By Olasupo Jubril Adedimeji [i]
The vision 2020 had started in nightmarish biblical proportions- droughts, fires, floods, and a pandemic virus that has gripped the planet. The response by governments, companies, and communities over the COVID-19 pandemic has suddenly impacted our way of life. [ii] The impact of COVID-19 on international shipping has been harsh and it is not likely to go away in the next two years, just as the dreaded pandemic won’t.[iii] Covid-19 is having a historic effect on maritime trade as demand for the transportation of goods falls, ships and their crew remain at sea, ports being closed and vessels being delayed in quarantine.[iv]
These effects of the pandemic are negatively rocking the global economy and maritime trade is particularly affected due to the interconnectivity of ports, people, and cargo. [v] Therefore, this paper will painstakingly examine some of the impacts of the COVID-19 pandemic on shipping and port operations in Nigeria. Also, it will stretch the eye into the outcome of the covid-19 pandemic in the sector. Also, it proffers realistic solutions/ measures that can be implemented to mitigate or address the negative outcome of the covid-19 pandemic on the sector.
EFFECT OF COVID-19 IN THE NIGERIAN SHIPPING SECTOR:
Shipping is the lifeblood of the global economy and without it, intercontinental trade, the bulk transport of raw materials, and the import/export of affordable food and manufactured goods would simply not be possible but, since coronavirus has started, it has disrupted shipping which has affected global trade. [vi]The existence of the COVID-19 pandemic has done more harm to the Nigerian shipping sector, most especially financially. Financial analysts have predicted that there would be a corresponding drop in government revenue as federal agencies such as the Nigerian Maritime Administration and Safety Agency (NIMASA), Nigerian Ports Authority (NPA), Standards Organization of Nigeria (SON), the Nigerian Agency for Food Drug Administration and Control (NAFDAC), Nigerian Agriculture Quarantine Services (NAQS) among others that generate revenue from authorizing the release of cargoes, would also lose revenue significantly. [vii]
Indeed, the pandemic is estimated to be costing the shipping industry $350million weekly in lost revenues, according to the International Chamber of Shipping (ICS). [viii] ICS estimates that over 350,000 boxes have been removed from global trade as a result of the pandemic. [ix] Experts in the Nigerian maritime sector forecast that Nigeria would be losing about N1 billion daily to the outbreak of Covid-19 (coronavirus) as the level of imports arriving Nigerian ports is gradually dropping while port calls to China are becoming less frequent. [x]
Commercial vessels have stopped calling, with port calls falling by an estimated 30 percent in February and container throughput estimated to decline by between 20 and 30 percent, according to Clarksons, a shipping research company. [xi] Seven of the world’s 10 largest container ports are in China, including Hong Kong. [xii] Many of the world’s largest container shipping lines, including the Mediterranean Shipping Company (MSC), AP Moller Maersk, CMA-CG, and Hong Kong’s own OOCL, have all cancelled their cargo routes from Asia to Europe and North America in recent weeks.[xiii] To a great extent, this has affected the Nigerian ports system, with fewer vessels coming into the port from the Asian country, Most especially china, which more than 50 percent of Nigeria’s machinery, raw materials, and finished products come from. [xiv] Expectedly, many Nigerian importers are now afraid to take cargoes from China, even millions who usually travel during this period had cancelled their trips.[xv]
However, after holding talks between the truckers and the Nigerian Shipper’s Council (NSC), operators currently evacuating cargoes from the ports via barges and truckers agreed to reduce their charges by 30%.[xvi] Similarly, the council has directed shipping companies to suspend the collection of demurrage charges and to refund charges collected from March 30, 2020, when the lockdown in Lagos State began. [xvii] This, as stated by the NSC, is to ameliorate the fiscal burden on port users, and It was an incentive for owners of cargo to accelerate the process of taking delivery of their cargo. Erring shippers – those who abandon cargo at the ports — may be sanctioned. [xviii]
AFTERMATH OF COVID-19 IN THE SHIPPING SECTOR:
Chairman of the Ports Consultative Council, PCC, Otunba Kunle Folarin noted that the aftermath of covid-19 in the sector will be a re-configuration of vessels. [xix] In other words, there will be an attempt to reduce the human component onboard vessels; there will be a need to create a social distancing space in constructing the cabins of crewmen, unlike before when they were cramped together onboard vessels. [xx] There will be bigger vessels to reduce cost; this will come up, and of course, what has happened in the past where every sailing ship had a medical doctor onboard will be re-introduced. [xxi] Dr.Alban Igwe said some companies will have to lay off their staff because they would not continue; prices will go up because prices now will include some risk elements; insurance will go up and people have to factor in several contingencies. [xxii] There are going to be a lot of safety regulations by different regimes as shipping lines are also going to shoot up prices to recover from the situation. In other words, the shipping sector can never remain the same. [xxiii]
Also, Jonathan Nicol, president of Shippers’ Association of Lagos State stated that the outbreak of the virus will not only affect the number of ship calls into Nigerian ports but also the volume of import goods coming into the country. [xxiv] Certainly, it will affect the volume of cargo after a few months from now. A lot of cargo had been exited before the outbreak of the virus in China, Europe, America, and other Asian countries. [xxv] Further, he said Nigeria will start to notice the lull especially regarding goods from China as from the second quarter of the year because some of the cargoes from Far East Asia may be trapped due to closure of Ports of Origin or even transshipment Ports due to the dreaded virus. [xxvi] There would be less cargo, less volume, and less revenue for the government. [xxvii] It might even affect exports due to restrictions at the receiving destinations in India, Europe, China, and some other ports.[xxviii]
There are indications that the Nigerian port industry would in the second quarter of the year, suffer a decline in ship traffic as well as a drop in the volume of imports coming into the country and exports originating from Nigeria to other countries, analysts have predicted. [xxix] According to them, this would be largely due to the aftermath of the Coronavirus outbreak in China, the United States of America, and India (Nigeria’s major import trading partners with 31.34 percent, 11.35 percent, and 7.49 percent of the country’s total imports coming from these countries, according to the National Bureau of Statistics (NBS) third-quarter report).[xxx] Given the decline in the volume of import and export cargoes, analysts also predicted that there would be a corresponding drop in government revenue as Federal Government agencies such as Nigeria Customs Service (NCS) and other agencies that generate revenue from authorizing these cargoes, would also lose out significantly. [xxxi]
1). Introducing a national shipping carrier to help provide employment opportunities to the country and enhance government revenue. In making this a reality, there needs to be seriousness on the part of the government to support the survival of the fast collapsing shipping industry.
2). Nigeria’s maritime industry is dominated by foreign shipping lines as 90% of its vessels are currently operating in the country which led to many local companies shutting down their operations. [xxxii] The introduction of the Cabotage Law in 2003 was supposed to reverse this trend by restricting the use of foreign vessels in the domestic coastal trade, but some said it has been poorly enforced. [xxxiii] It is pertinent to state that, as part of the ways the shipping sector can be balanced again, local companies must come back into operation and shun foreign companies from overtaking the shipping sector.
3) The rapid acceleration of digitalization and innovation has also proved to be a way forward in enhancing the productivity of the shipping sector. [xxxiv] Remote working has triggered a rapid spur in the adoption of technology. [xxxv] Many social distancing strategies have been deployed, hence the explosion of innovation around virtual meetings, video conferencing, digital learning, telemedicine, and knowledge sharing. [xxxvi]
Also, the fear of contagion is leading many people to abandon cash payments, thus embracing digital payments via digital channels. [xxxvii] This acceleration of digitalization and emerging technologies will generate efficiency gains, thus dominating the working world during the Post COVID-19 era and further drive remote working technologies, such as augmented reality (AR) and virtual reality (play systems. [xxxviii]
Thus, the Shippers’ Council should turn the current Covid-19 pandemic into an opportunity by constituting a committee to look into the digital transaction in shipping, which can come into place by collaborating, sharing knowledge, and discovering the very latest trends and innovations in the world.
Indeed, collaboration is one of the keys to the success of a sector, it is part of the critical action plans required to ensure organizational survival for the new normal. [xxxix] Active collaboration through the convening of regular meetings with relevant stakeholders and shippers representatives for pooling ideas are very crucial, and as such, will create a way for the advancement of the Nigerian shipping industry.
Given the degree of effects of Covid-19 in the Nigerian shipping sector, the sector will never remain the same for the damages caused to the sector is far greater than the benefits. However, the sector can still balance rather than collapsing completely by standing up to change, adjustment, and progress of the Nigerian shipping sector despite the great damages caused by the COVID-19 pandemic. This paper has been able to examine the rationale behind the setback of the sector which has provided opportunities and development to nations of the world for a sustainable future. For this to be met, this paper has further given realistic solutions to get the progress of the sector back on track.
[i] A 200 level student, faculty of law, Lagos State University, Ojo. He can be reached on 07012013950 and email@example.com.
[ii] Festus Okotie, ‘Nigeria’s Transportation Sector: Adaptation To COVID-19 and Way Forward’. https://businessday.ng/columnist/article/nigerias-transportation-sector-adaptation-to-COVID-19-and-way-forward/amp/ , accessed July 8,2020.
[iii] Aniebo Nwamu, ‘The maritime economy after Covid-19’, https://www.thecable.ng/the-maritime-economy-after-covid-19 ,accessed July 8,2020.
[iv] Akabogu law, ‘Covid-19:Should maritime trade be halted’, < https://akabogulaw.com/covid19-should-maritime-trade-be-halted/> , accessed July 8,2020.
[vi] Leadership, ‘International shipping news’, https://www.hellenicshippingnews.com/covid-19-threatens-global-trade-hits-shipping-industry-hard/ , accessed July 8,2020.
[vii] Festos okotie, ‘post covid-19 strategy, Nigeria’s economy and the transport sector’, https://businessday.ng/columnist/article/post-covid-19-strategy-nigerias-economy-and-the-transport-sector/ , accessed July 8,2020
[viii] Femi Adekoya, Adeyemi Adepetu, and Benjamin Alade, ‘Economic impact of covid-19 hits Nigeria’s trade, supply chain’, https://m.guardian.ng/news/economic-impact-of-covid-19-hits-nigerias-trade-supply-chain/ , accessed July 8,2020.
[x] Leadership, ‘International shipping news’, https://www.hellenicshippingnews.com/covid-19-threatens-global-trade-hits-shipping-industry-hard/ , accessed July 8,2020.
[xi] Femi Adekoya, Adeyemi Adepetu, and Benjamin Alade, ‘Economic impact of covid-19 hits Nigeria’s trade, supply chain’, https://m.guardian.ng/news/economic-impact-of-covid-19-hits-nigerias-trade-supply-chain/ , accessed July 8,2020.
[xiv] Amaka Anagor,’Coronavirus:Nigerian ports to suffer decline in ship traffic, cargo volume in Q2′, < https://businessday.ng/business-economy/article/coronavirus-nigerian-ports-to-suffer-decline-in-ship-traffic-cargo-volume-in-q2/> , accessed July 8,2020.
[xv] Leadership Nigeria, ‘Nigeria: Coronavirus Threatens N2trn Revenue Target From Maritime Sector’ , < https://www.hellenicshippingnews.com/nigeria-coronavirus-threatens-n2trn-revenue-target-from-maritime-sector/> , accessed July 8, 2020.
[xvi] Aniebo Nwamu, ‘The maritime economy after Covid-19’, https://www.thecable.ng/the-maritime-economy-after-covid-19 ,accessed July 8,2020.
[xix] Godwin Oritse, ‘Maritime Industy’ll never be the same after covid-19-stakeholders’, < https://www.vanguardngr.com/2020/04/maritime-industryll-never-be-the-same-after-covid-19-stakeholders/> , accessed July 8,2020.
[xxix] Amaka Anagor, ‘ Coronavirus:Nigerian ports to suffer decline in ship traffic, cargo volume in Q2′, < https://businessday.ng/business-economy/article/coronavirus-nigerian-ports-to-suffer-decline-in-ship-traffic-cargo-volume-in-q2/> , accessed July 8,2020.
[xxxii] Ship technology, ‘Building up Nigeria’s shipping sector’, < https://www.ship-technology.com/features/building-nigerias-shipping-sector/> , accessed July 8,2020.
[xxxiv] Chike Oliseh, ‘New report reveals how companies are adjusting to covid-19 pandemic’, < https://nairametrics.com/2020/04/21/philip-consulting-report-reveals-how-companies-are-adjusting-to-covid-19-pandemic/> ,accessed July 8,2020.
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