Reviving Nigerian Shipping Lines Via Cargo Support
Interview of Mr. P.L Carrodano on the need to revisit cargo support mechanism of the Nigerian Shipping Policy published by Dredge, Drill & Haul Magazine, Lagos Nigeria.
Mr Pier Luigi Carrodano has worked for the Comet Group of companies since the early 1980s when the Nigeria-America Line (NAL) was formed, rising to the position of group managing director for many years now. NAL was a member of the AWAFC conference line that traded the US coast/West Africa range and member of Brazil-Nigeria Freight Conference covering South America/West Africa range in 1980s and 1990s. With the suspension of cargo allocation, much has changed and the downturn in these trades is nearly total but NALComet Group, luckily was able to diversify during the good times and still continues to operate strongly in the maritime sector. In this interview, Mr Carrodano contributed his views to shedding light on the circumstances of the collapsed indigenous shipping industry and how it could be revived.
DDH:: Many Nigerian shipping lines have lately collapsed or stopped operations due to various difficulties. How do you think Government can intervene to aid the indigenous operators to wake up, develop normally and begin to claim Nigerian share of her international shipping market?
Carrodano: Government can intervene to aid the indigenous operators by helping them to capture cargoes for Nigeria. Successful operations call for good utilization of vessels which can only be achieved if enough volume of cargo is captured so that all available spaces on the ship are utilized for the carriage of goods.
In the past the UNCTAD Liner code of conduct was conceived to encourage the development of the shipping industry of developing countries by guaranteeing domestic lines a minimum (40 per cent) share of traffic. The UNCTAD Liner Code is less visible today as more countries have phased out from this code. Also, we have witnessed a large scale registration of ships to open registries, chosen by ship-owners to achieve flexibility in crewing their ships and to reduce costs. Because of this situation it would be more difficult to strictly implement UNCTAD code anymore. I believe this is the reason why many countries shifted from the UNCTAD code towards other form of cargo support regime i.e. cargo reservation policy. There are many examples of cargo reservation policy which allows the government to ship a certain portion of its cargo through their national carriers. For example, in the face of the global meltdown, the Indian National Ship Owners’ Association has just written a letter to Prime Minister Manmohan Singh asking for a certain portion of public sector cargoes to be reserved for Indian flagged vessels. According to chartering guidelines, Indian flag vessels get priority for PSU cargoes provided they can match the rates quoted by foreign vessels.
A big help by the government can be rendered by making timely information accessible to the Nigerian carriers on what cargo is expected to be generated by the various government projects. Knowing the expected volume and the type of cargo which will be available to carry allows for good planning which is essential in Shipping.
DDH:: You have many years’ experience in the Nigerian market working for Nigeria-America Line and Comet Shipping Agencies and have worked before then in other foreign countries. From your experiences so far, how best can cargo support regime to qualified Nigerian shipping lines be re-introduced to avoid the pitfalls of the past?
Carrodano: Cargo support regime to qualified Nigerian shipping lines can be reintroduced through cargo reservation schemes. These require that part of the cargo carried in trade with other countries must be transported only by national carriers or Nigerian carriers, interpreted as national by laid down criteria. These criteria to define Nigerian carriers should encompass NVOCC companies (non-vessel operating-common carriers), provided such companies are owned by Nigerians, with their head offices in Nigeria. I am saying so because at present there are only a few Nigerian companies which would be able to render good and competitive service with their own vessels.
To begin with, Government cargo should be reserved to qualified Nigerian carriers. At the same time, shippers should retain the ability to choose specific carriers from among the recognized Nigerian companies. To ensure this, cargo should not be allocated to just any shipping line as far as it is clear that only recognized companies are allowed to lift it.
Again, Government should be able to control the status of shipments of its goods in order to ensure carriage by one of the authorized national carriers. One way to do so is to issue L/C (letter of credit) calling for “Bill of Lading from Authorized Nigerian Carriers”. The benefit of this system is that compliance to cargo reservation scheme is ensured and Government agencies will be able to monitor the position of their cargoes and to know their expected arrival time in Nigeria.
Thus, no shippers would try to circumvent Nigerian cargo reservation scheme when letter of credit prescribes the use of an authorized Nigerian carrier.
DDH:: When cargo allocation was stopped by the NMA, how did it affect your international operations in terms of chartering of ships and your relations with foreign shipping partners and offices?
Carrodano: Stoppage of cargo allocation affected our company to some extent but luckily we were able to overcome the negative impact because at the time of stoppage our company had already consolidated its operations, also thanks to the cargo allocation regime. Still we had to shift our focus to domestic operations where our Group was able to establish sizeable volumes of business.
Cargo allocation was very useful. It had facilitated us in making contacts with cargo interests so that we could offer our services. We were contacting only shippers and receivers controlling cargo which we knew we could carry to their satisfaction. At no time did we impose it on shippers/receivers but rather we dealt with them strictly on commercial and competitive basis. We have never used cargo allocation to get an undue advantage. I can mention a few examples that while at beginning of our approach some shippers may have been hesitant to deal with us, they became willing customers once they experienced our services. In a particular case, a shipper booking very large amounts of cargoes with a foreign carrier on exclusivity basis, when contacted by us, kept an almost hostile attitude. He later became one of our strongest allies after the first lifting of their cargo; to the extent that any subsequent parcels were booked with us.
There was another case when a large European forwarding company which was in contact with us for booking cargo to Nigeria, decided to ignore us when they came to know of the suspension of cargo allocation. They thought, wrongly, that our business would halt. We can therefore say that cargo allocation, if properly applied, for instance, in the form of government cargo reservation, will help the local shipping industry very much so that it will be possible for some serious Nigerian companies to resuscitate their business to the benefit of the national economy.
DDH:: What is the imperative now for Nigeria in the shipping sector in view of the global financial hardship?
Carrodano: The international financial crisis has already started to seriously affect the world economy. World leaders advocate free trade and want to be perceived showing antagonism to protectionism but at the same time they promote very big stimulus packages tied to the utilization of their own national resources in terms of manpower and infrastructures, which is in essence protectionism. If those advanced countries which include superpowers feel the need to protect their own economies, I believe emerging countries like Nigeria, the giant of Africa, should align with this trend. Helping Nigerian shipping industry would be a good step in this direction.