CHAPTER ONE INTRODUCTION 1.1 Background Such therefore are the advantages of water carriage; it is natural that the first improvement of art and industry should be made where this convenience opens the whole world for a market to the produce of every sort of labour ... Adam Smith1 The linkage between international shipping and economic performancehas been recognised and settled, even at the global level (Gardiner1992:7).As Adam Smith (1776 (1983: 122) has observed, access to meaningful international trade, and consequent national prosperity, is built on shipping development. Shipping development is at the heart of economic growth, diversifiaction and specialisation. It promotes and facilitates trade. This is self-evident because it is primarily concerned with providing the infrastructure for trade in the global economy, and caters for movement of more than ninety percent (90%) of international trade by weight2. For national economies, shipping, and by implication its development, is important to trade competitiveness because it affects the overall cost profile, taken as freight, in international trade, and thus national well-being3. With its related services, shipping is perceived as a key ingredient, and perhaps the catalyst, for economic development. The primacy of shipping to international trade competitiveness has continued to be a central concern to states, anda great influence onpolicy choices for both rich and poor countries.Using Nigerian example, Filani (2008: 42) has argued that the “importance of the sector (shipping) is attested to by the fact that whether taken as a whole or disaggregated in terms of oil and non-oil traffic, it accounts for over 96 per cent of the physical carriage of Nigeria‟s external trade.” It is 1Adam Smith has forcefully argued that without the benefit of cheap transportation provided by shipping, markets would have remained constrained such that specialization and consequent industrial revolution would have been difficult. For a detailed analysis, see Smith, A. (1776) (1983:.122) 2The proportion of global trade carried by ships has been estimated between eighty to ninety per cent by volume and over seventy per cent by value. Also it is estimated that shipping freight is about six per cent of the value of goods, see Jean-Paul Rodrique et al, (2009: 132); and Gardiner, R and Couper A., (1992) 3See Stopford, M. (1997: 37) and for analysis of trends in world fleet and seaborne trade, see Gardiner R., op. cit 7 to 9 1 therefore not surprising thatboth developed and developing economies like Australia, Indonesia, India and even the United States of America4have continued to seek ways to reform and develop their shipping industry. For most of these countriesthe motive is economic. However, in other countries strategic and security considerations could be of significant influence. Thus from the statist perpective, the goals of shipping development policy are within the general concern and pursuit of major issues of national interests (Krasner, 1978:13). Nigeria with her vast maritime potential, like other emergent maritime states in the West African subregion, has shown this concern with the state of its shipping industry. As a result, the clamour by major stakeholdersfor aggressive pursuit of the goal of shipping development has not abated since independence. From an era of direct state involvement in the ownership and operation of shipping concerns in 1958, it has by 1987 swung to a phase offormal enunciation of a shipping development policy. Almost as a rule, these other West Africa countries, with perceived maritime potential, on attainment of independence moved into liner shipping by floating national shipping lines. By 1957 Ghana had floated the “Black Star Line” as her national shipping line, Nigeria followed in 1959 by launching her shipping company called the Nigerian National Shipping Line (NNSL). These attempts to participate in international shipping recorded little successes. By the 1980s, the shipping industry had started experiencing dramatic changes in technology, design and size putting to test the resilence of the shipping operations and mastery of these developing countries.Due to the inherent cyclicality in shipping market, mismanagement, corruption, incompetence, bureaucratic red-tape and political interference, most of the shipping lines had become distressed and collapsed in the 1990s.Worse still, none of them possessed the financial muscle to embark on aggressive fresh acquisition of modern vessels required for fleet replacement and expansion in response to emerging new technology and market demands. Meanwhile, the various Shipping Conference Lines in the sub regionwere not easily accessed due to theirdiscriminatory practices wilfully used to resist and even exclude the young national lines from participating in the shipping activities of the trades.Not surprisingly, the developing 4See the Economic and Social Commission for Asia and the Pacific report on the Framework for the Development of National Shipping Policies, 1988, ST/ESCAP/1988 2 countries blamed the failure and inability of their national lines to compete entirely on these hostile practices and gang-up of the conference lines controlled by the developed countries. The solution was to press for a more favourable international shipping regime. Convinced that investment in shipping was viable and economically justifiable, these developing countries took the fight for space in international shipping and survival of their shipping lines to the political arena(Iheduru,1996: 23). They united under a common platform of Group of 77 to advocate for a new international maritime order. They mounted pressure for change within the framework of the United Nations specialised agency the United Nations Conference on Trade and Development (UNCTAD), and were ableto secure the adoption of a Convention on Code of Conduct for Liner Conferences in 1974, the so-called UNCTAD Liner Code. The aim of the convention was to strengthen the the ability of developing countries to maintain maritime fleet by providing them with access to the liner conferences. By so doing, it created an inherent carriage right for states involved in bilateral trade, thus providing for cargo sharing principle of 40-40-20. Each party in any bilateral trade was, therefore, entitled to lift at least forty percent of their cargo, leaving the cross-traders with a maximum carriage of twenty percent share. This was to ensure fairness and equal participation for nations involved in seaborne trade(Singh, 1978; Iheduru,1996). It was this provision that offered opportunity for a shift in strategy as well as providing the basis for the emergent maritime nations to enact shipping promotional laws. It marked the commencement of the use of legislation and policy intervention to protect and promote national shipping development by post-colonial states to ensure national participation in shipping. It was not until 1987 that Nigeria enacted the National Shipping Policy Act (NSPA). Apart from the objectives of redressing trade imbalance, promoting export trade and improving balance of payment position, the Act established the National Maritime Authority (NMA), nowabsorbed as part of the Nigeria Maritime Administration and Safety Agency (NIMASA). This government agency was charged with the responsibility to implement the Act, including the protection and promotion of Nigerian shipping companies in international shipping. It also conferred special rights on these Nigerian shipping companies classified and registered by NMA as “national 3 carriers”(NSPA,1987; sec 9). Apart from carriage rights, the Act also aimed at other objectives including the expansion of national fleet and the development of seafarers. Specific programmes were then designed and implemented by the agency to realise the policy objectives.To deal with the policy on a minimum carriage right of Nigeria‟s shipping companies, a Cargo Allocation Programme (CAP) was introduced. Ship Acquisition and Ship Building Fund (SASBF) Scheme was floated to render financial support to Nigerian companies for vessels acquisition and shipbuilding. Similar steps were taken for Seafarers Capacity Building including the acquisition of a training vessel to support the sea-training of cadets at Maritime Academy, Oron, who needed a minimum period of training at sea for full certification. These programmes raised high hopes. Besides promising to support indegenous shipping industry, they assuaged the feeling of lack of maritime fulfilment for a country with so huge a potential. This can be illustrated by the following facts: Nigeria is blessed with an extensive coast line of over 854 kilometres, an extensive network of inland waterways of over 4000 miles and a huge concentration of young virile and vibrant population who inhabit both the coast and hinterland. There is, no doubt, a compelling economic and strategic justification for attention to be paid to the shipping sector, especially to harness the opportunity in international and domestic shipping. However, by 2000 these programmes had all been abandoned, suspended or scrapped. The SASBF scheme was suspended in 1995, with a total outstanding debt of over $92 million, and millions of naira and pounds sterling(Asoluka 2003:232).Although the purpose of the Ship Acquisition and Ship Building Fund (SASBF) was to provide finance for ship acquisition, by the time of it was suspended, the national fleet or tonnage had infact dwindled(Ekwenna,2003: 214). For the cargo control and sharing