The Impact of the Cabotage Act on Local Capacity Development: A Study of Selected Indigenous Shipping Companies

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ABSTRACT

In 2003 the cabotage law was enacted with provisions to empower local investors to take control of the domestic shipping trade and from it develop enough muscle to assume the right of place for Nigeria as a maritime nation in the movement of her import/export cargoes including crude oil to and from international markets. The implementation/enforcement of the provisions of the Act needs to be constantly monitored to ensure that the goals and objectives of the law are pursued with vigor and accomplished. Thus, the object of the study is to verify the alleged unabated dominance of the coastal services by foreign flag operators; the impact on the Cabotage Act 2003 on local capacity development in terms of tonnage, human resources and cargo support. The research made effort to highlight people’s views that are relevant to the study and this formed the literature review. The major instrument used for the study is a set of questionnaires served on a population of 55 industry stakeholders out of which 27 responded. The data obtained were statistically analysed with the chi-square model and pie chart for presentation as explanatory model. The findings of the study revealed factors hindering the achievement of the objectives of the Acts such as lack of funds, failure on the part of NIMASA to process the applications for the cabotage vessel finance fund loan for tonnage expansion; lack of commitment by NAPPIMS and PPMC to guarantee cargo support to indigenous operators; NIMASA lukewarm attitude in enforcing the provisions of the Act. The study also noted that most of the cabotage vessels operated by most indigenous shipping companies are below specified standards and are un- seaworthy. Also it was noted that there was a growing lack of seafarers particularly qualified and certified marine engineers and navigators to operate the few available cabotage vessels. The study recommended strategies to enhance indigenous participation and reduce the foreign dominance. For example, NMASA is urged to make the cabotage vessel finance Fund/loan facility accessible to local operators for fleet expansion and to make solid arrangements for cadet-ship sea-training to enhance proficiency and avoid importation of manpower. PPMC and NAPPIMS should guarantee long time charter of the fleet as a kind of incentive against idle moment. On the other hand local operators should try to present standard and seaworthy vessels for optimal cabotage operations and clean sea assurances.

TABLE OF CONTENT

CONTENTS PAGES

Title i

Certification ii

Dedication iii

Acknowledgement iv-v

Abstract vi

Contents vii

List of Tables viii

List of Charts ix

CHAPTER ONE INTRODUCTION

1.1 Background Information 1

Nigerian initial involvement in shipping trade 3
1.2 Statement of the Research Problem – The problem of a nation
without national fleet. 5

The problem of non-participation of indigenous shipping operators 7

The Nigerian Cabotage Act/the objectives/implementation strategy. 10.
1.3 Objectives of the Study. 13
1.4 Research Hypothesis 14
1.5 Justification of the Study. 14
1.6 Scope and limitations of the Study. 15
1.7 Research Questions 15
1.8 Plan of the Study 16

CHAPTER TWO

LITERATURE REVIEW

2.1 Conceptual Framework 17

2.1.1 NIMASA mission accomplishment initiatives and problems 19
2.1.2 Seafarers training program and development. 20
2.1.3 Historical perspective of seafarers training in Nigeria 20
2.1.4 NIMASA efforts to provide practical training for trainee
Seafarers (on-board placement) 22
2.1.5 Ship building and ship repair industry 23

2.2 What is Cabotage Regime 24
2.3 Overview of types of cabotage laws operated by some
Maritime countries and the type adopted by Nigeria. 25

2.3.1 United States of America 25
2.3.2 Greece 26
2.3.3 Malaysia 26
2.3.4 Brazil 26
2.3.5 Denmark 26
2.3.6 India 27
2.3.7 Philippines 27
2.3.8 Australia 27
2.3.9 Nigeria 28

2.4 Cabotage Cargo 29
2.5 Non-Cabotage Cargo 29
2.6 Cabotage Zone 30
2.7 Investment Opportunities 30

vii

2.8 Vessels eligible for registration under the Act 31
2.9 Major operation problems of the cabotage law and the
published implementation guidelines 32
2.10 Prospects and challenges of cabotage regime in Nigeria. 35
2.11 Challenges of the Cabotage Act. 36
2.12 Historical antecedents of the Act 38
2.13 Capacity building 41
2.14 Over regulation 43
2.15 Tonnage availability constraints 43
2.16 Financing constraints 44
2.17 Human Resources constraints 45
2.18 Institutional factors 45
2.19 Advocacy 46
2.20 Enhancing local content in marine and shipping services. 47
2.21 Aims of the Federal Government on Local Content 48
2.22 Recommendations 51

2.22.1 Regulatory 51
2.22.2 Fiscal 52
2.22.3 General 52
2.22.4 Coastal shipping 52
2.22.5 International shipping 52
2.22.6 Bunkers 53
2.22.7 Possible criteria for accredited shippers for crude exports. 53
2.22.8 Risks and mitigates 54

viii

2.22.9 Practical example of countries that promote local content in
Oil and gas. 55

2.22.10 Vessel operating assistance programme 59 2.22.11 Suspended ship acquisition and ship building fund 60

CHAPTER THREE RESEARCH METHODOLOGY

3.1 Data collection 62

3.1.1 Primary data 62
3.1.2 Secondary data 62
3.1.3 The questionnaires 62
3.1.4 Interview 63
3.1.5 Observation 63
3.1.6 Conduct of fieldworks 63
3.1.7 Population of study 64
3.1.8 Stratified sampling system 64
3.1.9 Simple convenience sampling system 65

3.2 Method of Data Analysis 65

CHAPTER FOUR
RESULT AND DISCUSSION

4.1 Results of data Analysis and Testing of Hypothesis 66
4.2 Discussion 85

CHAPTER FIVE
CONCLUSION AND RECOMMENDATIONS

5.1 Conclusion 88
5.2 Recommendations 91

5.2.1 Fleet expansion 91
5.2.2 Human Resource Development 92
5.2.3 Cabotage Financing 93
5.2.4 Accessibility to Cabotage Cargoes 93
5.2.5 Regulatory 94

BIBLIOGRAPHY

APPENDICES 1 & ll

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The Impact of the Cabotage Act on Local Capacity Development: A Study of Selected Indigenous Shipping Companies

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