The maritime sector is of critical significance to any economy. It is the main means for transporting goods internationally, and many cities rely on their ports as a major source of revenue. The maritime industry, which is a subsector of the transport sector, globally accounts for over 70% of transportation requirement of the world.
Maritime activities are expanding; bringing benefits to people across the world. The merchant navy, offshore oil subsector, commercial fishery and cruise companies have added impetus to the growth in the industry. The sector is a major catalyst for socio-economic development and international competitiveness in a changing world.
The maritime industry is of huge importance in terms of natural resources and energy, trade and industry, as well as sciences and leisure activities. It is an essential part of trade which demands innovative solutions and careful management systems to ensure its long-term sustainability. It is difficult to quantify the total value of the world’s maritime industry, and the economic relevance of a sector that affects a wide range of aspects of modern societies and their development.
For example, the European Union’s (EU’s) maritime regions account for about 40% of its Gross Domestic Product (GDP).
Mechanisms for Maritime Financing Worldwide
- Shipyard Credits –financed by shipyards and banks
- Foreign and Local Commercial Banks –loans granted by international or regional financial institutions
- Bilateral Aid or Government to Government Soft Loans
- Leasing Arrangements
- Special National Funds set up for shipping or ship building development
- Joint Ventures
- Equity or Retained Earnings; and
- Concessions, privatization and commercialisation
Most of the financial facilities mentioned above are not enjoyed in Nigeria. Commercial banks consider shipping a high risk business and rarely commit their funds to it. The fact that most Nigerian Banks only have short term funds at their disposal makes it impossible for them to invest in maritime pursuits which generally have long term gestation period. It was as a result of this that the Federal Government of Nigeria was compelled to intervene by providing the Ship Acquisition and Ship Building Fund which was discontinued because of corruption, abuse, and poor documentation.
Developing Economies Driving Global Trade
Developing countries continued to thrive, accounting for about 41% of global trade in 2012. This reflects their growing resilience to economic setbacks and an increasingly leading role in driving global trade. The shifting patterns of trade are associated with the rapid industrial growth of developing countries. Moving from agricultural and other sectors to manufacturing tends to drive up the import intensity of production. Moreover, global trade increase involves value chains with different geographical locations contributing various parts to the production processes.
Developing countries are expanding their participation in a range of different maritime businesses. They already hold strong positions in ship scrapping, ship registration and the supply of seafarers. They have growing market share in more capital-intensive and technologically advanced maritime sectors such as ship construction and ship owning. Currently, 9 out of the 20 largest countries in ship owning are developing countries.
Seaborne trade, which also constitutes a larger percentage of water transport trade, accounts for over 60% of the total GDP of the 16 countries that make up the Economic Community of West African States (ECOWAS).
Nigeria's International Trade
Nigeria as a nation is endowed with a vast coastline as well as navigable inland waterways and is strategically placed on the Atlantic Coast of West Africa. However, 76% of shipping business that takes place in the whole of West Africa is done in Nigeria alone, which means that Nigeria is very important in the West African sea ladder.
Nigeria is the sixth largest producer of crude oil in the world and also has most prolific gas reserves in the world which have only been recently exploited. The country is also rich in natural resources and agricultural produce. Most of these products are exported to international markets by sea where they are sold and foreign currency earned to ensure the country's developmental objectives. A virile and well organised maritime industry is therefore very important to facilitate Nigeria's international trade.
Despite the country’s large export of crude and import of over 100 million tons of general cargo, no Nigerian flagged ship is currently plying international routes. The country is the only oil producing nation without a national fleet, whereas, Angola, which recently joined the ranks of oil producing countries in 2002, has a fleet for her oil deliveries. The nation’s upstream offshore operations presently employs over 500 pieces of marine equipment, consisting of construction vessels, platform supply vessels, tug boats, barges and crew vessels with less than 5% participation of Nigerian ship owners.
The marine vessels requirement plan by the International Oil Companies (IOCs) between 2010 and 2014 for its upstream operations is a total of 912 units. With the volume of maritime trade and required marine equipment, Nigeria qualifies by her volume of import trade to be a hub for the short sea-trade of West and Central Africa sub-region.
Statistics from the Nigerian Ports Authority (NPA) on ship calls to Nigeria revealed that between 2009 and 2012, Nigeria’s tonnage has grown from 82 million tons to over 150 million with an estimated freight payment rising from $4.1 billion to above $7.5 billion annually, but participation of Nigerians was zero. The four years import freight payment estimated at $22.53 billion was all paid to foreign ship owners with no benefit to the Nigerian economy. Some other shocking statistics indicate that Nigeria exports about 900 million barrels of crude oil annually, but foreign vessels earn the freight of about $2.25 billion a year carrying the country’s crude with no freight earning benefit to Nigeria.
The maritime industry is a key sector of the Nigerian economy, considering the country's status as an oil producing and exporting country. As a consumer nation, the country is a large market for foreign goods owing to its population. Shipping remains very crucial to Nigeria’s economy as the petroleum industry which is currently the number one revenue earner for the country depends largely on shipping. Without shipping, product lifting becomes impossible as it is the back bone of oil and gas production and marketing.
Over 70% of the world’s oil is produced in regions where total consumption of oil produced is not feasible. Hence, transportation to other regions of need becomes essential in ensuring full consumption. Statistics has shown that over 80% of the global oil is transported by ship. In the case of Nigeria it is 100%. The Nigerian oil and gas sector requires huge shipping and logistics services for its smooth operations. This subsector of the maritime industry is estimated at over $3 billion.
Recently, the United Nations Conference on Trade and Development (UNCTAD) found that 35 coastal countries were served by only three or fewer liner companies. The implication of this is that the consolidation of services provided by the container shipping industry to achieve improved operational efficiency may reduce negotiating powers for some players and result in less overall market efficiency in some market segments.
However, as developing countries strive for improved infrastructure capacity, they will be confronted with increasing concentration of shipping services. The improvements in competitiveness are critical to ensuring a country’s effective integration into global trading networks.