THE IMPACT OF THE CABOTAGE ACT ON LOCAL CAPACITY DEVELOPMENT: A STUDY OF SELECTED INDIGENOUS SHIPPING COMPANIES

1.1 Introduction

According to Garner (2004), the term cabotage connotes coastal trading (Garner, 2004). It is the transport of goods or passengers between two points/ports within a country’s waterways (Uche, 2012). Originally cabotage was concerned with shipping along coastal routes, from one port to another of a country’s territorial waters (LFN, 2004), but now its application has been broadened to include aviation, railways, and road transport as well. Historically therefore, nations have used the concept of cabotage as a tool for protecting their domestic trade and commerce from undue foreign competition. Cabotage, often referred to as coastal trading, is usually regulated by the national law of the host nation (LFN, 2004).

As a prelude to other parts of this study, this chapter will discuss the background upon which this study was initiated, the statement of problems that led to this study, the Aim and Objectives of the study. Others are Significance of the study, Scope of work, Limitations of the Study and Definition of technical terms.

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1.2 Background of Study

The place of effective Carbotage Law in the seemingly porous and loose marine transport system in Nigeria cannot be pushed to the dark. Globally, shipping plays an important part in the economic life of nations. This is because it provides an inexpensive way of carrying people and goods from one place to the other, compared with other modes of transport. It may be between one country and another or even within a particular country, moving from one coast to the other. The demand for shipping is an indirect one as it is not demanded as an end in itself, but only as a means to an end. In other words, it is a derived demand, since it does not create its own demand, but its demand is derived from trade in goods (Walter, 2010).

Generally, shipping activities have been going on for a very long time. The first known sea trade network was developed about 5,000 years ago between Mesopotamia, Bahrain and the Indus River in Western India (Stopford, 2009). In modern times, shipping has assumed an important position in the carriage of goods and passengers across the globe. It constitutes an important component in world trade, carrying about 90% by volume of cargoes generated globally.

The modern international maritime transport system falls into three zones: interregional transport, which covers deep-sea shipping; short-sea shipping, which transports cargoes of short distances and often distributes cargoes brought in by deep-sea services; and inland transport (Stopford, 2009).

Deep-sea shipping is the only economic transport between the continental landmasses for high-volume inter-regional cargoes. On the other hand, short-sea shipping provides transport within regions. It involves distribution of cargo delivered to regional centres by deep-sea vessels. However, short-sea shipping is subject to many political restrictions, one of which is cabotage, the practice of enacting laws. which reserve coastal trade to ships of the national fleet of a particular country (Stopford, 2009).

Ocean shipping is one of those three vital economic areas whose indigenous control or lack of it may make or mar the fortunes of a country’s socio-political independence. Of the other two - banking and insurance - significant progress at such control has been made in Nigeria. In the case of ocean shipping, Nigeria is still to have effective control in this area covering the supply and pricing of the services to the country.

Generally, over the years, various countries have sought to protect their citizens by restricting participation in key sectors of the economy to the citizens, usually through restrictive/protectionist policies and although shipping is international, the maritime industries of some nations have not been immune from such policies. An instance of this is the restriction of participation in the coastal carriage of cargo of a maritime nation to the exclusive preserve of its citizens, otherwise known as cabotage (Agidee, 2003).

Maritime transport is very central to the Nigerian economy. This centrality is underscored by the very nature and structure of Nigeria’s international trade. Nigeria’s economy can be said to depend largely on the efficiency of international trade and commerce. Consequently, the development of maritime transport capacity becomes important for the utilization of human resources found in the length and breadth of the country (NIMASA, 2009).

Realizing this importance, successive governments in Nigeria since independence have made considerable efforts through various policy strategies and administrative measures to encourage indigenous shipping capacity development, even in the face of threats from developed countries that have always monopolized the trade. The climax of all these efforts was the promulgation of the National Shipping Policy Decree 10 of 1987 by the Federal Military Government. Thus, the National Maritime Authority was established to coordinate the implementation of the shipping policy.

This move was necessitated by the desire to fully promote and develop the nation’s maritime resources, protect and encourage the utilization of local technologies and personnel as well as generate accruable revenue for national development. Furthermore, in order to ensure the development of domestic shipping in Nigeria, through the empowerment of Nigerians to be able to handle all aspects of coastal and inland waterways transport, the Coastal and Inland Shipping (Cabotage) Act was enacted in May 2003.

Therefore, in Nigeria where the research was carried out, the activities that was conducted is to know the Impact of the Cabotage Act on Local Capacity Development of a Nation.

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1.3 Statement of Problems

Now twelve years after the promulgation of the Cabotage Act, indigenous shipping development seems not to have improved, rather, it seems to be worsening. Fleet expansion has not been achieved; instead there has been a considerable depletion of the national fleet. More also is the envisaged idea that the Cabotage Act would promote the use of local personnel and therefore is a strategy to create job opportunities for the teaming unemployed Nigerians, this however is yet to be seen as the rate of unemployment has skyrocket in the time view. It is in the light of this that the researcher wishes to examine the Impact of the Cabotage Act on Local Capacity Development of a Nation in the Maritime Industry with a special reference to Onne Seaport and to identify what has been responsible for the unimpressive performance of the local shipping lines in Nigeria’s shipping trade, especially coastal shipping.

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1.4 Aim and Objectives of Study

The main aim of this study is to examine the Impact of the Cabotage Act on Local Capacity Development of a Nation. In achieving this aim, the following specific objectives were laid out as follows:

1. To examine the Carbotage Law and its effect on Local Capacity Development in the Maritime Industry.
2. To find out the effect of government protectionist policy on the growth of the maritime industry.
3. To determine the impact of government restriction on the efficiency of coaster shipping in Nigeria.
4. To investigate the effect of Carbotage Law on job creation in Tin-Can Island Port.
5. To provide plausible recommendations for effective implementation and improvement of the Carbotage Law.

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1.5 Research Questions

The study came up with research questions so as to be able to ascertain the above stated objectives. The specific research questions for the study are stated below as follows:

• Does Carbotage Law have effect on Human Resource Utilization in the Maritime Industry?
• Is there any significant relationship between protectionist policy and growth of the maritime industry?
• What are the effects of government restriction on efficiency of coaster shipping in Nigeria?
• Does Carbotage Law have effect on job creation in Tin-Can Island Port.

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1.6 Research Hypothesis

In order to pursue the objective of this study, the following generalized statements have been designed to guide and aids in obtaining the result for the experiment to be conducted. For this work, the null hypothesis will be represented with H0 while the alternative hypothesis will be represented with hypothesis H1.

Hypotheses One

• H0: There is no significant relationship between Carbotage Law and Local Capacity Development in the maritime industry.
• H1: There is a significant relationship between Carbotage Law and Local Capacity Development in the maritime industry.

Hypotheses Two

• H0: Government protectionist policy does not have any effect on growth of the maritime industry.
• H1: Government protectionist policy has an effect on growth of the maritime industry.

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1.7 Significance of Study

Cabotage law is principally a protective law that safeguards local shipping interests in the carriage of locally generated cargo. The law restricts the participation of foreign shipping companies in the carriage of such locally generated cargo.

Now, it is anticipated that the analytical, conceptual and empirical studies will be a furtherance of understanding of salient issues relating to Cabotage law in the Nigerian maritime competitive business environment. The study will also serve as a useful tool for students of the University of Port Harcourt, who would want to carry out further research in this domain. It would also be useful to human resource managers. The study would be significant to policy makers and implementers in the maritime subsector of the Nigerian economy, as they will make use of the findings and recommendations of this study.

This study will be of immense benefit to other researchers who intend to know more on this study and can also be used by non-researchers to build more on their research work. This study contributes to knowledge and could serve as a guide for other study.

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1.8 Scope of Study

The study focuses on the Impact of the Cabotage Act on Local Capacity Development of a Nation in the Maritime Industry using Onne Seaport, Port Harcourt, Rivers State as its study area.

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1.9 Limitations of the Study

During the course of this study, many things militated against its completion, some of which are:

1. Time Constraint: The time frame given to accomplish this project was very short due to school academic calendar and it was carried out under pressure which made the researcher not to implement some necessary features.
2. Establishment Policies: Establishment policies posed a serious limitation as most staffs are not ready to release information needed for this project work. There were lots of information needed from the staffs of this establishment to enhance the study which took them time to release or they did not release at all for security purposes, hence the scope was reduced.
3. Research material: availability of research material is a major setback to the scope of the study.
4. Frequent power failure: This made the researcher append more money on fuel to ensure sustainable power.
5. Financial Constraint: Insufficient fund tends to impede the efficiency of the researcher in sourcing for the relevant materials, literature or information and in the process of data collection (internet, questionnaire and interview).

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1.10 Definition of Terms

The following are the operational definition of terminologies used in the study;

Cabotage law: in the context of this study it refers to protective law that safeguards local shipping interests in the carriage of locally generated cargo. The law restricts the participation of foreign shipping companies in the carriage of such locally generated cargo.

NIMASA: Nigerian Maritime Administration and Safety Agency.

NPA: Nigerian Ports Authority

NNPC: Nigerian National Petroleum Corporation

Protectionism: are legislation put in place by the government to encourage indigenous participation of Nigerians in the maritime business.