The perilous times of indigenous shipping

By Funso Olojo

This is not the best of time for indigenous shipping operators as it seemed all odds are stacked against them, threatening their survival.
The interplay of government policies and international regulations have combined to make the operating environment hostile and unfavourable.

The Cabotage law enacted by the Act of Parliament in 2003 to strengthen their participation in coastal trade has refused to fly.
The law, meant to preserve their exclusive rights to participate in coastal shipping, has not improved their fortunes as their foreign
counterparts, which the Cabotage targeted to shut out, have almost muscled the hapless local operators from shipping business. To compound their problems, the Cabotage Vessels Financing Funds (CVFF), revolving loans meant to empower them for strong participation in the coastal trade, is yet to be disbursed more than 10 years after its take-off.

Faced with stiff competition from their better funded foreign competitors as well as dwindling resources, some of the operators have shut down their businesses when they could not bear the pressure from the creditor banks from where they got loans as they were being hounded and harassed. Others, who are struggling to keep their heads above the strong current of the turbulence sea, are barely able to survive. With dwindling business opportunities and contracts, they are owing their staff tons of salaries.

According to a recent survey conducted by a Lagos -Based Communications Company, two of the 12 indigenous shipping companies sampled were operating viable businesses. The remaining 10, representing 83 per cent of the companies surveyed, were said to be either completely dead or struggling to survive.

To worsen the already bad case of the indigenous shipping operators, was the phasing out of single-hull vessels by the International Maritime Organisation (IMO). According to the rule, vessels with single hull were banned to operate on international waters from 2015.
In April 2001, the International Maritime Organization (IMO) adopted regulations under the International Convention for the Prevention of Pollution from Ships, or MARPOL, requiring new tankers of 5,000 dwt and over, contracted for construction since July 6, 1993, to have double hull, mid-deck or equivalent design. At that time, the regulations also required the phase out of non double hull tankers by 2015, with tankers having double sides or double bottoms permitted to operate until the early 2017 or when the vessel reaches 25 years of age.
Existing single hull tankers were required to be phased out unless retrofitted with double hull, mid-deck or equivalent design not later than 30 years after delivery. These regulations were adopted by over 150 nations, including many of the jurisdictions in which the company’s tankers operate.

Subsequent amendments to the MARPOL regulations accelerated the phasing out of single hull tankers to 2005 (at the latest) for Category I vessels and 2010 (at the latest) for Category II vessels. Category I vessels include crude oil tankers of 20,000 dwt and above and product carriers of 30,000 dwt and above that are pre-MARPOL Segregated Ballast Tanks (“SBT”) carriers.

Category II vessels include crude oil vessels of 20,000 dwt and above and product carriers of 30,000 dwt and above that are post-MARPOL SBT vessels. In addition, a Condition Assessment Scheme (“CAS”) will apply to all single hull tankers 15 years or older. Flag states, however, may permit the continued operation of Category II tankers beyond 2010, subject to satisfactory CAS results, but only to 2015 or 25 years of age, whichever comes earlier. Category II tankers fitted with double bottoms or double sides not used for the carriage of oil will be permitted to trade. beyond 2010 to 25 years of age, subject to the approval of the flag state.

Although flag states may grant life extensions to Category II tankers, port states are permitted to deny entry to their ports and offshore terminals to single hull tankers operating under such life extensions after 2010, and to double sided or double bottomed tankers after 2015. Unfortunately however, 80 out of 150 registered indigenous vessels are likely to be affected by this new rule.
The implication is that apart from those who have gone under among the operators, very few out of the remaining struggling survivors actually met the requirements of IMO regulations.

Captain Niyi Labinjo, one of the foremost indigenous shipping operators and the Managing Director/Chief Executive Officer of Al Dawood Shipping company Limited, lamented the effect the convention had on the already depressed indigenous operators , majority of whom he
said, operated single-hull vessels.

He claimed that most of them got loans from banks and did not have financial capacity to comply with the convention. Converting single-hull ships to double hulls is estimated at a cost of over $20 million. According to Captain Labinjo, a 1,000 tonne double-hull vessel costs over $1m while the cost will be pushed up to between $1.5 to $2m when the cost of importation and customs duty is factored in. The indigenous operators are aware of this convention and the deadline as far back as 2009 when the Nigerian Maritime Administration and Safety Agency(NIMASA) set up a committee, comprising the officials of the agency and members of

Nigeria Indigenous Shipping Association (NISA) to work out the modalities for the implementation of the international convection.
It was gathered that NIMASA has since that year, stopped registering single-hull vessels. Labinjo however, pleaded with the agency, to use its discretions to allow single-hull vessels operate in Nigeria, using the Condition Assessment Scheme (CAS), which is the window of opportunity for vessels in that category. ‘’ The law gives an exception to single hull ships working within a country or state. If it is working within your state, you have the discretion to allow it or not. If this were a country where the government was very sensitive to domestic trade, they would have given us conditions to continue using these vessels.

“We could have been allowed to continue using the tankers but the government would conduct periodic inspections to confirm the state of the vessel; that is how it is done in other places’’,he observed. Unless NIMASA gives this discretionary condition and government intervenes in other areas of their challenges, indigenous shipping business may soon give in to the choking wave of problems that are already threatening to sniff life out of its operators.