Monday, 27 October 2014

National interest and local shipowners

Last month China gave four shipping lines including China Cosco 1.8 billion yuan ($293.3 million) in subsidies to encourage them to retire and upgrade their vessels. This amount is about the size of Nigeria's Cabotage Vessel Financing Fund (CVFF).

In December 2013, China announced it would hand out subsidies to the shipping lines to replace old models with new and greener ones and to generate orders for its shipbuilders, which have been hit by an order slowdown in a global shipping slump.
Shortly after the announcement, one of the shipping lines, China Cosco said it had received 1.3 billion yuan through its controlling shareholder, state-owned China Ocean Shipping Group, to compensate it for scrapping and upgrading old vessels. Sister company Cosco Shipping also said it had received 182.9 million yuan for ship upgrades while China Shipping Development Co. said China's finance ministry had given it 215 million yuan in subsidies for scrapping 15 ships. China Shipping Container Lines also acknowledged receiving a subsidy of 40 million yuan.
The companies said they expected the subsidies to have a positive impact on their full-year results.
There are arguments that China has become the leading exponent of an economic model called "state capitalism," in which state-owned or state-supported companies used public money to dominate markets and advance strategic interests.  
Truth is state capitalism, as well as a range of new forms of protectionism involving barriers behind borders such as regulations, discrimination against foreign companies, and forced technology transfers have become tools with which countries enable their indigenous businesses compete in key markets. 
Every country, including the United States of America which professes open, free, transparent, and fair system practices some form of protectionism which is what state capitalism is all about.
Besides, developing economies like Nigeria have a lot of work to do to lift hundreds of millions of their people out of poverty. This imperative must outweigh any obligation to play by established doctrines. 
The notion of open market operation is a misnomer in shipping parlance and that is why I am concerned about our government's laissez-fair philosophy, which has entrenched a hands-off approach in the sector.
Whereas developed nations and emerging super powers like China are consciously providing subsidies and other relevant incentives to their ship owners, ours is flexing all the muscle it can to decimate its own. The actions of government through the Nigerian Maritime Administration and Safety Agency (NIMASA) clearly show that the administrators either lack requisite knowledge to promote the sector or are deliberately entrenching policies that will shove operators down the cliff.
Late 2007, NIMASA concluded plans to float a ship repair and maintenance fund. The plan was to carry out an audit of Nigeria-owned ships, repair and place them in class so they could effectively perform Cabotage operations. An MOU was to be signed with the Naval Dockyard in Victoria Island, Lagos. The idea was not to give money directly to the ship owners but pay the shipyard seventy per cent of the repair cost while the owner pays the rest. It looked good on paper and was applauded across the industry but problem was; the scheme never saw the light of day. 
Four years earlier, government had enacted the Coastal and Inland Waterways Act, known as the Cabotage Act. That law is now eleven years old and it is nowhere near implementation.
With the Cabotage Law came the Cabotage Vessel Financing Fund (CVFF). CVFF is a contribution by ship owners and it is not government money. It smirks of mischief (or ignorance) to describe the CVFF as an intervention fund. It is a direct contribution by ship owners at the instance of government and backed by adequate regulation and guidelines. 
The idea behind CVFF was to create a pool fund accessible by the contributors from time to time at a single digit interest rate to acquire vessels.
The CVFF account has grown to over N50 billion in ten years with no hope in sight for disbursement. There is a sort of ding-dong and a game of musical chairs between the uncanny banks selected by NIMASA as primary lending institutions and the docile maritime administration. The banks are the beneficiaries of the non-disbursement as it provides them cheap deposits while NIMASA is content with using the fund as a bait and bargaining chip. 
Over the past four years and especially under the present NIMASA leadership, the nation's fleet has suffered substantial depletion due largely to lack of sufficient funds needed grow and maintain them. There are also instances of nepotism, which are better discussed some other time.
Without belabouring the issue, the leaderships of NIMASA and the Federal Ministry of Transport are accountable for the comatose state of the shipping sector. 

They have one more chance to redeem themselves by disbursing the CVFF and reviving the fleet maintenance subsidy. The lesson from China is a good one to imbibe. 

Monday, 20 October 2014

Jonathan's anti-people policy

Implementation of the hike in tariff of imported vehicles will place the cost of vehicles beyond the reach of about 90 percent of Nigerians, increase the cost of transportation by at least 50 percent and increase inflation before the end of this year. It is for these reasons that I join my voice to those of concerned patriots to call on the Federal Government to halt implementation of this obnoxious policy to save the masses from further hardship.
I believe the new automotive policy will be bedeviled by several problems. First, there is a huge gap between demand and local capacity. Local production capacity of automobiles by all the assembly plants in the country today stands at a pathetic 45,000 units per annum while demand stands at 800,000 units per annum.
There are a handful of assembled-in-Nigeria vehicles alright but how many Nigerians are able to buy such vehicles? 

The price of locally-made vehicles is way out of the reach of average Nigerians and this is mostly as a result of the collapse of public infrastructure including power supply. Infrastructural challenges will make it impossible to produce enough cars locally and cost-effectively
for the Nigerian market.
Imported second hand cars have an average price N750,000 million while the cheapest locally assembled car sells for N3.5 million. It is just too expensive to manufacture in Nigeria and President Jonathan's argument that Nigeria would soon begin to export cars is a mere pipe dream. Who does he plan to sell the cars to and for how much? Under the current production environment in Nigeria, can any manufacturer churn out products that can compete with those made in Taiwna, China, Japan and Korea?

Truth is if government makes it too difficult to import cars into the country legitimately, importers will do so through unapproved means. And with over 1,400 illegal entry routes, over 80 poorly manned borders, and an ill-equipped and largely corrupt Customs structure; smuggling will boom. So the federal government is inadvertently promoting smuggling through its ill-conceived policy.  

Whatever we manufacture here will be insufficient for the local market and cannot compete on price so the imported ones will still reign supreme in the market place. 
There is a precedence that has cost this nation well over N365 billion in a year – an amount that would have been sufficient to reconstruct and modernise the Lagos-Ibadan expressway and the Apapa-Oshodi expressway together. The ugly consequences of Jonathan's ill-conceived and hastily implemented policy on rice, introduced in the first quarter of 2013 still stares us in the face. It is similar to the new automotive policy.
Supposedly to support Nigerian rice producers and make their product competitive, the federal government in 2013 imposed a 100 per cent levy on polished rice in addition to a duty of 10 per cent. This was meant to discourage rice production despite knowing that the local capacity was, and still is, insufficient for the overall Nigerian market.

Since there is a huge demand which cannot be satisfied by local production because of the capacity and price, a massive amount of rice is being smuggled into the country from Benin Republic on a daily basis. Experts estimated that over a million tons of rice was smuggled into the country between April and December last year. Nigerian ports lost all their rice shipments to Cotonou port and the commodity eventually commodity found its way, under the nose of our Customs operatives, into our market illegally. 99 per cent of the rice consumed in this country during the past Christmas and New Year festivities was smuggled in.
The consequence has been a loss of huge revenue to terminal operators and the three tiers of government through customs duties, value added tax, corporate taxes and others.

Of course, the price of rice shot through the roof in the market while local production – which was to have benefited from the policy – has not recorded any significant increase.
Since there is a huge demand of vehicles which cannot be met by local production because of the capacity and because of the price, the Nigerian buyer will be inadvertently left with no choice but buy smuggled vehicles from Benin Republic just as we have seen with rice.

It may interest Mr. President to know that if his policy is implemented, over 600,000 vehicles will be smuggled from the ports of neighbouring countries mainly Benin Republic into Nigeria annually. 
I heard there was a big feast in the Presidential Palace in Cotonou to celebrate the folly of the Nigerian government.

Friday, 10 October 2014

China: Africa's second colonialist

China’s Premier Li Keqiang made his first visit to Africa in May this year after taking office 18 months ago. The week-long trip will took him to Ethiopia, Nigeria, Angola and Kenya.
China is investing billions of dollars in Africa but Beijing has been accused of exploiting the continent’s vast mineral and energy resources, at the expense of local people. Li was quick to dismiss talk of any problems as “growing pains” and “isolated incidents”.
China has been Africa’s biggest trade partner since 2009. Bilateral trade stood at just under $11 billion in 2000, by 2006 this figure had jumped to nearly $60 billion and last year bilateral trade had soared to $210 billion.
Chinese investment in African countries has also risen some thirty fold in the past ten years. Foreign direct investment went from $500 million in 2003 to almost $15 billion by 2012. And last year, China pledged $20 billion in loans for infrastructure development.
Premier Li called on Chinese companies to “shoulder responsibility” for local communities in Africa, adding: “I wish to assure our African friends in all seriousness that China will never pursue a colonialist path like some countries did or allow colonialism, which belonged to the past, to reappear in Africa.”
But what is at stake for African countries, and who stands to gain the most from the China-Africa relationship?
Across our vast continent, there is rising prosperity and terrible poverty, responsible governments and total lawlessness, lush fields and forests and drought-stricken states.
Experts have posited at various times that many of Africa’s conflicts and challenges stem from colonial-era decisions that drew borders without regard for ethnic, tribal, or religious differences.
Poor governance and faulty economic theories in the post-colonial era perpetuated divisions and promoted corruption. Rebel leaders, as is often the case everywhere, knew how to fight but not govern. The Cold War made much of Africa an ideological and sometimes real battleground between forces backed by the West and those backed by the Soviet Union.
The continent’s challenges remain acute, to be sure, but there is another side to Africa emerging in the 21st century. Several of the fastest-growing economies in the world are in sub-Saharan Africa. Since, 2000, trade between Africa and the rest of the world tripled. Private foreign investment surpassed official aid, and it is expected to continue growing.
Between 2000 and 2010, non-petroleum exports from across Africa to the United States quadrupled, from $1 billion to $4 billion, including clothing and crafts from Tanzania, cut flowers from Kenya, yams from Ghana, and high-end leather goods from Ethiopia. Over the same period, child mortality rates declined while primary school enrollment increased. More people gained access to clean water and fewer died in violent conflicts.
Africa now boasts more cell phone users than either the United States or Europe. Economists expect consumer spending in sub-Saharan Africa to grow from $600 million in 2010 to $1 trillion by 2020. All of this means that a different kind of future is possible for Africans.
Historically, Western powers have too often seen Africa as a source of resources to be exploited or as a charity cause in need of patronage.
There are many African nations where workers earn less than a dollar a day, mothers and fathers die of preventable diseases, children are schooled with guns instead of books with greed and graft becoming the dominant currency.
Chinese companies, many of them state-owned, responding to their own immense domestic demand for natural resources, are buying up concessions for African mines and forests.
Since 2005, China’s direct investment across Africa has increased thirty fold, and by 2009, China had replaced the United States of America as Africa’s largest trading partner.
In all of these, a pattern developed: Chinese companies would enter a market and sign lucrative contracts to extract resources and ship them back to Asia. In return they built eye-catching infrastructure projects like soccer stadiums and superhighways (often leading from a Chinese-owned mine to a Chinese-owned port). They even built a massive new headquarters for the African Union in Addis Ababa, Ethiopia.
There was no doubt that these projects have been welcomed by many African leaders and that the Chinese are helping modernize infrastructure in a continent where just 30 percent of the roads are paved. But the Chinese brought their own laborers rather than hire local workers who needed jobs and sustainable incomes, and they paid little attention to the health and development challenges Western nations and international organizations worried about.
African leaders must review Chinese investment on the continent. Over the long run, investments in Africa should be sustainable and for the benefit of the African people.
Sino-Africa relationship is anything but a win-win. It is heavily skewed in favour of the Chinese and I hope it won’t be too late when African leaders wake up to reality.

Aniebonam @ 60

In 1999, I was a young reporter, fresh from the university and bubbling with new ideas. I was saddled with the responsibility of producing and anchoring a 30-minute weekly programme called Maritime Diary which aired on select television stations including NTA 2 Channel 5 Lagos, RSTV Port Harcourt and DTV Warri.
In no time, Maritime Diary became the most watched and most respected shipping program on Nigerian television. We had over one million viewers across the country per week.
Every week, I interviewed one or more prominent individuals, usually highly placed people in the maritime industry. We produced incisive reports and conducted interviews from the studio. I also interviewed people on-site in their offices, in the ports, onboard ships, in their homes, hotels and other unique locations. It was a lot of fun for me as I met with great personalities in the industry. That period created the foundation for what I am able to do today in the maritime industry.
One of the personalities I met back in those days was Peter Okocha, then newly elected National President of the Association of Nigerian Licensed Customs Agents (ANLCA). I met him at an occasion and couldn’t help but notice his poise and style. He was tall and dressed in all-white attire. Even his shoes were spotless white. He did not cut across like the regular clearing agent I had come across at various times.
I didn’t waste time in introducing myself and asking for an appointment which he promptly granted. Two days later, I was in his office in Surulere where his beautiful Secretary (I couldn’t help but notice. I was young and single after all)  ushered me into his vast and immaculate office after a brief wait.
Okocha was pleasant and eager to speak with me. After about an hour, the interview was over. He gave me a small note to his accountant but as I made for the door of his office, he asked if I had ever interviewed one Boniface Aniebonam.
“No, I haven’t,” I said.
“That’s good. Make sure you don’t interview him. Anytime you do, I won’t grant you interview again,” he said.
That sounded strange to me. I thought it was a free world. Anyhow, I shrugged and left his office.
But he had piqued my curiousity about the man. Who was this Aniebonam and why was he so important to Okocha? I determined to meet (and interview!) Aniebonam as soon as possible.
Dr. Boniface Aniebonam’s office in 1999 was the direct opposite of Okocha’s. It was a small 12 square feet space located in the busy NPA Commercial building near the Apapa Area Command of the Nigeria Customs Service. That building has since been demolished after an inferno about 10 years office.
I met Dr. Aniebonam who surprisingly accused me of not featuring him on Maritime Diary because, according to him, I was on Peter Okocha’s payroll. I was taken aback and vehemently denied it. I was new to the waterside game and didn’t understand such tactics but I now know better. If anyone says that to me these days, I won’t even bat an eyelid.
We had a good interview session. He told me that he was a member of ANLCA and headed a very important unit of the association until a few months earlier when he had to pull out and formed NAGAFF. Indeed, I remember him saying despite forming NAGAFF, he remained a valid member of ANLCA.
Suffice it to say that I was able to maintain cordial relationship with both Okocha, for about six months until he resigned as ANLCA President and Aniebonam, till date.
Dr. Aniebonam is a man many love to hate and hate to love. You simply cannot ignore him in the industry; he won’t allow you to.
Aniebonam it was that popularised the phrase “freight forwarding” in Nigeria. Many scorned him when he set up NAGAFF but like a prophet, everyone now identifies with freight forwarders and agents call themselves freigh forwarders.
Aniebonam has paid his dues and matured into a great leader over a space of 15 years. Many people have bought into his vision and the National Association of Government Approved Freight Forwarders which he formed on 31st November 1999 with a handful of followers has grown to become the largest freight forwarding association in Africa.
Aniebonam is a man of the people (apologies to the late China Achebe). You will always see people flocking around him everywhere he goes. NAGAFF Village in Apapa is the melting pot of freight forwarders – the successful ones and the upstarts alike. His greatest investment is in people. I am not sure anyone can boast of ‘dragging’ as many people into freight forwarding as Aniebonam has done over the past decade and a half.