CEOs Talk Business: Capt. Iheanacho talks about Nigeria’s shipping development, human capacity, financing and what policy planners should consider doing
On this edition of ‘CEOs Talk Business’ Captain Emmanuel Iheanacho, the Chairman/Chief Executive of Genesis Worldwide Shipping, Eko Refineries, and Integrated Oil and Gas Company, sits with us ‘At The Marina Today’ and shares great insights of Nigeria’s shipping industry and the many requirements to create a balance and encourage more private- player participation. They seem a lot, but Iheanacho talks about available capacity, the issues with financing and the consciousness to take advantage of opportunities for indigenous players’ growth. And, an important discussion is on a proposed merger of some agencies of government; Iheanacho thinks ‘That must have been a slip of the tongue’ for anyone to even talk about merging agencies that have entirely different portfolios of duties and services.
Host: Hope Orivri.
Transcription;
Kindly share your thoughts on Nigeria’s shipping development, considering indigenous players’ capacity to acquire ships, the establishment of shipbuilding/ship repair yards. And what significant difference do you think the CVFF disbursement would make?
Nigerians have the capacity to run shipping. First and foremost, shipping is a very important element of our international trade. Nigeria as an international trading country, we export large volumes of crude oil, send them to foreign refineries and then bring the products that are refined back into Nigeria. Then the money that is earned from this trade powers huge international trading operation where we buy all kinds of consumables and goods for development. So, we use shipping to a very large extent. So, when you ask me about potential Nigerian ship-owners; are they in a position to take advantage of this structure that we have? They are, but they are not actually doing it.
There are several dimensions to this; one, shipping is highly capital-intensive. So, when you are looking at ordinary Nigerians being able to afford the cost of ships, it wouldn’t happen. If you are looking to borrowing from Nigerian banks, they are not capitalised to lend people the kind of money that they require to buy well-founded ships.
The Cabotage Vessel Financing Fund (CVFF) should be a component of a larger programme for developing shipping as a whole. So, in terms of technical capacity to run a ship, we have run shipping operations since the late 1950s, starting from when the Nigerian National Shipping Line (NNSL) was established, when people like myself had the opportunity to sail on board and to acquire the skills of technically operating ships. So, we can operate the ships. We had money to buy these ships, if only government realised the importance of shipping as situated correctly in terms of our developmental agenda. So, that they didn’t, is the reason why we still export our crude oil without adding value to it. We allow that this crude oil is carried on ships that belong to third parties, then the crude oil makes a transit and goes into refineries that don’t belong to us, further value is added and profits made at our expense because we are sitting down there and not doing anything about it. These are areas that our policy planners must look into very carefully and try and harvest some of these benefits which we had neglected in the past.
What significant difference do you think the CVFF disbursement would make?
The CVFF is a good support. But, let me say that we should go beyond the CVFF, because, it is a fund that is established to provide the ‘seed money’ for those who are trading mostly on Nigeria’s Coast. But you want to know what proportion of Nigeria’s trade does the CVFF constitute? Our shipping trade constitutes of maybe 95%. So, if we are accruing funds for developing shipping, we shouldn’t just concentrate on the CVFF cabotage business, we should absolutely set out to develop shipping in all its ramifications. And from my experience, one area we should have just mastered easily, arising from the nature of activities involved, is the tanker trade, because the tanker trade is so easy, you carry only one cargo, one Bill of Lading, and all you have to do is to be able to take the ship to a port, stop the ship there, load the sip and sail the ship out of the port and then to another port. So, it is not as difficult for instance, as if you were operating a liner service, which requires you to carry thousands of containers and in each of those containers you have thousands and thousands of small goods and you have the administrative requirement to be able to sort all of those things out and make sure that you go to the port at the right time, you deliver to the person who owns the cargo, at the right time. So, there is really a lot that we could have done to harvest and to develop our shipping potentials, which can still be done.
What about taking advantage of establishing ship-building and ship repair yards?
Yes, shipbuilding and ship repair yards; remember that we did have a very modern shipbuilding and ship repair yard and dry-dock at Snake Island. I said we did have, because it is now in history. It seems to me that the business interest has absolutely moved on, and the shipbuilding and ship repair part of that facility is no longer getting the priority attention that it used to get. Maybe the owners of the business are now doing some things in the maritime other than actually building and repairing vessels. But I do think that there is a great potential if you look at the size of Nigeria’s economy. The extent to which we use ships; whether they are Nigerian-owned vessels or foreign-owned vessels, there really would have been a great demand for dry-docking services and for ship- building services for smaller vessels to ply our coastal waters.
What about the call for the establishment of a maritime bank? How well would that help in addressing the issue of financing for ship acquisition?
I think it would go a long way to making it possible for us to attain our goals in shipping development, if we had a bank that is particularly devoted to financing asset in the maritime. Part of the problem that ordinary banks have is that they do not understand the risk element and how to provide the mitigation for it. If you just wind back our story, maybe ten years back, you will see that a lot of Nigerian commercial banks absolutely burnt their fingers when they inadvertently lent money to people without fully evaluating the risk that was involved. In so doing, they lost a lot of money. So these days when you invite them, they would tell you they are taking care of their shareholders’ funds and they would not knowingly lend you money to buy ships. And you don’t blame them; the risks are very different and they are specialists. The specialist banking institutions with the necessary skill sets would be the best for advancing our interest in that area.
What’s your assessment of Nigeria’s human capacity development in providing manpower needs for the maritime industry?
Nigeria has done quite well actually. The Maritime Academy of Nigeria, Oron, is there. The Academy provides a good training group for people who wish to pursue a career in the Shipping industry. And I think that what really should have been done would have been for the Academy’s output to be hooked on to a national capacity where we bought tankers, similar to what we did with the general cargoes vessels in the Nigerian National Shipping Line (NNSL) so many years. We in the industry have actually thought a campaign to ensure that we participated in the carriage of Nigeria’s trade goods; not only were we supposing that it would give us the opportunity to make money, it would create the opportunity for us to acquire engineering and technical skills, it would create a very good opportunity for us to hook on to what is done elsewhere. So how do you process these linkages? If a Nigerian registered tanker and Nigerian crude tanker picked up cargo from here and to America, what are the standards that are required? So, there are so many things that we are losing , because we were just satisfied with just selling the oil , allowing that others would do the job when we would have actually done that job and made significant profit from participating in that business.
What are your thoughts about a proposed merger of the FIRS, the Customs Service, and NIMASA?
Well, my take on it is that I think it was a slip of the tongue, to be honest. I can’t understand the basis upon which anyone would propose to merge the Nigerian Maritime Administration and Safety Agency (NIMASA) with the Federal Inland Revenue Service (FIRS) and then with the Nigeria Customs Service. NIMASA is an organisation that is set up to develop shipping capacity; an organisation set up to regulate safety and sea-worthiness. The FIRS is a revenue- generating agency; collecting money on behalf of the government, and the Customs to a certain extent, it does that. If you are talking of merger maybe between Customs and the FIRS, that would be understood, but if you throw in NIMASA, then I think you will be playing in the realms of speculation, if you do that.
Considering how clogged the roads leading to the ports are, what is Nigeria not still getting right in that regard?
We are getting everything wrong. The road would not unclog itself; somebody has to organise it. It could well be an efficient call-up system that allows that certain categories of vessels carrying certain categories of freight pass at certain times. But certain what we need is to have proper planning. The other thing we need of course, is to carryout studies over time ; snapshots in time to look at the rate of growth of transport and throughput cargoes over time and to make the provisions for infrastructure that is meant to accommodate these throughput. The roads that we met fifty years ago cannot be sufficient or adequate transportation that goes into and out of the port today. So, the lesson for us there is that we have to continuously plan, and that is how you see the great ports of the world that things work, because people are planning and people are continuously directing everything that is done there. There is no way a system can plan itself and just carry on like that.
On trade matters, we saw that Nigeria closed her land borders for over three years, even after signing to the AfCFTA agreement. What economic edge or failure do you think that decision brought to Nigeria?
It was actually strange, because Nigeria is a major player in Africa, even in terms of trade. So, for the Africa Continental Free Trade Area ( AfCFTA) agreement to be promulgated and we shut our borders, it was really over 100 per cent contradictory as far as the AfCFTA agreement was concerned. We wanted to encourage intra-Africa trade and then we shut our borders; so how are we supposed to achieve that purpose? We could ask that question, but we would not know, because this was done by the person who was in charge at the time. And there was nobody to compel him to explain what the rationale was for that decision then. We were watching and praying that the borders were opened and when it was opened the Customs say importation of vehicles through the land borders remained prohibited. Why not? If there are any differences in tariffs, why do they exist? So, it could have been a basis for us to sit down and look at our tariffs and those things acting as barriers in trade between our African brothers.
On the fuel subsidy removal conversation; Nigerians are yet experiencing the benefits. What do you think would be the shape of things to come in the very near future in this regards?
Let’s talk about the subsidy issue; it was a total waste. Subsidy was maintained because the masses were supposed to benefit from cheap transportation as a result of subsidy on petroleum products. But the truth of the matter is that the poor people were not benefitting from it at all. The people who benefitted where the ones who actually drove into the fuel stations and could buy unlimited amount of fuel as a result of the fuel subsidy, but the poor people, like fifteen of them, are stuck in a bus and they could only buy a maximum of like 100 litres. Split that among fifteen people and you can see that it was a limited benefit to them. But the car owner drives in all by himself in a car and buys maybe 200 litres of fuel and there is nothing that says to him to pick up people on the streets as he drives along so there is greater efficiency in the use of the transport that government has subsidised, so the subsidy is spread. Also, government was spending huge amounts for every litre to sustain this misguided policy. So, we are not surprised that subsidy was removed. But people are disappointed because prices are rising because the changes that are expected have not fully manifested and part of the problem is that people are still fiddling with the pricing of petroleum products. The price of petroleum products is not supposed to be dictated by anyone, the volume that is supplied in the market is not supposed to be dictated by anyone. All of these things are supposed to be determined by interaction of competitors in the marketplace. So, if there is need for fuel in the market, people bring in fuel, more people bring in fuel and there is greater competition, it brings down the prices and comes down to an equilibrium level beyond which the price could not be dropped again. .That is the price that people would pay for it. It would happen once people stop fiddling, calling prices, calling volumes. It happened with diesel.
How well would the establishment of modular refineries help with price and volume stability of fuel?
Well, modular refineries are a logical way to go. Let me start by comparing ourselves to America for instance. America is a huge country; it is about one and a half times the population of Nigeria. It has 139 fully functional refineries. And Nigeria has four refineries that are not working. Again, let us look at Texas, which is about the size of Lagos. How many refineries does it have? Thirty-Two! How many refineries does Lagos have? None!
So, we have a long way to go. It means we must have means of refining petroleum products, so that we can provide transportation to move goods and services, the energy resources to power our industries. These are the basic things that we need. If we upend them and give priority to other areas of our economy, we would not get the benefits that we are entitled to. So, first and foremost, provide energy resources, provide the lighting. These are the things that modular refineries can do. So the government should actually take into considering the need to have more modular refineries to work in tandem with Dangote Refinery when it begins to produce, because government refineries in Warri, Port Harcourt and Kaduna have not been working. So we need the private sector input, in the conception of modular refineries and the operation of these facilities.
So, how well and how far gone is Integrated Oil and Gas Company on its modular refinery project?
Our modular Refinery proposition has gone as far as it can go. Modular refineries are highly capital intensive facilities. We have articulated this, we have done the engineering studies, we have done the detailed engineering studies, and we have achieved the authority to construct. But we are still at the point where we ate trying to raise financing; this is the key drawback. It is very similar to the problems people have with owning ships. It is highly capital intensive. Unless you have some specialised financing mechanisms set up by the Central Bank, so that people can borrow money from it, it would be difficult for these things to be actualized. There is also a need for us to have specific guarantees with respect to availability of crude, because it is really odd in a situation where the Nigerian government partners some oil producing companies and then has a share of the oil. It would be odd for the government to be selling that oil on FOB basis, whilst there are local refineries that are set up and can use those things and add value. So, the time has come when we should match the government’s share of the crude to the refining proposition of the local refiners and then have cheap and sufficient fuel for use in our economy and that we can also export to our neighbouring countries.
How do you see Nigeria’s desire for wanting to be a hub in several sectors; like being a hub port in the sub-region?
Well, we like to subscribe to clichés, like wanting to be a hub port for trade in West Africa; we also want to be a hub port for refined products and all of these things. We got to move away from buying into those clichés and absolutely sink our teeth into reality. Is it really a good thing to be a hub port for refining so that we can refine petroleum product, we can become self-sufficient in the availability of refined product, we can put ourselves in the position when we can then send this product out, because we can make profit from it and we are going to have technology transfer through involvement in some of these things? Yes. So the same thing, we want to be the hub for trade in West Africa, we have got to do what has been done in Lekki; a port has been developed. There are additional ports that have been proposed like on Tomaro Island, so we have to develop all of those things, encourage those people who bring themselves out to say they want to do those things.
Looking at where we are coming from, I will say the future is bright, and what we have endured in the last few years, the future is absolutely bright.
