Since the crash in oil prices in 2014, the Nigerian Government has been pushing to diversify its economy. The prolonged slump, combined with conflict in the oil-producing Niger Delta region, caused Africa’s largest economy to enter a major recession – something its administration is keen to avoid happening again.
While oil remains the backbone of the Nigerian economy, one of the most promising sectors it’s hoping to develop is the shipping industry. With a coastline of more than 850km, a maritime area of 46,000km2, and more than 70% of Nigerian trade by value being moved by sea, “the importance of the blue economy and in particular, maritime transport for trade and development in Nigeria, cannot be overemphasised,” said Nigeria’s Maritime Administration and Safety Agency (NIMASA) in a recent report.
Piracy on the rise
However, major challenges face the industry, which has been in steady decline for a number of years. Despite a costly campaign, last December NIMASA had its third consecutive attempt to be re-elected onto the International Maritime Organization (IMO) Council under Category C rejected. It was beaten to the position by several smaller countries including Jamaica, Kenya and Liberia.
“Our performance at the election has dealt a hard blow on our psyche as a maritime nation,” said Greg Ogbeifun, president of the Ship Owners Association of Nigeria in a recent statement. “The world has told us that our maritime domain is sick and almost moribund, that we are not a maritime nation that can be relied on for maritime trade.”
One of the key issues facing Nigeria’s maritime sector is security. Over the past few years NIMASA says it has been collaborating with the country’s military and navy to improve intelligence, surveillance and marine security. In late 2012, the agency set up a Maritime Guard Command, to prevent oil theft and reduce levels of piracy.
At a conference last year, Dakuku Peterside, head of NIMASA, said the federal government has also approved an additional $186m for an Integrated Waterways Surveillance and maritime security initiative to be run by the Nigerian navy, marine police and army “with the sole objective of operationally eliminating piracy and criminality on our waterways.”
How well do you really know your competitors?
Access the most comprehensive Company Profiles on the market, powered by GlobalData. Save hours of research. Gain competitive edge.
Your download email will arrive shortly
Not ready to buy yet? Download a free sample
We are confident about the unique quality of our Company Profiles. However, we want you to make the most beneficial decision for your business, so we offer a free sample that you can download by submitting the below formBy GlobalData
But piracy and other illegal activities remain a major barrier for investors. A recent report published by the International Maritime Bureau (IMB) named Nigeria as one of the world’s most active places for piracy. In the first three months of this year, 22 security incidents were recorded in the country, with eight out of eleven vessels that came under fire around the world taking place in Nigerian territorial waters.
“The Gulf of Guinea is a major area of concern, consistently dangerous for seafarers, and signs of kidnappings are increasing,” said IMB director, Pottengal Mukundan, commenting on the report. “IMB has worked closely with the response agencies in the region including the Nigerian navy, which has provided valuable support, but more needs to be done to crack down on the area’s armed gangs.”
Nigeria’s collapsing shipping industry
Another issue facing Nigeria’s shipping sector is inefficiency. In October 2016, the Lagos Chamber of Commerce and Industry published an analysis on the country’s ports that said trillions of Nigerian naira in revenue is lost every year due “to inefficiencies and inherent shortcomings of the nation’s maritime ports”.
The report cited “longer-than-ideal” border clearance times, lengthy yard handling procedures, and informal payments to customs and other government agencies, which combined make Nigeria’s seaports the most expensive in West Africa. Inefficiency is also made worse by poor infrastructure across the entire sector.
“The huge infrastructure deficit has led to deplorable access roads, faulty cargo scanner, non-existent rail system, non-functional truck bay and others which conspired to negatively impact on the service delivery efficiency,” said Taiwo Afolabi, executive vice chairman of the Nigerian multinational SIFAX Group, at a conference last year.
“Our sector cannot continue to reel under the burden of infrastructural decay if we want to contribute meaningfully to the economy and fulfil the industry’s potential,” Afolabi added.
Nigeria’s maritime industry is also dominated by foreign shipping lines, with many local companies shutting down their operations in recent years. The introduction of the Cabotage Law in 2003 was supposed to reverse this trend by restricting the use of foreign vessels in the domestic coastal trade. But 15 years on, critics say it has been poorly enforced. A recent report by Nigeria’s Guardian newspaper claimed that foreign firms own 90% of the vessels currently operating in the country.
“22 years after the demise of the Nigeria National Shipping Line, we have not been able to midwife the emergence of a Nigerian fleet, be it public, private or resulting from Public Private Partnership,” said Ogbeifun at a workshop last December.
Last year, Peterside said the NIMASA intends to introduce a national shipping carrier to help provide employment opportunities to the country and enhance government revenue. But the fleet’s establishment has faced delays, with Peterside blaming the inability of recession-struck local investors to raise funds and others blaming the government.
“There seems no seriousness on the part of government to support the survival of the fast collapsing shipping industry,” said Ogbeifun in a recent interview with the Nigeria Tribune.
NIMASA looks to the future
Despite criticism, Peterside says the agency remains committed to developing Nigeria’s shipping industry. He was recently awarded a public service award for his role in building the sector.
Earlier this year, the agency also published a maritime industry forecast for the first time to help identify opportunities and challenges in the sector and provide certainty to investors in the coming years.
The report mentions five new bills affecting the maritime industry which are expected to enter into force this year. They include an Anti-piracy Bill, which will incorporate two existing IMO conventions – Safety of Life at Sea and the Suppression of Unlawful Acts at Sea – into a comprehensive new law, and amendment to the Cabotage Act, which will introduce an entirely new compliance regime to boost the position of Nigeria’s own shipping companies.
“Compliance on international regulation is to ensure safety in port operations, and ease of doing business in Nigeria,” Peterside said.
One of the opportunities NIMASA identified in its report is building up the country’s pool of marine industry talent. The agency recently began an education programme involving 2,500 cadets, nearly 300 of whom have been sent to Europe and Egypt for on-board training under the Nigeria Seafarers Development Programme.
Recent government efforts to fund the establishment of maritime institutions across the country are also expected to boost manpower development in the industry.
But even Peterside accepts the road ahead won’t be easier. “We are passing through a lot of challenges,” he said last September at a meeting in the Rivers State capital of Port Harcourt, located in the troubled Niger Delta.
“I know that God will intervene in Rivers [state] and sustainable change will come,” he added.