of Africa to make her mark as a maritime nation.
Formation of the National Fleet.
The plan to reestablish the national fleet began when the Minister of Transportation, Mr. Rotimi Chibuike Amaechi, set up the Committee on the Modalities for the Establishment of Nigerian Fleet on 25th April 2016. This committee included the ES of the NSC, Barrister Hassan Bello; the MD of NPA, Ms Hadiza Usman; the DG of NIMASA, Dr. Dakuku Peterside; Engr. Olu Akinsoji, former Rector of Maritime Academy of Nigeria, Oron and member of the Association of Marine Engineers, as the chairman; Capt. Greg Ogbeifun, MD of Starz Marine (ship repair yards); Mrs. Nwaolisa, Chairman of Ship Owners Association of Nigeria; Alh. Aminu Umar, Chairman of ISAN; African Ship Owners Association; Mrs, Mfon Usoro, Secretary of the Abuja Memorandum of West and Central Africa. After working for two months, the Committee submitted its report on the 26th of June, 2016. The Honourable Minister immediately re-constituted the same panel into the Nigerian Fleet Implementation Committee (NFIC) with the addition of representatives from the Federal Ministry of Finance, Petroleum Resources, Agriculture, Trade, Investment and Industry, and Solid Minerals.
The Committee on Modalities of the National Fleet made far-reaching recommendations, including the adoption of the preliminary joint venture proposal involving President International Line (PIL) of Singapore, as lead technical partner in 40-60 shareholding participation in favour of Nigerian shareholders. However, with regard to the expertise and long years of experience of PIL in international sea trade, it was also mutually agreed that it provides the managing director and chief executive officer of the company while other shareholders provide some of the other leading functionaries based on the respective weights of their shareholding. This is one similarity the new line shared with the defunct NNSL. During the formative stages of the latter, between 1959 and 1963, the Elder Dempster and Palm Line Agency, which were the managing partners in the joint, between them provided the managing director who was based in Lagos and the Operations Manager who was based in Liverpool.
Liverpool was the operational base of the NNSL because it was the hub of shipping in those days. Incidentally, the years of technical partnership were also the only years the NNSL made profit throughout its forty years of existence: £155,000; £294,000; and £298,000 for 1959-60, 1960-61 and 1961-62 financial years, respectively. Thus, with the adoption of this Elder Dempster-Palm Line-NNSL model, the NFIC would seem to be acting with the benefit of hindsight. As with that model, the PIL is expected to provide the initial fleet of two vessels for the startup. According to reliable sources, the ships of the new national fleet will be spread over three core areas: crude oil tankers, dry cargo ships and offshore support vessels.
Working together with the Committee, an outline business case (OBC) is being provided which would establish the viability of the project and provide a bankable instrument to be used for loans and funding solutions from local or international organizations. Due to the highly technical nature of an OBC, the Committee is seeking a transaction adviser to guide it through the maze of processes and procedures precedent to establishing the company. The broad base of stake holding in the new carrier is underscored by the participation of the African Import Export (Afrexim) Bank. The usefulness of Afrexim includes relevant advice on the procurement of long-term ship financing at low rates which should give the new carrier the elbow room to trade for some years without the weight of loan repayment. The assurance of a successful application would require the expert advice of the likes of Afrexim Bank on what constitutes bankability in the money world of 2017.
The Cargo for the New Fleet
Shipping is a derived demand. This means that cargo availability is the lifeblood for any viable shipping line. In the case of the proposed new fleet, where would the catchment cargoes come from? Unlike in the past when the chase for cargo was a nightmare for the defunct national carriers, there is a huge promise that Nigeria’s adopted national carrier would swim in juicy tranches of cargoes generated from across the sectors of the economy. There is no gainsaying the fact that such a carrier would benefit from the nationwide ambition to get it right this time. Consequently, DDH was informed that the new shipping line would be availed the support from all the relevant MDAs to lift the lucrative cargoes which the NNSL angled only in vain to carry during her trading days.
These cargoes include crude oil and white products, fertilizers, government project cargoes and whatsoever else would be available for haulage. Despite efforts made in the past, these cargoes were frittered away from Nigerian carriers in sweetheart deals by Nigerian officials who favoured foreign carriers in exchange for bribes and kickbacks. We were reliably informed that aside from the support of the Nigerian National Petroleum Corporation (NNPC), the Nigerian Content Development Management Board (NCDMB) would also assist the carrier in unspecified ways. This is from the point of view of local content development for which the agency budgeted $100m to support capital acquisition by pre-qualified indigenous operators in the oil and gas sector during the current financial year.
Furthermore, the Federal Ministry of Agriculture was also made a member of the Committee because of the significant market for fertilizers in Nigerian farming. This sub-sector had completely eluded Nigerian carriers in the days of yore. Fertilizer affreightment carried a huge foreign exchange price tag because of the large volumes of fertilizers of all types and grades, which the federal government bought annually for local farmers. The officials of the Agriculture ministry, the awarding agency, rarely preferred the licensed indigenous public or private sector carriers of the country. Rather, Israeli, Arab or Asian contractors who always used foreign carriers, and gave the awarding officials huge kickbacks, were the lucky winners of the haulage contracts for Nigerian fertilizers till date. Under the dispensation of the current anti-corruption campaign, it is likely that the boast that the new national fleet will be a beneficiary of future fertilizer carriage contracts will materialize.
According to World Top Exports, an online database, Nigeria exported $34.9 billion and imported $30.3 billion worth of goods in 2016. The top export items were mineral fuels including oil, US$31.9 billion (91.6%); cocoa, $899.1 million (2.6%); wood, $279.4 million (0.8%); oil seeds, $279.2 million (0.8%); raw hides and skins not furskins and leather, $216.7 million (0.6%); ores and slag and ash, $169 million (0.5%); aluminum, $134.9 million (0.4%); copper, $109.8 million (0.3%); fish, $107.2 million (0.3%); and, fruits and nuts, $65.6 million (0.2%). Her chief imports included mineral fuels including oil, US$5.3 billion (17.4%); machinery including computers, $3.1 billion (10.3%); electrical machinery and equipment, $3 billion (9.9%); plastics and plastic articles, $1.5 billion (4.9%); vehicles, $1.4 billion (4.7%); pharmaceuticals, $1.2 billion (3.9%); cereals, $938 million (3.1%); articles of iron or steel, $846.1 million (2.8%); clothing and accessories (not knit or crochet), $763.3 million (2.5%); and, sugar and sugar confectionery, $616.7 million (2%). and imported industrial machines, industrial chemicals and feedstock, vehicles, … The Nigerian Customs Service published figures for the trade in West Africa for 2014, 2015 and 2016 as …. Thus, the very high volume of oil and gas exports and imports justifies the emphasis being laid by the NFIC on appropriating carriage rights for the new line from the NNPC and its relevant subsidiaries, ab initio. DDH gathers that Nigeria’s age-long practice of selling her oil and gas products on free on board (FOB) will soon be changed to cost, insurance and freight (CIF) to pave way for oil sales to be delivered by Nigeria-nominated carriers, especially the new national fleet.
Shareholding in the new line
The NSC, ab initio, was appointed as a midwife saddled with the onerous task of overseeing all the committees’ activities, including the provision of secretariat services, the funding of local and foreign travel and any other logistic needs – a role that would lapse after the shipping line had been formed and set sail for foreign shores. The Council would not by any means acquire any shares or interest in the new line. For that matter, no government MDA would take part in the funding or operation of the carrier. Aside from providing enabling environment and assuring tax holidays to pave way for unhindered take off and honey moon, the new shipping line would be a purely private-sector international company whose shares would trade at the Nigerian Stock Exchange. In the fullness of time, there would be an initial public offering (IPO) and the new carrier would be a recipient of funds from investors, local and foreign. Unlike the NNSL whose fortunes were tied to the subventions from the federal government and whose activities were approved or sanctioned by the Federal Ministry of Transport, the new national carrier would have a governing board made up entirely of shareholders.
The Cargo Tracking Note (CTN)
As a an advanced cargo declaration project, the cargo tracking note (CTN) will be an online intranet accessible to authorized MDAs for the verification of Nigeria’s import and export data on a secure platform. The security implication removes the programme from the status of small-time; it has to be hosted on the top-secure segment of the government’s web management infrastructure reserved for such departments as the Central Bank of Nigeria. The centrality of the CTN to future corporate governance of national import and export data means that many of the revenue-generating MDAs and their supervising authorities, for example, must be members of its governing board. To be domiciled in the Nigerian Shippers Council is the clearest indicator of hyper elevation as a foremost grade A parastatal in the scheme of future organogram of the country’s economy. Consequently, all existing cargo declaration and trade facilitation softwares such as the pre-arrival assessment report (PAAR) would be docked within its domain in the information superhighway.
As a result of its large functionality and top security, the CTN is being touted to be highly expensive to design, install and mount on the strengths of a World Area Network (WAN). Although some sources told DDH that federal government technology companies are being consulted to complete the project, it is unknown what level of foreign collaboration would be required to establish the efficacy of its protocols for international services. Nigeria, being a member of the International Telecommunications Union (ITU), mounting a CTN website that is resistant to hacking should not be a huge challenge. For long, the issue of disparity of trade information has constituted a menace to the country whereby the NPA, NCS, NIMASA, NNPC and literally dozens of other revenue generating agencies find it hard to maintain harmonized figures for exports, imports and other economic categories.