Wednesday, 21 May 2014

Before we set up another national carrier

As the Federal Government, through the Nigerian Maritime Administration and Safety Agency (NIMASA), plans to float a new national carrier within the next six months, it is important to remind the powers that be of pitfalls to avoid for the survival of the new venture.
Excessive interference by top government officials played an important role in the eventual demise of defunct Nigerian National Shipping Line (NNSL). Because it was seen as a cash cow, Federal Ministry of Transport officials found every excuse to meddle in its affairs and thus circumvent important decisions.
The management of NNSL was changed as often as Transport Ministry officials liked. Every NNSL Managing Director who was seen as uncooperative by the Ministry officials soon found himself in the labour market.
Frequent changes in the management were not for the right reasons and management programmes for turning round the shipping line were not given due consideration. The company and government could not react without delay to situations dictated by market and technological changes or development in the trade.
For instance, it took the Federal Government almost five years to approve the tonnage expansion programme and modernization of NNSL ships in the seventies. Perhaps the post civil war demands contributed to this. By the time the vessels were eventually built and introduced into the market, a measure of obsolesce had set into the original concept. It took another five years to convince the government about the need to phase out the 19 combo vessels with a view to introducing appropriate vessels that were technologically up to date as well as meeting market demands. Other decisions such as rationalization of staff were dictated by government policies rather than sound business judgment.
Another major factor which compounded NNSL’s woes especially in the 1980s and 1990s was that services performed for other arms of the Nigerian government by the company were not paid in time. Such services rendered by NNSL vessels to government were paid for in local currency while the company racked up operational expenses incurred in foreign currency.
NNSL ships played vital role in moving troops and materials into Liberia during the operation of the Nigeria-led Economic Community of West African States Monitoring Group (ECOMOG) which was established in 1990 to restore peace to Liberia during its civil war. Not a dime was paid for this service.
Accumulated debts of NNSL to trade creditors originated from government’s failure to pay NNSL for the shipment of government project materials such as Aluminium Smelter Company, Ajaokuta and Alaja Steel projects. Efforts made by the management of the company to diversify into ancillary activities such as terminal operations, clearing and forwarding, oil tanker operation etc were not approved.
Regular changes in the headship of the Federal Ministry of Transport and the company brought inconsistency in its focus and vision.
Former leaders of NNSL that I spoke with agreed that government interference was a major stumbling block for the operation of the company.
Gerald Chidi told me sometimes ago that during his tenure as Managing Director of the NNSL from 1990 to 1993, he worked under four different Ministers of Transport while his successor who served for only two years from 1993 to 1995 also served under four Ministers of Transport.
Certainly, every Minister of Transport came with his own agenda and ideas on how to run the ministry with its parastatals which included NNSL.
“In some cases, changes in the headship of the company were engineered by officials of the Ministry (not necessarily by the Minister) for selfish reasons. It is this type of situation that a one-time Chief Executive of one of the parastatals who happened to be a retired General of the Army had in mind when he once said that the relationship between the supervisory Ministry and its parastatals could be likened to that of a military commander who sent a platoon of soldiers to capture a location and also deliberately sent another platoon of his soldiers to ambush the other platoon to ensure a failure of that assignment. This analogy is very apt.”, Chidi said.
As at the time it was drafted into the ECOMOG Liberia mission in 1990, NNSL was already in deep financial mess. Several of the company’s vessels have been seized in different parts of the world for alleged breach of contracts and unpaid bills.
In 1994, late Head of State, General Sanni Abacha approved the direct injection of cash into NNSL to enable it pay its creditors and secure release of some of its ships. The late dictator approved $45 million and another $20 million for NNSL but as a matter of fact, this act pushed the last nail into the company’s coffin. This was so because of avarice of some officials who colluded with outsiders to defraud the company as much as they could.
By early 1995, all of the vessels owned by NNSL had either been sold as scraps or downright shipwrecked without any hope of redemption.
In September 1995, the Minister of Transport, Major General Ibrahim Gumel shut down the operation of the Nigerian National Shipping Line, NNSL after 36 years. He appointed Captain Cosmos Niagwan as Liquidator of the company.
The NNSL story is a reminder to the decision makers of today that government has no business being in business.
While one applauds the renewed attempt to float a new shipping line, it should purely be a private sector driven venture with government’s role being that of providing an enabling environment.
I strongly recommend the Nigeria Liquefied Natural Gas (NLNG) model for structure of the new national carrier. The Nigerian National Petroleum Corporation (NNPC) owns 49% of NLNG while Shell, Total and ENI own 25.6%, 15% and 10.4% of the entity respectively. A structure like this has ensured the buy-in and ownership of the NLNG project by critical industry stakeholders.
My suggestion therefore will be that the NNPC, which is the cargo owner that the new national carrier is targeting, should own 25% share, indigenous ship owners under the aegis of the Nigerian Shipowners Association should own 49% while three oil majors – it could be the three mentioned above – should own the remaining 26% share.
NIMASA cannot own shares in the new venture because it is a regulatory agency. Its role in the entire arrangement should be that of a facilitator in line with its mandate of promoting shipping development in the country.

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