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Published On: Mon, Jan 11th, 2016

Revenue: Maritime agencies groan under ‘target pressure’

FUNSO OLOJO|                   There is palpable anxiety within the ranks of operators of agencies in the maritime sector that are facing unprecedented pressure to deliver even more and more revenues to the federation account.

This is coming on the heels of the shock-inducing fall in oil prices in the international market which has placed financial constraints on the Federal Government to look elsewhere to shore up its depleting revenue base.

Nigeria has been operating a mono- product economy, relying heavily on oil earnings from where it gets over 90 per cent of its revenue to fund the budgets.

But the upheaval witnessed in the oil market in 2015 has changed the financial calculations of government.

The N6 trillion budget estimates made by the present administration of Mohammed Buhari is benchmarked on a price of $38 per barrel for the nation’s crude oil sales. But even before the budget could be passed by the National Assembly, the price had dipped below the mark.

The International Monetary Funds (IMF) has predicted a further slide in the prices of oil this year.

The international financial institution has predicted a further fall in oil prices to as low as $20 per barrel and with the lifting of sanction on Iranian oil exports as well as the commencement of oil exports by the United States of America (USA), the glut in the oil supply market may further plummet the price to as low as $5 to $15 this year.

To survive the excruciating financial paucity this development will bring, the government has now shifted its attention to the maritime industry where it hopes to get earnings to augment its dwindling revenue.

Prior to this downturn in the economic fortunes of the country, successive governments have ignored the vast opportunities in the sector, despite the repeated assertions by experts and stakeholders in the industry that the maritime sector has the potentials far more than the oil industry.

But due to the huge petro-dollars which successive governments were freely harvesting from the oil and gas, the maritime industry was subjected to several years of neglect which make it to under- performed and under-utilised its capacity.

Experts and operators in the industry are unanimous that the sector can generate between N7trillion to N8trillion per annum, more than enough to finance the country’s budget, if well harnessed.

However, the harsh economic realities have now forced the government to shift its attention to the maritime sector.

Investigations revealed that the Buhari Administration, in its desperate bid to shore up government revenues to fund the budget, is putting unbearable pressure on the industry.

The most hit in the funds search are Nigerian Ports Authority(NPA), Nigerian Maritime Administration and Safety Agency(NIMASA) and the Nigeria Customs Service which are regarded as ‘cash cow’ agencies.

It was reliably gathered that government is expecting a whooping sum of N700billion from both the NPA and NIMASA this year while it is expecting over 900billion from the Nigeria Customs Service.

To achieve this, tremendous pressure is currently on the management of the NPA and NIMASA who have since late last year, after the appointment of Rotimi Amaechi, the Minister of Transportation, engaged in marathon meetings with the Minister in his office.

On the other hand, the Comptroller- General of Customs, Col. Hameed Ali (retd.) has consistently placed his officers on their toes and admonished them on the need to plug revenue leakages in order to boost their revenue target which he said they must meet, if not surpass.

To further tighten the noose on the agencies, it was learnt that the NPA was given an expenditure cap of N2 billion per annum, outside its staff salary.

A similar expenditure cap, the amount of which was not disclosed, was placed on NIMASA.

The siege on the agencies was even made worse by the Treasury Single Account (TSA) policy of the present government which has effectively turned the agencies into beggars, having collected the money and remitted all the amount to the government, will have to go back and ask to be given what to spend.

Stakeholders have however expressed worry that the desperate search of funds by government in the sector, if not moderated and in proportionate to the developmental programmes in the industry, may hurt the sector.

Captain Niyi Labinjo, the President of Nigerian Shipowners Association(NISA), warned that if government does not plough back part of the money generated from the sector, its desperate search for funds will hurt the industry.

”It is good that government now know the worth of the maritime industry after many years of neglect and utter disregard of expert opinions on the vast potentials in the sector. But it will be counter- productive if all what the government is interested in is the funds from the industry and not its development.

” If that is the case, it will hurt the sector. Government should therefore plough back part of the funds generated to develop the infrastructures and build capacity of the industry”, the master mariner observed.

Other operators alleged that government sudden interest in the maritime industry was not to develop the sector but use it in its ”fund-raising” exercise.

”Despite our consistent appeals that government should focus more attention on maritime due to its vast potentials which are more than oil, they have ignored our calls. Now that oil is not selling in the global market, they now realized they should shift attention on the sector. I hope the industry will not be turned into the proverbial hen that lays the golden egg but which was being starved”, another ship owner declared.

However, there is now a palpable fear among the industry operators that the pressure currently placed on both the NPA and NIMASA to produce that larger chuck of the revenue expected from the sector this year may hamper their operational performance.

Both agencies are service-based organs which statutory duties include the development of the maritime industry.

Unlike some other government agencies which wait on government allocations to carry out their functions, both the NPA and NIMASA, just like few other agencies, are self-sustaining which remit revenue surplus to the federation account, after they must have carried out their statutory functions.

NIMASA statutory areas of focus include effective Maritime Safety Administration, Maritime Labour Regulation, Marine Pollution Prevention and Control, Search and Rescue, Cabotage enforcement, Shipping Development and Ship Registration, Training and Certification of Seafarers, and Maritime Capacity Development.

All these functions are capital intensive if they were to be effectively implemented.

After meeting some of these obligations, the agency remits the surplus revenue it generates to the federation account.

In 2013, the agency claimed it remitted the sum of N9.7billion into the federation account.

To underline the capital intenseness of most of its functions, the erstwhile Director- General of NIMASA, Patrick Akpobolokemi, who is currently facing allegations of fraud at the Federal High Court, had once called for an exception of NIMASA from remittance into federation account for five years.

His argument then was the capital intenseness of some of the infrastructural development programmes which the agency embarked upon in 2013 which included the construction of Maritime University and the Shipyard.

The NPA is in a similar position. Even though its cope of functions has been limited by the port concession programme of 2006 when the port concessionaires have taken over most of its statutory function, but the agency is till statutorily required to carry our capital and maintenance dredging of the port channels, lightings the ports, roads constructions and maintenance, pilotage services ,wreck removal.

The agency is to be the commercial arm of the government which has to operate almost like any other business and make profit before remitting its operating surplus to the government, being the owner. This is net of all cost of undertaking operations (including development /maintenance of facilities /purchase of equipment) administrative expenses.

In pursuance of the above, the authority was given financial autonomy under section 13-14 of the Ports Act to apply its revenue towards carrying out the operations, development of ports, purchasing of equipment before remitting the surplus to government.

Section 14 (1) of the Ports Act allows the agency to maintain a general reserve fund into which it set aside appropriate amounts for replacement, contingencies and other purposes .The monies are to be applied for purposes of the Authority with the approval of the Minister as provided under section 14(2). However, with the coming into force of the constitution of the Federal Republic of Nigeria, the appropriations in respect of the Authority are approved by the National Assembly by virtue of section 81 of the constitution.

Section 15 allows the Authority to apply its surplus revenues for its own purposes as it may determine. With the coming into effect of the 1999 constitution, the surplus revenues of the Authority were made subject to the consolidated revenue fund established under section 81(1) of the constitution. This supersedes section 15 of the ports Act in order to bring it in line with the constitution.

It should be noted that what is remitted is the revenue surpluses after meeting all operational, maintenance, development and administrative cost as appropriated by the National Assembly under section 81 of the constitution in each year .

The Authority therefore deals with the revenues only as appropriated.

It should be pointed out here that Section 162(10) specifically stated that revenues to be remitted must be as authorized by law.

The Authority prepares annual reports not later than six month after the end of each year and submit to the Minister in accordance with section 21(1) and (2) of ports Act .It is only then that revenue surpluses are determined for remittance under the Fiscal responsibility Act when all cost as appropriated for it by the National Assembly must have been settled.

Because of the peculiarity of the industry, the requirement to pay all revenues directly to the Federation Account is not practicable as at the point of collection from third parties, the monies are not yet revenues of the Authority until the service and all associated costs are covered.

As a global tradition the Port industry must conform to outlined safety and operating standards, hence the need to ensure that all operating expenses are undertaken before surpluses are determined and remitted to the consolidated revenue fund cannot be overemphasized.

The retention of revenue as provided for by the law has enabled the Authority to successfully execute its mandate as enunciated in the Federal Government port reform.

However, all this statutory requirements and provisions have been eroded by the TSA policy.

In 2014, the traffic/cargo –based revenue of the agency stood at 40.8billion, climbed to N55.5billion in 2015 and expected to increase further in 2016.

According to the financial analysis of the agency, NPA remitted the sum of N5.2billion in 2009, N3.5billion in 2010, N1billion in 2011, N17.8 billion in 2012, while it contributed to the Federation account the sum of N3.2billion in 2013.

From the analysis of revenue remittances made by both NIMASA and NPA in the years past, these remittance made over a period of four years by the two agencies did not come close to the N700billion expected of them this year by the Federal government.

Analysts feared that if the agencies should meet the target even with the revenue leakages plugged, the services being statutorily rendered by these two organs of government in the maritime sector will be severely hampered.

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