An Appraisal of the Cabotage Act, Policies and Ship Registration

CONTRIBUTED BY OLO ARIA

INTRODUCTION

The name Cabotage draws its origin from the French word Caboter” meaning to sail coastwise or “by the capes”, which signifies coastal shipping.[1] In Nigeria, the existing law on Cabotage is embodied in the Coastal and Inland Shipping (Cabotage) Act 2003. It came into force in April 2004, and aims to restrict commercial transportation within Nigerian coastal and inland waters to vessels flying the Nigerian flag, owned and crewed by Nigerian citizens, and built-in Nigeria (Cabotage Act, 2003).

The Nigerian Cabotage Law is crucial not only due to the topographical nature of the country which is depicted by coastal and inland waterways, but also due to the fact that Nigeria is heavily dependent on import, and the market reservation provisions of the Cabotage law would help to stimulate growth in coastal shipping business opportunity. This is achievable, especially through the oil & gas sector which involves the supply of offshore vessels of different operational and market role descriptions, and ultimately the supply of all manner of shipping services between all Nigerian coastwise and offshore locations for Nigerian operators only.[2]

This disquisition shall proffer an overview of the Nigerian Cabotage Act 2003, by highlighting its key provisions such as registration and its types, Waiver, License, and Exemptions. It will also identify the major challenges affecting the implementation of Cabotage law in Nigeria and recommendations.

AN APPRAISAL OF THE NIGERIAN CABOTAGE ACT 2003

The Nigerian Cabotage policy encourages indigenous shipping; this is evidenced by the Part II of the Cabotage Act stipulating the restriction of foreign vessels in domestic coastal trade. The restriction was mainly to increase indigenous participation in commercial shipping in Nigeria. This was necessary because of intense competition from foreign shipping firms that were heavily capitalized and experienced. Thus, the Cabotage law was introduced to ensure the protection of poorly funded new indigenous companies so that these new local operators are not forced out of the market, thereby enhancing the domination of foreign shipping companies.[3] However, critics of the Cabotage Act have stated that the Act merely encourages development but does not initiate development.[4]

Specifically, Section 3 of the Cabotage Act stipulates exclusions of vessels which cannot participate in the domestic carriage of cargo and passengers and they include vessels not wholly owned and manned, built, and registered in Nigeria. The implication of this provision gives Nigerians the sole right of engaging in the country’s coastal trade and inland waterway transport ensuring that domestic shipping is fully indigenous.[5] The protection of national and economic interests, national security and agitations of the citizens are other contributory factors that led to the introduction of the cabotage policy.[6]

Proper implementation of the cabotage policy in Nigeria would be able to provide more jobs, cause a growth in skill acquisition; increase in revenue generation, and eventually development of the shipping capacity of the country which is vital to its future. Despite the cabotage guidelines specifying the procedure for implementing the Act, implementation has been a challenge and currently, the implementation process has received a lot of criticism from the public and stakeholders.

Furthermore, the current outlook of the Nigerian indigenous shipping seems discouraging, the objectives for which the cabotage law was enacted are far from actualization. The challenges for effective implementation of the Act are quite enormous as these challenges manifest in various forms, for instance, the absence of a national fleet or carriers which can be used to provide necessary training and give sea time experience for cadets, officers and engineers might be a clog to the actualization of the manning objective of the Act.

Another problem that has led to the ineffectiveness of the Cabotage Act is the availability of cabotage vessels in comparison to the amount of tonnage; there are not enough cabotage vessels to carry the available tonnage. Insufficient funds for acquiring new ships and other marine types of equipment are reasons for this shortage. The problems are multifaceted and are attributed to some of the provisions of the Act.

REGISTRATION OF VESSELS/SHIPS

All vessels intended for use in Cabotage Trade are required to be registered by the Registrar of Ships in the Special Register for Vessels and Ship Owning Companies engaged in cabotage (Cabotage Register) at the Nigerian Maritime Authority (NMA),[7] as well as obtain all other applicable licences and permits from other relevant government agencies, such as the National Inland Waterways Authority (NIWA).

The following types of vessels are identified under the Act and the guidelines as cabotage vessels:

  • Passenger Vessels.
  • Crew Boats.
  • Fishing Trawlers.
  • Barges.
  • Tugs, amongst others.

Any other craft or vessel for carriage on, through or underwater of persons, property or any substance whatsoever.[8]

Types of Registration:

The guidelines issued by the Minister of Transport provide for five categories of registration.[9] These are:

1. Registration of Wholly Owned Nigerian Vessels: To qualify for registration in this category, the vessel’s 64 shares must be wholly and beneficially owned by Nigerian citizens or by a company registered in Nigeria with 100 per cent of share capital wholly and beneficially owned by Nigerian citizens. All the shares in the vessel or in the company that owns the vessel must be held free from any trust or obligation in favour of any person who is not a citizen of Nigeria.

2. Registration of Joint-Venture Owned Vessels: As the name implies, this category applies to the registration of vessels owned under a Joint-Venture arrangement between Nigerian citizens and non-Nigerians. It is required that the equity shareholding of the Nigerian partner(s) in the vessel and/or the shipping company must be at least 60% held free from any trust or obligation in favour of non-Nigerians.

3. Registration of Bareboat Chartered Vessels: To qualify for registration in this category, the bareboat chartered vessel is required to be under the full control and management of Nigerian citizens or a Company with 100% of its share capital wholly and beneficially owned by Nigerian citizens, free from any trust or obligation in favour of non-Nigerians.

4. Registration of Foreign-Owned Vessels: To be eligible for registration in the Cabotage Register, foreign-owned vessels are required to obtain a waiver and a licence for participation in coastal trade (cabotage) from the Minister of Transport.

5. Temporary Registration of Cabotage Vessels: The Cabotage Act in Section 27 provides that foreign-owned vessels presently engaged in cabotage trade, may be granted a temporary registration in the Cabotage Register for the duration of the contract for which the vessels are employed. However, as stipulated in the guidelines, where the period left to run on the contract exceeds one year from 1 May, 2004, the foreign vessel will only be granted temporary registration for one year and not for the duration of the contract for which the vessel is employed.

Thereafter, the vessel is required to obtain a licence from the Minister of Transport and obtain registration as a foreign-owned vessel. This appears to be inconsistent with the Act which provides that temporary registration will be granted for the duration of the contract.

Requirements for Registration

The registration requirements for all the five categories are similar except that in the case of a Bareboat Chartered Vessel, a copy of the Bareboat Charter Agreement is required and in the case of a foreign-owned vessel, a licence from the Federal Ministry of Transport is required prior to registration. The duly completed application form is required to be submitted to the Registrar of Ships with the applicant’s corporate documents and the statutory certificates for the vessel as specified in the guidelines. However, vessels registered in the Nigerian Registry at the date of enforcement of the Act (i. e. 1 May, 2004), that are above 15 years old, shall continue to be eligible for participation in cabotage for a period of 5 years after the enforcement date, subject to the vessel possessing a Certificate of Registry and a Certificate of Seaworthiness from a recognized classification authority.

Duration of Registration

The guidelines stipulate that the Cabotage Ship Registration Certificate for categories 1-4 shall be valid for a period of 5 years, subject to annual endorsement by the Registrar of Ships. The documents required to be provided for the annual endorsement of the certificate by the Registrar of Ships are:

  1. Evidence of payment of 2% surcharge (where applicable).
  2. Copy of the Joint Maritime Industrial Council (JOMALIC) certificate and declaration of compliance with Seafarers’ condition of employment.

WAIVER, LICENCE AND EXEMPTIONS

The Cabotage Act[10] permits the Minister of Transport to grant waivers for matters on the prohibited list. Foreign-owned vessels are required to obtain a licence from the Minister of Transport in order to qualify for registration in the Cabotage Register. In certain prescribed circumstances, vessels both foreign and Nigerian may be granted a waiver by the Minister of Transport in respect of the prohibitions contained in the Cabotage Act.

The Minister of Transport is empowered to grant the following waivers:

  • Waiver on the requirement for the vessel to be wholly owned by Nigerian citizens; on being satisfied that there is no wholly owned Nigerian vessel that is suitable or available to perform the activity(ies) specified in the application.
  • Waiver on the requirement for the vessel to be fully manned by Nigerian citizens; on being satisfied that there is no qualified and available Nigerian officer and crew for the position(s) specified in the application.
  • Waiver on the requirement for the vessel to be built in Nigeria; on being satisfied that there is no Nigerian ship-building company that has the capacity to construct the particular vessel or that there is no available Nigerian-built vessel of the particular type specified. Foreign-built vessels that were entirely rebuilt in Nigeria are eligible for participation in cabotage services without a waiver.[11]

The Cabotage Act establishes a priority system for the grant of waivers as follows:

  • First, to wholly owned Nigerian vessels;
  • Second, to Joint Venture Owned Vessels; and
  • Third, to any vessel registered in Nigeria and owned by a shipping company registered in Nigeria (foreign-owned vessels).

The validity of waivers granted by the Minister is one year, subject to annual renewal. On renewal, applicants among other things are required to show evidence of improved level of compliance with the requirements of the Cabotage Act on manning, ownership and ship-building requirements. 3.2.6 Enforcement.

The Minister of Transport is empowered to create an Enforcement Unit (Cabotage Enforcement Unit) within the NMA with the responsibility to enforce compliance with the provisions of the Cabotage Act.[12]

Enforcement

Enforcement Officers have wide powers under the law including the power to:

  • Stop and board any vessel reasonably suspected of contravening the Cabotage Act;
  • Search a vessel and seize anything found that may be used as evidence of contravention of the Cabotage Act;
  • Request the Master of the vessel or any other responsible person to produce for inspection the log book of the vessel or other documents that may provide evidence of contravention; and
  • Enlist the assistance of Nigerian Customs Service, Nigerian Navy or Nigerian Police or any other law enforcement agency as deemed necessary, and in exigent circumstances, issue a detention order in respect of a vessel without first obtaining a Court Order.

Offences and Penalties

The Cabotage Act specifies penalties for the breach of its provisions with fines ranging from N100, 000.00 to N15, 000,000.00 or higher as determined by the Court and/or forfeiture of the offending vessel.[13]

CHALLENGES AFFECTING THE IMPLEMENTATION OF THE CABOTAGE ACT IN NIGERIA

Some of the numerous challenges that have hindered the effective implementation and enforcement of the law are:

  1. Policy Inconsistency.
  2. Limited Stakeholder Involvement at the Point of Formulation and Implementation of the Policies.
  3. Inadequate Capital Investment.
  4. Stringent Credit Facility Conditions for development.

CONCLUSION

It can be stated that despite the seemingly unimpressive impact of the cabotage policy regime on the indigenous shipping operators in Nigeria, the policy remains one of the best things to happen to indigenous shipping development in the country, given the loud clamour for its enactment by various interests and the relief that greeted its promulgation into law in the year 2003.

  1. F. O Agama and H. C Alisigwe, ‘Cabotage Regimes and their Effects on States’ Economy’ (2018) Nnamdi Azikiwe University Journal of International Law and Jurisprudence, 9(1), 71-82
  2. K. K Anele, ‘A Study of the Cabotage Policy in Nigeria from the Prisms of Ship Acquisition and Shipbuilding. WMU Journal of Maritime Affairs, (2018) 17(1), 91-117
  3. C. C Igboanusi and T. Nwokedi ‘Cabotage Implementation in Nigeria: Analysis for Improving Coastal Shipping Business Opportunities for Local and Joint Venture Operators’ (Department of Maritime Technology, Federal University of Technology, Owerri, Nigeria 2015)
  4. O. A Adekola, ‘Elements of Cabotage Law in Nigeria: Towards Integrating Nigeria into the World Economic Order (Lagos: Arthur Publishing House, 2018)
  5. Ibid [n.5]
  6. V.U Ijarshar,‘The Empirical Analysis of Agricultural Exports and Economic Growth in Nigeria’[2015] Journal of Development and Agricultural Economics, Vol 7(3) pp. 113-122
  7. Section 22 Cabotage Act 2003
  8. Section 22(5) (a)-(m) Cabotage Act 2003
  9. Section 23(1) Cabotage Act 2003
  10. Section 47 Cabotage Act 2003
  11. Section 7(1) Cabotage Act.
  12. Section 29-34 Cabotage Act 2003
  13. Section 35-40 Cabotage Act 2003

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