- Marine Infrastructure and maintenance deficit
In 2019, the Marine infrastructure deficit was identified as one of the major challenges faced by the Nigerian Maritime Industry, owing to the fact that its success is largely dependent on its infrastructural development which includes ports, terminals and cargo handling equipment,[2] most of which were built several years ago, and cannot presently handle all of the tonnes or capacity currently received on a daily basis.
One of the major causes of infrastructural deficit is the unavailability of operational equipment, coupled with the failure of the industry’s management personnel to widen the country’s shipping business, which has ultimately culminated in the country’s revenue loss in the industry in the last few years.[3] Even in cases where these equipment are available, the required expertise to achieve a proper maintenance structure seems quite hard to find, as most persons involved in the chain of vessel acquisition and maintenance do not always possess the requisite expertise. In a maritime survey conducted in 2019[4], it was discovered that most companies in the industry have no room for maintenance expenditure, as it is often considered a waste of resources.
Although there have been various reactions to this issue, most of which highlight this challenge, it is clear that this is a crucial aspect that must be addressed to secure the consistent growth that is required in the industry.
2. Loss of revenue owing to inefficiencies and sharp practices
In recent times, research[5] has revealed that Nigeria is currently losing over 15 billion naira in revenue, with its percentage in ownership of vessels lower than the 8% contemplated in extant legislations, owing to the unpredictability in maritime operations, sharp practices, unanticipated delays in ports shipment etcetera. More so, the collaboration amongst stakeholders, inclusive of regulators and operators alike, to curb or mitigate the existing efficiencies through the promotion of global best practices, and the use of innovative technologies seem to be slow-paced.
3. Lack of funding
The Maritime Industry is largely capital intensive and thus, requires a significant amount of funding as a lot of businesses thrive on the success of the industry, which is due to the high demand of shipping and trade level in the country. As such, a lack of funding would impede economic growth to a large extent, creating a lot of risks for foreign investments.
As earlier highlighted, the Nigerian Maritime Industry is capital intensive. Hence, it requires a significant amount of capital to keep it afloat. Undoubtedly, investment has been acknowledged as one of the most reliable methods for the expansion and sustenance of any industry, irrespective of size. However, the level of investment is also dependent on an ascertainable valuation of risks as well as revenue generated. So, in a case where the risks weigh higher than the revenue, this poses a challenge as it reduces investment options.
Some regulatory frameworks have been put in place to mitigate a few of the highlighted challenges such as:
a. Nigerian Maritime Administration and Safety Agency (NIMASA) Act 2007: The NIMASA Act created NIMASA and charges it with promoting the development of shipping and regulating issues affecting Merchant ships and Seafarers in Nigeria. Other statutory tasks of NIMASA include but are not limited to, regulating shipping safety in terms of ship construction and navigation, and administering ship registration and licensing.
b. The Coastal and Inland Shipping (Cabotage) Act 2003: The Cabotage Act was enacted in response to a growing demand from Nigerian maritime enterprises for legal intervention, to encourage Nigerians in the participation of the country’s internal coastal trade. The Act in a bid to encourage participation restricts the participation of foreign vessels in domestic coastal trade (including the carriage of goods and passengers in Nigerian seas), encourages the growth of indigenous tonnage, and creates a Cabotage vessel financing fund. The Act specifically prohibits a vessel that is not wholly owned and manned by a Nigerian citizen, built and registered in Nigeria, from engaging in domestic coastal carriage of cargo and passengers within the coastal territorial inland waters, or any point within Nigeria’s exclusive economic zone.
c. Nigerian Ports Authority (NPA) Act: The NPA Act empowers the NPA to maintain, improve and regulate the use of the ports; ensure the efficient management of port operations; provide and operate ports facilities; form and establish or incorporate subsidiaries or affiliate companies with other persons or organisations, for the purpose of carrying out any of its functions.
d. Merchant Shipping Act, 2007: This Act provides for Merchant shipping in Nigeria and allows only registered Nigerian ships to operate commercially to the exclusion of others, except for statutory exempted cases[6].
e. The Finance Act 2021: This Act primarily regulates the taxation of companies, inclusive of companies involved in the maritime business. It is important because taxation policies play a huge role in attracting foreign direct investments.