• Mon. May 20th, 2024

Sam Epia: The struggles of Nig shipping lines with cargo reservation scheme

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  • Sam Epia: The struggles of Nig shipping lines with cargo reservation scheme

Mr Sam Epia is the chief executive of Cloverleaf Shipping Nigeria Ltd, an indigenous shipping company formed in the 1990s. It specialized in the export of agricultural produce, especially palm kernel cake. Before his time in Cloverleaf, Mr Epia had worked at Brawal Shipping as the deputy managing director solely responsible for the daily running of its shipping activities. A highly practiced shipping guru, Sam, as he is fondly called by friends, has also served in very critical federal government committees when the seaports needed help. For instance, during the last seaport congestion a few years ago, Sam was in the committee that emplaced certain rules of the game that eased the situation at the time. But for Cloverleaf’s business, the issue of the suspended cargo allocation was evocative of varied emotions, good and bad. In its heyday, the company was chartering 120 ships a year, 45 of this operated at Port Harcourt alone. While the company enjoyed the boost of the cargo allocation scheme, it also suffered the disadvantages of its abuses and its eventual suspension. Today, the profile of its operation is very much smaller. These are some of the issues raised and discussed in this exclusive interview to mark the formation of the Nigerian Shipping Roundtable as a new association to pursue the burning issues at the heart of indigenous shipping activities today. Herein as well, we can begin to understand the handicaps that spelt failure for many Nigerian carriers in the hotly competitive international marketplace of shipping. Excerpts:

DDH: How do you account for the place of the suspended cargo allocation regime in the growth and sustenance of Nigerian indigenous shipping while it lasted?

Sam: Of course, it helped a lot of the shipping companies to be involved in chartering. If that would have continued till this time, a lot of these companies would have developed to the point of owning their own vessels. I mean real standard vessels that would have been able to go to Europe without any form of arrest or detention. But because of the abuses at that time, it was not well managed and that brought about the cry again of Nigerians that everybody should source for their own cargo, that there should be no allocation.

DDH: These abuses, can you describe some of them?

Sam: I can simply put it using our own experience. A cargo that belonged to us, a market that we have developed, is allocated to somebody who has no idea of where the cargo is, where the cargo is going to, no form of involvement, just a piece of paper allocated to the fellow, and the fellow is coming to you that I have this cargo allocated to me, buy it off me. This, of course, is an abuse. Where you have to pay money for a trade you have developed over the years before you can lift the cargo I think is a very big abuse.

DDH: When he says you should buy, how is the transaction concluded; what kind of figures are we talking about?

Sam: These were no small monies at that time because some of them were looking at the freight component involved. They calculate from the freight, whatever the freight is. Maybe the freight is about $200,000 and they are asking you for about 5%, as much as 5%. Some two and half percent. Of course, negotiation puts it down a bit but imagine if you have a freight of $200,000 and you are being asked to pay 1% of it. Now, you as the Nigerian company that has developed that trade are perhaps not making that kind of money yourself. The thing is that it created room for a lot of middlemen. And this thing should be eliminated. There should be no form of middleman.

DDH: Despite its seeming faults, do you think that the suspension of the scheme hastened the collapse of the shipping lines?

Sam: Total abrogation of cargo protection, let me use the word protection, really really has hastened the death of a lot of Nigerian shipping companies. And it has also slowed the growth of the Nigerian shipping companies that are still in existence. A lot have died, the ones that are surviving, it has slowed down their growth.

DDH: In view of the abuses but seeing you express its need, if it is to be reintroduced, what is your idea of how to avoid the abuses?

Sam: My own idea of how to take care of such abuses is that we should allow the Nigerians to develop their own trade, that is trade routes. And you source for your cargo and when you get it you should be allowed to lift it. The issue of middlemen should not be there. Again, there must be a very serious parameter to determine those that are actual shipping companies, that is to say there must be track record of your performances in the port in the past, even if you are not working now. But in the past there is a record that you have been involved in the lifting of cargo from this country, be it dry cargo, be it wet cargo. Once you have a good track record, such companies should be encouraged. Again, I believe that one of the ways of encouraging companies like this is that apart from giving our the cargo, they should be encouraged to do chartering. And for every Nigerian cargo that wants to leave this country, we ought to have some form of priority, that when you are chartering a vessel to come in to load Nigerian export, there should be priority to berth you on time, load you on time, and a tariff regime that will not be at par with import, for instance. There should be a preferential tariff regime for export to encourage indigenous shippers.

DDH: These issues are so intricate and many. Do you think that associations like the newly-formed Nigerian Shipping Roundtable presents a good opportunity to liaise with government in fashioning out a very good process of midwifingthe rebirth of Nigeria’s shipping sector?

Sam: The Nigerian Shipping Roundtable has just taken off and from the foundation of what I have seen so far, I believe it’s a forum where issues like this can be well addressed because it’s a combination of people with wealth of experience in the industry, people that have seen the good and the bad sides. So, they would be speaking from the position of strength of experience to be able to advise the government on what to do. In this case, I don’t see the Nigerian Shipping Roundtable as a body that is asking government for money but a body that is advising government what should be done to revive the industry. Such bodies should be encouraged.

DDH: If we are not able to revive Nigerian indigenous shipping we definitely face a loss. How do you quantify the loss Nigeria is facing?

Sam: For goodness sake, it’s simple. Look at every trade in this country and take out the F component from it, because our business is CIF. When we are importing into this country, everything is CIF. When we are exporting the crude oil, it is FOB. When we are doing our other exports apart from oil, other things like cocoa, agricultural produce, they are all on FOB or FAS. So that freight, the F component is always missing. Quantify the volume of trade that comes in and out of this country and then you can imagine the volume of freight that we are losing to the foreigners, the people who own ships. In fact, that is creating jobs for even the European that are yet unborn. While we are enslaving generations yet unborn here.

DDH: With many indigenous shipping lines going under, do you feel pained?

Sam: Of course, I feel very sad about it, even with my company, Cloverleaf. Before now, we used to do 35 to 50 vessels annually export. But today, we hardly can do 5 vessels. Is that not sad enough? What do we do? In every aspect, we have to encourage shipping business in this country. Sometime ago, we made a presentation on export of bulk agricultural produce, kernel. Malaysians, for instance, were killing the Nigerian market. Let us not forget that Malaysia came to Nigeria to take palm kernel. Even Nigerians went there to help do the planting. But today they produce more palm kernel than Nigeria. And their volume into the European market of the palm kernel extract, which is used for animal feed, is five times what Nigeria exports into the market. But the thing is that at a time we had an edge because we were able to take small volumes through the hinterland rivers to the factory doorsteps. But for Malaysia, they needed huge volumes to be able to break even. It takes them about 21 days’ steaming from their own port to where the cargo is required while it takes us in Nigeria between 10 to 15 days. So, we had that advantage and besides we do small parcels from here, of between 2,000 tons and 5,000 tons, that can go into the small river where the factories are located, and discharge into them. But for the Malaysians they need to transship, they need to break their big volume of 30,000 tons into small parcels. So that is now involving double-handling and double freight, added costs, which was not making it too viable for them to go. But the government came in when they knew that the problem was from Nigeria. How to break the Nigerian market was, they were able to put consolidation at a point through subvention by the government on freight. The shippers were like, oh, we will not be able to take the freight from Malaysia to the point of transshipment and then to the factory. So there was now a subvention to be able to take care of the huge freight involved for their produce to get into the market. That helped to kill the Nigerian produce into the market.

DDH: So the Nigerian competitor was edged out using that?

Sam: Yes, because what you gain through freight by the shorter run (you are doing 10 and 15 days and they are doing 21 days), which is two times the number of days required from here, so it’s a higher freight there, they have been able to take care of their freight through (government) subvention to enable their shippers go into the market and compete well with Nigeria. While in Nigeria here, there’s not much. The thing is that freight is everyday on the increase from Nigeria to Europe. If we had our own vessels….