In most advanced or developing economies, regulatory bodies are financially fortified because they are the backbone of transparency and accountability.
Unfortunately the story is different in Nigeria as economic watchdogs are struggling under the weight of underfunding, yet overburdened.
The paucity of funds is glaringly evident in the maritime sector, which is literally the gateway to the nation’s economy.
The lack of resources has left a regulatory agency like the Nigerian Shippers’ Council ill-equipped to enforce the laws that protect shippers, the citizens and ultimately boost the economy.
Many insist it is time for a paradigm shift as without adequate funding, the Council will be a toothless bulldog, barking ceaselessly without actions.
The beginning
For decades, the Nigerian Shippers’ Council (NSC) has been reliant on the 2 percent Port Development Levy to fund its operations, while its statutory 1 percent Freight Fee, as outlined in its Acts, remains unrealized. This reliance has limited the Council’s ability to effectively execute its responsibilities.
With the federal government now set to implement the Oronsaye Report, a new chapter is about to unfold for Nigeria’s port economic regulator.
The report’s directives include the withdrawal of the 2 percent Port Development Levy, compelling the NSC to adopt a self-funding model. This means the Council must now generate its own revenue to carry out its vital functions, raising questions about its ability to maintain oversight of the nation’s maritime industry without adequate financial support.
Archaic Act
Amidst the harsh economic realities faced by port users in Nigeria, and with no clear government agency tasked with protecting the interests of shippers and importers, the Federal Government, through a presidential decree in 2015, designated the Nigerian Shippers’ Council (NSC) as the Port Economic Regulator for the country’s ports.
However, this presidential fiat, lacking the necessary legislative backing, has faced numerous challenges in court. Terminal operators and shipping companies have taken the NSC to court in recent years, disputing matters that directly affect the interests of shippers and importers.
Compounding the situation, the NSC is operating under an Act that no longer aligns with the realities of today’s maritime industry. The Nigerian Shippers’ Council Act of 1978, which established the Council, is outdated and ill-suited to the modern port system shaped by the 2006 Port Reform Act. Key legislative developments, such as laws protecting the rights of shippers and importers, have also outpaced the provisions of the NSC’s founding law.
When the NSC was established in 1978, the nation’s ports were entirely managed by the Federal Government through the Nigerian Ports Authority (NPA). At that time, there was no private sector involvement in the port system. However, the 2006 Port Reform, ushered in by President Olusegun Obasanjo’s administration, transformed the landscape by allowing private investors to take over port terminal operations, while the NPA assumed a supervisory role in a landlord capacity.
Now, with the NSC facing significant challenges, especially regarding funding, there is an urgent need for legislative action. The Nigerian Shipping, Port Economic Regulatory Agency Bill 2023, which has passed through the House of Representatives and is currently under consideration in the Senate, must receive presidential assent. For the NSC to effectively function as the nation’s Port Economic Regulator, it requires robust legal backing to support the presidential decree of 2015. Without this, the Council’s ability to execute its mandate and safeguard the interests of Nigeria’s maritime sector remains in jeopardy.
Speaking recently at the Council headquarters when the Nigerian Maritime Law Association (NMLA) paid the Council a courtesy visit, the Executive Secretary of the NSC, Mr Pius Akutah, affirmed that the Act setting up the Council is obsolete.
According to Akutah, “Today, we have the Ministry of Marine and Blue Economy, which is dedicated to the maritime sector. This is, in effect, the first step that has been taken by Mr. President in recent time to diversify the economy of Nigeria from the oil dependency to the non-oil sectors of the economy, as you are aware.
“With this kind of approach, it is important for us to collaborate with very critical stakeholders like yours to be able to move not only the ministry forward, but also to promote the development of the maritime sector and the blue economy in Nigeria.
“I know that the Nigerian Shippers Council, which you know has a mandate to take care of the interests of shippers over the years, is operating under a 1978 law which set it up.
“You will agree with me that by 2024, we should all know that the law is obsolete and it’s not going to adequately provide for what the sector stands for at the moment. So there is a need for us to look into that law and see what we can do to change the law and empower the agency to do more of what is required of it in this 21st century.
“Now, the Nigerian Shippers Council has a bill before the National Assembly seeking to transmute into a regulatory agency by law. You are also aware that the agency at the moment is empowered by a presidential directive and a regulation for it to assume the duties of the Port Economic Regulator, which the agency has been carrying out.”
“But the nitty gritty of what the Port Economic Regulator would do is not provided in that presidential order and the guidelines. So there is a need for us to have a legislation.
“We have that legislation. It’s ongoing for some time now. Luckily for us, the National Assembly, the House of Reps has passed it. It’s before the Senate now.
“So many areas of collaboration with the Nigerian Maritime Law Association will be very necessary and needed as soon as that law is passed into law and assented to by Mr. President.”
Also speaking when the House of Representatives Committee on Shipping Services paid a working visit to the Council, Akutah asked the lawmakers to assist the agency in getting approval for the 1 per cent freight stabilisation fee, which is statutorily embedded in the Act setting up the agency.
“There is a directive from Mr. President and the Federal Executive Council (FEC) to implement the Oronsaye Report, and as this concerns the Nigerian Shippers Council, the report says we should be self-funded.
“Therefore, there is a need for us to implement our statutory funding, which is the 1 per cent freight stabilisation fee. I think this is very pivotal at this moment that the Oronsaye Report is being implemented.
“Once the Oronsaye Report is implemented, the 7 per cent Port Development Levy, which the Shippers Council gets 2 per cent from, may no longer be available. So, I think we need to work very hard to ensure that the Nigerian Shippers Council funding position is secured.”
Impact of insufficient funding
The Nigerian Shippers’ Council (NSC) plays a vital role in mediating economic disputes between terminal operators and shipping companies on one side, and shippers and importers on the other. Common issues such as container deposits, shipping and terminal charges, and extortion frequently arise at the ports, with the NSC often receiving complaints from shippers and importers, calling for its intervention.
However, without adequate funding, the NSC’s ability to effectively mediate in port-related disputes will be severely compromised.
The agency will lack the resources necessary to enforce sanctions against operators who blatantly ignore directives.
A prime example of this challenge is the case between CMA CGM, a French shipping company and ASPA POP Investment Limited, a Lagos-based importer. In this case, N23.7 million worth of imported bags of POP were damaged due to an unapproved barge operation. When the compensation demanded by ASPA POP differed from what CMA CGM was willing to pay, the importer sought the NSC’s intervention. The Council successfully mediated the dispute, directing CMA CGM to pay ASPA POP $5,316, instead of the $2,500 the shipping company had initially offered.
This case, like many others, highlights the critical need for a well-funded and legally empowered economic regulator in Nigeria’s maritime sector.
The NSC must be adequately resourced to enforce its directives during dispute resolution and mediation, ensuring that the interests of shippers, importers, and other stakeholders are effectively protected. Without the necessary funding and legal support, the NSC will struggle to fulfill this essential role.
The Nigerian Shipping, Port Economic Regulatory Agency Bill 2023 provides the Nigerian Shippers’ Council (NSC) with the essential legislative backing to operate decisively and without opposition as the nation’s Port Economic Regulator. Additionally, the bill ensures that the Council receives the necessary funding to effectively carry out its responsibilities, fostering a well-regulated and efficient port environment.