….And Indigenous Operators Groan Under Vessel Import Duties Regime
Even as stakeholders in the Nigerian oil and gas industry brace up for the one year anniversary and commemoration programme of the enactment of the Nigerian Oil and Gas Industry Content Development Act, 2010, some of them have equally sent a wake- up message to the implementing agency of a synonymous Act; The Nigerian Cabotage Act which has been enacted since year 2004 to ensure that it takes a cue from the Nigerian Content Act.
….And Indigenous Operators Groan Under Vessel Import Duties Regime
Even as stakeholders in the Nigerian oil and gas industry brace up for the one year anniversary and commemoration programme of the enactment of the Nigerian Oil and Gas Industry Content Development Act, 2010, some of them have equally sent a wake- up message to the implementing agency of a synonymous Act; The Nigerian Cabotage Act which has been enacted since year 2004 to ensure that it takes a cue from the Nigerian Content Act.
The Executive Secretary of the Nigerian Content Development and Monitoring Board, Mr. ErnestNwapa, had announced recently that the commemoration programme will be flagged- off by the Minister of Petroleum Resources, Mrs. Diezani Alison-Madueke on April 4, 2011.
Among the first set of stakeholders to commend the achievements of the Nigerian Content Act is an indigenous ship owner and secretary of the Indigenous Ship owners Association of Nigeria (ISAN) Captain Niyi Labinjo who said that indeed there is something to celebrate out of the Act. According to him, “it is a new beginning and it calls for celebration”.Captain Labinjo told Shipping Position Weekly exclusively last week that without the Nigerian Content Act, the situation could have been worse, even as he charged the Nigerian Content Development and Monitoring Board not to rest on its oars as there are still lots to be done in order to galvanize the oil sector and move it forward.
Labinjo who is also a master mariner however frowned at the implementation of the Nigerian Cabotage Act which is similar to the Nigerian Local content law in that it was enacted in 2004 to empower indigenous shipping operators; saying that it is very low in implementation as a result of the lack of clear- cut understanding on the part of the implementing agency; Nigerian Maritime Administration and Safety Agency (NIMASA).
He lamented that “Nigerian ports are filled with foreign vessels today because there is no enforcement of the Cabotage Act, and I tell you that no matter how beautiful or how big a British ship is, it cannot be allowed to operate in the U.S unless the indigenes and local operators’ interest have been taken care of”
“The Nigerian Content Act has done better than the Cabotage Act so far because those running the Act seems to know what they are doing and they are more focused, while the Cabotage Act enforcers do not know what to do or what they are doing”, he stressed.
According to him, the success of the Nigerian Content Act is also hinged on the fact that it is not just about shipping alone, but it is also about welding, fabrication, banking and so on, it is about the inclusion of a Nigerian element in crude oil businesses.
The Nigerian Maritime Administration and Safety Agency (NIMASA) which is the implementing agency for the Cabotage Act have over the years been bedeviled with instability of Directors General’s term in the management of affairs.
To this, Captain Labinjo says that “for as long as government keeps interfering in affairs in NIMASA, things can not go on well, you don’t just put anybody as Director General of NIMASA, people who do not have what it takes to run shipping, we do not want political jobbers or people who will learn on the job, because if you don’t have the knowledge, what do you want to sell about Nigeria at the IMO where it will require you to seat in meetings and making solid contributions” he said.
And in a similar development, Indigenous ship owners have called for Federal Government’s intervention to address the discrimination in import duties levied on vessels imported by them and their foreign counterparts.
This was one of the challenges and controversial issues raised last week in Lagos at a joint meeting by the Nigerian Chamber of Shipping (NCS), the Nigerian Content Development Monitoring Board (NCDMB) and indigenous ship owners.
The Director-General of NCS, Mrs Ify Anazonwu-Akerele had in kick-starting discussions, highlighted the challenges facing operators in the downstream oil and gas sector, saying that foreign operators were better favoured by the prevailing import duties on vessels.
According to her, foreign operators are allowed under the import laws to bring vessels in on a Temporary Import Permit (TIP) at a negligible sum annually, when compared with the volume of business they engaged in.
She said an indigenous operator “brings in his vessels and pays importation duty of up to 13 per cent, thereby increasing the cost of the indigenous operators and places him at a competitive financial disadvantage with the foreign operator.’’
The foreign operators pays only five per cent as import duties.
Anazonwu-Akerele explained that for the foreign operator, the vessel could be re-exported after two years as required by the guidelines and re-imported three months after, with no import duties paid.
She suggested that Value Added Tax (VAT) should be zero-rated on the vessels, adding that this would drop the import cost incurred by the indigenous operators to seven per cent from 13 per cent, currently applicable.
This will bridge the gap between indigenous companies and the foreign companies who used the temporary import permit, she added.
Anazonwu-Akerele also said the rate of company income tax and the various taxes which indigenous ship owners paid were very high.
“It is there therefore no wonder that the foreign operators can afford to underbid the Nigerian companies in any commercial bid as they carry overall a lower cost structure in loans and import duties’’, the NCS boss said.
She also said that shipping was a long-term business and so longer-term contract should be awarded by the NAPIMS, NNPC and the International Oil Companies (IOC).
Anazonwu-Akerele spoke against early contract termination clause, saying that termination of a long -term contract by the IOC without reason negated the longer tenor contract of five years.
She suggested the establishment of a standardised system of progressive compliance with the cabotage requirements
In his opening remarks, the Executive Secretary, NCDMB, Engineer Emeka Nwakpa said it was imperative to sit down with the ship owners and write to government through the Board concerning their challenges.
Nwakpa said Nigerians should be participating strongly in the maritime industry, saying that apart from job creation by the industry, technology transfer, the sovereignty of the nation was at stake.
“If we continue to use foreign vessels to do our businesses, what if something happens and foreigners pull out, are we going to be able to run the maritime industry alone, ‘’ he asked.
He said the situation had become so serious that the NCDMB had stopped processing marine tenders until the strategies for improving indigenous participation in shipping are perfected.
According to him, the IOCs are working out strategies to finalise this.
Nwakpa said the operators need to arrive at a common position on marine crew, ship registration, ownership and building of the vessels.
He said the focus for now must be on ownership to ascertain factors militating against ownership of vessels by Nigerians.
Nwakpa described the Temporary Import Permit as really a problem and wondered whether the issue must be taken back to the parliament for deliberation to instill some guidelines to enforce it.
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