Captain Emmanuel Ihenacho can best be described as a cross-over, an all- round professional in shipping and associated businesses. He started out as a dry cargo ship owner, who after gauging the trend, cleverly carved a niche as wet cargo ship owner and petroleum product importer. Apart from owning some of the biggest indigenous ships, he is also the chief executive of Integrated Oil and Gas. From his vantage position as frontline member of the shipping community and a first eleven player in the downstream sector, he spoke to a select team of reporters recently in Lagos.
On the MoU that was entered into between NIMASA and NNPC
Referring to the MOU which has been executed between NIMASA and NNPC, it is indeed a very good development; years ago we introduced the idea that we could have a law which will reserve the coastal shipping opportunities for Nigerian companies and we spent a lot of time and resources refining these idea and suggestions and eventually we took actions to ensure that this idea was passed into a law, hence we now have the Cabotage law, and basically what this has done is to create opportunities for the indigenous operators to participate more fully in the transportation of goods and services within the Nigerian coast. I will like to tell you that a lot has indeed been achieved; for a start, there is a greater awareness on the part of the people about the business opportunities that exists in this sector, not only the awareness, there are now lots and lots of Nigerian operators particularly in the offshore industry engaged in supplies in small supply vessels, anchor handlers and even in the supplying of rigs which could not have been possible had it not been for the initial action that we undertook in bringing this idea to the Nigerian public. So, a lot has been achieved, there are also certain sub sectors of the Cabotage trade such as the tanker trade where the successes that has been achieved has been limited so far and the reason for the lack of success is that the Cabotage business came at a time when there where changes in the IMO which actually prescribed the use of single hull vessels in lots of European countries, and rather than scrap the vessels they saw a lacuna or a gap in our law here which allows that you can bring in these ships and since we have hundreds of the ships hanging outside and providing challenges for Nigerian Cabotage owners who are operators of tanker ships. But by and large, there have been a lot of gains and we are hoping that with a greater awareness from NIMASA and with the exhibition of the MoU with NNPC, with the cooperation of ISAN we will eventually be able to manage the challenges posed by these foreign ship owners who are creating problems for Nigerian tanker owners.
On domination of Cabotage trade by foreign ship owners
Well if I am in the position to pronounce upon that, I could not make that allegation myself, I can say that indigenous ship owners appear to be having difficulties in accessing certain contracts which are being given out in our oil industry, but I do know for a fact that there is a cartel that is responsible for this. What we really need to do is to continue to talk, I saw an interview that was given by the chairman of ISAN and he actually pressed upon the range of problems which we are experiencing and which has made it impossible for us to fully access the market, as long as that dialogue continues and the ISAN executives continue to talk to NIMASA, NNPC, CBN and all other authorities, greater awareness will be created as to the opportunities that exist that Nigerians could benefit from which they are not accessing and I think that is the way to resolve the problems. It really would have been very nice though if you understand that the idea of Cabotage is more than five years old and we have talked about it severally, we have held endless conferences and you would have thought that we will have moved from the idea of Cabotage because Cabotage is about coastal shipping, and we would have moved on to the idea of developing an international shipping capabilities which was what we had before the collapse of the NNSL, we were not talking about Cabotage vessels or opportunities in the middle trade, we were talking about opportunities internationally and then Nigeria operated more than 20 ships at one time in the international trade and these ships were fully manned by Nigerians and what we should be doing now is to look at where we stopped, what were the problems which we encountered at that time and how we can resuscitate these potentials and go forward from there.
On the recent stakeholders’ meeting for operators in the downstream sector of the oil industry
It was a very well attended meeting, in fact the honorable minister for petroleum and energy actually conveyed and hosted the meeting, all the top brass of the NNPC were present at the meeting and most of the major operators in the downstream sector where there, MOMAN, DAPMAN members were there and most of the stakeholder unions namely NUPENG, PENGASSAN, TUC were all represented; indeed it was a very well attended meeting. At the meeting, the NNPC and all the different strategic business units of the NNPC gave some presentations to show that there was some problems in the downstream market and they gave there own version of why these problems persist and people were also given an opportunity to participate and give suggestions on how the problems are going to be dealt with, essentially what everybody was aiming at is for us to have reduction in the uncertainties which are experienced in the downstream sector so that we can have regular supply of petroleum products into the market at a reasonable price to people who consume it.
On whether the meeting can proffer a lasting solution to existing problems of the sector
Well, I don’t see that any one meeting with several objectives can be achieved at that time, the most important thing is that all the key problems that bedevil the downstream sector were brought on the table and I think every body has gone home to work on those aspects of the problems that concerns them with a view to achieving a better supply of petroleum products into the Nigerian economy in the very near future.
On deregulation
My take on regulation is that I am honestly surprised that we continue to thither and continue to talk about deregulation; it is the only solution that will bring about supple to the petroleum product supply situation in the Nigerian economy, you cannot have a situation where you regulate the price and quantity of the product being brought in, this gives rise to problems with regards to subsidy because you have to pay the subsidy in order to be able to sustain the regulation of the market and these subsidies are huge, it has been estimated to amount to some N670billion on an annual basis, if you reduce it down on a monthly basis, we are talking about subsidy of N60billion and you will want to ask the question: who are the real beneficiaries of these subsidies because the subsidies are supposed to be targeted at the welfare of the masses, but are they the ones who are getting it, is it reaching them, and is this the most efficient way to ensure that products are delivered? We believe that if we were to take a decision about deregulation and have to allow the international forces and competition, then all issues as regards product availability and pricing will be adequately dealt with. Let me also back- off and talk about the issue of our refineries because every time, we talk about deregulation people will say how can we talk about it without talking about the refineries, it is the situation which comes first, refineries cannot come to being if we have a situation where there is intervention in the determination of the quantities of petroleum products that will be produced and the price at which it will be sold, refineries are very expensive installations and I don’t see that any financing institutions or any bank will be willing to put its money in the support of the scheme in a situation where the beneficiary can not determine for himself based on market parameters what quantity of petroleum product he will produce, what specification he will produce and the price at which he will sell. So, if we continue to insist that we want to have a functional refinery before we can then have deregulation, we might not have it, because nobody is going to bring out the money to invest in the refineries unless there is deregulation, so it is a chicken and egg situation, we can have functional refineries that will be better set up under the private sector ownership and management and they will be better set up when there are no regulation in the market, deregulation does not always benefit the poor man certainly in our own example, it benefits parties elsewhere order than the common man.
Deregulate or else….
I have explained to you that we have to deregulate the market and we have examples of what to happen if we deregulate the PMS market, the AGO market has been deregulated for a long time and if you have to look at the statistics in terms of what has been happening to the supply of AGO, its always on supply in the market and the price has not hit the roof, the reason is that there is open competition between suppliers of AGO. Over the past eight months, I will say that the price has hovered between N90 and N100 mark and this is the essence of competition and that is what is likely to happen if the PMS market is similarly deregulated.
On excess revenue accruable from prices
What I can only say is that if you look at what happened with regards to the savings that were accrued as the PTF savings when we had bumper revenues on the account of the crude oil that were sold beyond the budgeted price, we can do exactly that same thing, I don’t see why we cannot have a subsidy recovery fund and set up committees and sub committees and the money that will be acquired from savings in subsidies can then be used to develop projects that will directly impact on the lives of the common masses. So when people continue to fight about the issue of deregulation, they must focus on the real issue because deregulation has no doubt showed that this is the best way to go, but the issue is that: savings from subsidies how will it be allocated, that is where I want people to divert attention to and not whether we are going to deregulate or not.
On stoppage of banks’ facilities
You are entirely correct in your surmise; the banks have not been there cooperating particularly with people who have put forward applications to them for the importation of PMS, first and foremost there is a credit crunch because of the changes in the banking sector but within the limits of the money that is available, banks have been very selective in terms of what particular product they are going to sponsor, so if you for instance came to them with an application for PMS, because of the problems in PPPRA which is the government agent that reimburses you for the subsidy elements, PPPRA in time past have given a commitment to pay subsidies within a certain time range, but of course it takes two times that time range so the banks understand that there is a risk element which is inherent in the situation where subsidies were not received when they are expected and so for that reason they are very careful about how they give support to people who are importing and they prefer to give support to product that is not under regulation and the subsidy regime.
On the risks involved
There are two major elements of the risk you can see: risk in terms of changes in terms of interest and exchange rates and risk in terms of the timing. Before you import any product you will do a template and in the contents of it, you have to make an assumption as to what time you are going to buy the product and turn it round, if you make an assumption that you are going to turn that money round in 45 days and it turns out that you didn’t turn it round in 45 but 90 days, then you interest exposures doubles. There is also the risk in terms of exchange rates, if made an assumption that by the time you import this cargo, the exchange rate will be N140 to the dollar and on the base that you actually get that reimbursement you are getting closer to about N160 to the dollar, you would have lost money, because the value of the reimbursement that you are getting is much less. So if you discount those changes which are due to exchange rate and discount those changes which are due to the additional interest which you are going to pay, then it will now mean that something that is originally a ‘gain’ proposal turns out to be a loss making proposal and that is why the banks are worried about lending money to people who are willing to import PMS.
On NIMASA and Cabotage
That is not entirely true and I will be very surprised that the DG of NIMASA made such a comment. One of the things that we have been fighting in this Cabotage business is to fight for the maintenance of the integrity of NIMASA as the legitimate agency as regard the standards of vessels if I have a situation where two ships are going to have a rendezvous; one is foreign registered and the other is Nigerian registered, the only person who can pronounce upon the standards of both ships is NIMASA, if we then have a situation where a foreign ship owner assumes on himself the duties, rights and responsibilities of NIMASA and becomes the one that gets the standards of Nigerian ship, is that acceptable? That is the problems that we have now, we have foreign ship owners who accord themselves the right to do the job NIMASA is supposed to do, for instance it is NIMASA that can look at all the certificates that you have and say whether they are valid or not, but if we have a situation whereby foreign vessels now appropriates to themselves the right to act as a maritime administration, it is an unacceptable situation. And if we have a situation where anyone in NIMASA is supporting that then we will ask whether the person understands what their responsibilities are, vis-à-vis those of the foreign operators who come into our waters. We are actually trying to fight to restore the integrity of NIMASA. Now let me ask you a question: why is it that the federal government through the Central Bank of Nigeria provides foreign exchange resources for Nigerians to import goods into Nigeria and the people who supply these goods prefer not to deliver the goods in Nigeria but in a foreign country? The reason is very simple, when they go and deliver it in Cotonou and issues of whether the ship has the right paper or not arises, they have put themselves out of Nigerian law and jurisdiction so you cannot go and complain to NIMASA because you are standing in Cotonou with goods that are supposed to come into Nigerian waters.
On products diversion to Cotonou
It is the goods of the Nigerian authority because if these goods are not brought to Nigeria whether its oil or dry goods, you as an importer will go and make an application to the Central Bank of Nigeria to appropriate foreign exchange for your import, how can you justify a situation where the goods are now delivered to Cotonou and not to Lagos. Three things happen: one is that Nigerian Ports Authority is denied opportunity of the revenue accruable to them because when that vessel comes into Nigeria, it must be cleared for arrival and it must pay dues, two; Nigerian maritime administration is denied the opportunity of the revenue accruable to it because it is supposed to have three percent of all the freight element, but because you are standing outside Nigerian waters, we will not consider that the goods have been delivered, the third thing is that if there is any agreement between a Nigerian company and anyone of those suppliers, then he is holding on to the short end of the stick because the Nigerian law cannot apply because the man is standing outside Cotonou and you cannot force Nigerian authorities to change it. This has been ongoing and it is something that needs to be addressed otherwise Cabotage is not going to work, I can’t imagine a situation where people will be interested in doing business with Nigeria, but do not wish to comply with the content of the Nigerian law or they can comply with certain parts of it that they are very happy with and the rest they will say well we collected the money for free, but we are not going to submit our self to Nigerian jurisdiction so that we don’t get arrested unnecessarily when we are trying to create troubles for Nigerian ships.
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