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Coastal Trade: Nigerian Operators Fall Behind Amid Challenges

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NEPC
  • Coastal Trade: Nigerian Operators Fall Behind Amid Challenges

The implementation of the Coastal and Inland Shipping (Cabotage) Act is being hampered by the myriad of challenges facing local operators in the shipping sector, ANNA OKON writes.

Cabotage, otherwise known as coastal trade, involves carriage of goods (and passengers) within the territorial and inland waters of any nation by ships and any other means of transportation from one place to the other in the same country.

As part of maritime reforms, Nigeria enacted the Cabotage Act 2003, which was designed to restrict foreign participation in Nigeria’s domestic coastal trade.

The Act makes provision for only ships that are built, flagged and manned by Nigerians to operate in Nigerian coastal waters.

The Nigerian Maritime Administration and Safety Agency had stated that even though the Act reserved the right of coastal trade to Nigerians, opportunities existed for foreign involvement.

But foreign participation in Nigerian coastal waters has overshadowed local participation owing to challenges peculiar to the Nigerian environment.

For instance, 90 per cent of the vessels trading on Nigerian waters are owned, manned and operated by foreign shipping lines, with Nigerian operators managing fishing boats and inland water transport boats that ferry goods and passengers to and from short distances.

The large cargo vessels and oil bunkers are all operated by foreign shipping lines.

The participation of local shipowners in the transportation of petroleum products ended when the Nigerian National Petroleum Corporation became the sole importer of products.

“Local shipping firms are hurting,” The President, Shipowners Association of Nigeria, Dr Mkgeorge Onyung, responded when asked about the fate of the industry in the light of the NNPC monopoly.

He said most of the shipowners had invested money and time in the business, adding, “Some of them borrowed money from banks to acquire those assets and the interest on the loans is increasing.

“When there is no business for them to do, the assets will decay and people will say local operators don’t have capacity. How can they develop capacity when they don’t have business?”

The President, Nigerian Shipowners Association, Aminu Umar, told our correspondent that the NNPC employed the services of foreign vessels to lift its products.

He said the practice was a departure from the past when oil marketers employed local shipowners to ferry petroleum products for them.

Responding to the yearnings of local operators, NIMASA had made several attempts, in collaboration with the Nigerian Content Development and Monitoring Board, to enforce the Cabotage law and increase participation of indigenous operators in the coastal trade.

In 2018, the agency cancelled waivers for foreign seafarers intending to work in vessels operating in Nigerian waters.

In February this year, the Director-General, NIMASA, Dr Dakuku Peterside, said the agency would no longer entertain any form of application for waivers under the Cabotage Act, particularly from oil firms.

Recently, the agency placed an embargo on the importation of cabotage vessels.

But all these efforts have been unable to bring about a significant increase in the participation of local operators in the shipping business.

Challenges facing local operators

Local operators are hampered majorly by finance.

Shipping business is capital-intensive and it would take the involvement of government for operators to build and operate a successful shipyard, according to the Managing Director, Genesis Worldwide Shipping, Capt. Emmanuel Iheanacho.

“The only thing that one would like to see is where the government recognises the critical nature of some of the things you are trying to do and provides a kind of guarantee that can get you the funding you need. When the government stands as a surety, then the financial institutions will have confidence to lend money to the investor.”

According to him, about $10m to $12m is needed to build a 15,000-tonne ship that can sail on a shallow sea with a draft of 6.5 metres.

Iheanacho disclosed that he obtained foreign grant to invest in his refinery and shipping business and the condition for that grant was that he must employ people from the country that gave him the grant.

Most Nigerian operators do not have access to finance, even for acquisition and maintenance of service boats.

This, in part, has resulted in their inability to build capacity and maintain their existing boats.

Our correspondent learnt that some local operators’ contracts were terminated by international oil companies because they did not have functional service boats and often defaulted in the contracts.

The Chief Executive Officer, Marine Platforms Limited, Taofeek Adegbite, highlighted the challenge of operating a shipping firm.

He said, “A vessel is a very expensive thing to maintain. You need to provision monthly. In fact, you must set your day rate per month aside for dry docking and it is simply not money you start running around looking for when you want to dry-dock your boat.

“If you want to dry-dock your boat, you are looking at a million naira a month; that is not money you can call your friends to lend you. You must understand what we are talking about here. It is not meant for the lily-livered.”

Operators had set their sights on the Cabotage Vessel Financing Fund but their hopes had proved futile as they had been unable to access the $124m fund set up to aid them in buying new vessels and maintaining existing ones.

Another challenge has been the shortage of skilled workers in the industry.

The maritime institutions in Nigeria cannot offer Certificate of Competence to seafarers and this necessitated additional training in foreign schools to enable them to obtain the CoC and be employed aboard ocean-going vessels.

As long as Nigerians do not have the necessary qualifications, they cannot be employed on ocean-going vessels, including the ones calling on Nigeria.

The National President, Nigerian Merchant Navy Officers and Water Transport Senior Staff Association, Mr Mathew Alalade, pointed out that if the foreigners were made to stop operating in Nigeria, there may be no indigenous seafarers to take up their jobs.

He said, “We don’t have people to replace these people because our training institutions have not been upgraded to higher level to issue CoC that accommodates all cadres of people on water.

“We must take it easy with the Cabotage law because our schools need be upgraded to issue first-class CoC.”

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Businessinsider, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

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Guinness Nigeria Postpones Spirits Importation Exit, Extends Deal with Diageo

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Guinness Nigeria Plc has announced a delay in its plan to halt the importation of spirits as it extended its agreement with multinational alcoholic beverage company Diageo until 2025.

The decision, communicated through a corporate notice filed with the Nigerian Exchange Limited on Tuesday, cited a longer-than-expected transition period for separating its business from Diageo’s.

Initially slated for discontinuation in April 2024, the importation of premium spirits like Johnnie Walker, Singleton, Baileys, and others under the 2016 sale and distribution agreement with Diageo will now continue for an additional year.

The extension comes as the process of business separation between Guinness Nigeria, a subsidiary of Diageo, and Diageo itself faces unexpected delays.

In October, Guinness Nigeria had announced plans to cease importing spirits from Diageo, a move aimed at reducing its foreign exchange requirements.

However, the separation process has encountered unforeseen hurdles, necessitating the extension of the importation agreement.

The notice, signed by the company’s Legal Director/Company Secretary, Abidemi Ademola, highlighted the ongoing efforts by Guinness Nigeria and Diageo to implement the separation, originally scheduled for completion by April 2024.

The extension underscores the complexity of disentangling the businesses and ensuring a smooth transition.

Guinness Nigeria reaffirmed its commitment to the long-term growth strategy, aligning with Diageo’s decision to establish a new, wholly-owned spirits-focused business.

Despite the delay, both companies remain dedicated to managing the importation and distribution of international premium spirits in West and Central Africa, with Nigeria as a key hub.

The postponement comes amid challenges faced by Guinness Nigeria, including significant exchange rate losses, which amounted to N49 billion in the 2023 half-year operations.

Despite these setbacks, the company remains optimistic about its future prospects in the Nigerian market.

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Private Sector Warns: Interest Rate Hike to Trigger Job Cuts and Inflation Surge

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As the Central Bank of Nigeria (CBN) announced a hike in the Monetary Policy Rate (MPR) from 22.75% to 24.75%, concerns have been raised by the private sector regarding the potential ramifications on job stability and inflationary pressures.

The move, aimed at curbing inflation and stabilizing the exchange rate, has prompted apprehension among business operators who fear adverse effects on the economy.

Representatives from the Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA) and the Nigerian Association of Small Scale Industrialists have voiced their worries over the increased difficulty in accessing affordable credit.

They argue that the higher interest rates will impede the private sector’s ability to borrow funds for expansion and operational activities.

This, they fear, could lead to a reduction in business investments and subsequently result in widespread job cuts across various sectors.

The Lagos Chamber of Commerce and Industry (LCCI) acknowledged the necessity of the interest rate hike but emphasized the potential negative consequences it may bring.

While describing it as a “price businesses would have to pay,” the LCCI highlighted the current fragility of the economy, exacerbated by various policy missteps.

They cautioned that the increased cost of borrowing could stifle entrepreneurial activities and discourage expansion plans critical for economic growth and job creation.

Experts have echoed these concerns, warning that the tightening monetary conditions could exacerbate inflationary pressures and hinder economic recovery efforts.

With inflation already soaring at 31.70%, the rate hike could further fuel price hikes, especially in essential goods and services, thus eroding the purchasing power of consumers.

However, CBN Governor Yemi Cardoso defended the decision, citing the imperative to address current inflationary pressures and ensure sustained exchange rate stability.

He emphasized the need to restore the purchasing power of ordinary Nigerians and expressed confidence that the economy would stabilize by the end of the year.

Despite assurances from the CBN, stakeholders remain cautious, calling for a more nuanced approach that balances the need for price stability with the imperative of fostering economic growth and job creation.

As businesses brace for the impact of the interest rate hike, all eyes are on the evolving economic landscape and the measures taken to mitigate its effects on livelihoods and inflation.

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Breaking Barriers: Transcorp Hotels CEO Shares Journey from Crisis to Success

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Dupe Olusola

Dupe Olusola, the Managing Director/CEO of Transcorp Hotels Plc, reflects on her remarkable journey from navigating the depths of a global pandemic to achieving unprecedented success in the hospitality industry.

Appointed in March 2020, amidst the onset of the COVID-19 pandemic, Olusola found herself at the helm of a company grappling with the severe economic fallout and operational challenges inflicted by the crisis.

Faced with a drop in occupancy rates from 70% to a mere 5%, Olusola and her team were confronted with the daunting task of steering Transcorp Hotels through uncharted waters.

Undeterred by the adversity, they embarked on a journey of transformation, leveraging creativity and resilience to navigate the turbulent landscape.

Implementing innovative strategies such as introducing drive-through cinemas, setting up on-site COVID-19 testing facilities, and enhancing take-away services, Transcorp Hotels adapted to meet the evolving needs of its guests and ensure continuity amidst the crisis.

Embracing disruption as a catalyst for growth, Olusola fostered a culture of collaboration and teamwork, rallying her colleagues to overcome obstacles and embrace change.

Through unwavering determination and a commitment to excellence, Transcorp Hotels emerged from the pandemic stronger than ever, breaking profit and revenue records year after year.

“It’s indeed been a great opportunity to learn and relearn, to lead and to grow. When you see success stories, remember it’s a journey with twists, turns, ups and downs but in the end, it will all be okay”, she said.

Olusola’s leadership exemplifies the power of adaptability and perseverance, inspiring her team to transcend limitations and chart a course towards unprecedented success.

As Transcorp Hotels continues to flourish under her stewardship, Olusola remains steadfast in her dedication to driving innovation, fostering growth, and breaking barriers in the hospitality industry.

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