SURVIVAL OPPORTUNITIES AND STRATEGIES OF A MARGINAL FIRM IN A CARTELIZED OLIGOPOLY: CASE STUDY OF THE NIGERIAN NATIONAL SHIPPING LINE Dissertation for the. Degree of Ph. D. MICHIGAN STATE UNIVERSITY BASSEY UDO EKONG 1974 LIBRAR Y - W813» I Univenit] .. '5 4" 4/” O. V: "Mania; v.3; .. 2:} mt. sm- putt. um. \ . Chipping 3 3!. ~ , «. I'D inoozyrn .r '1 Shipyh..; x__ 2‘ 3 had 19*»wa » “Gill Li. .5 v! z . ~ ‘ _ u 'm “M?- . I "I I - 5* mm‘fl’S «‘ 4:..\I_'..t‘,.‘>\';‘ ‘ '. )‘K “OI-$9M Liné’l W109 mute: Ly R1, «, , *. I ‘ | ”W in 1:13. W‘” {WA W W'Q‘WO‘ «midway; mfl.w‘ “*5: m w '«m-If-‘xw m, . “mm.” ~."-‘~\_~... A: _ ‘ " ."mm- “was". 3‘ ABSTRACT SURVIVAL OPPORTUNITIES AND STRATEGIES OF A I MARGINAL FIRM IN A CARTELIZED OLIGOPOLY: CASE STUDY OF THE NIGERIAN NATIONAL SHIPPING LINE BY Bassey Udo Ekong This dissertation had the prime purpose of investi- I gating the criteria for public investment of scarce re- ' sources in ocean shipping and specifically dealt with the Nigerian Government's incorporation of and investments in the Nigerian National Shipping Line. Between 1959 and 1972, differences of opinions had tended to exist between the management of the National Line on the one hand and the Nigerian Government on the other, on the necessity for in— creased investment of the nation's resources in this ocean shipping venture. The National Line's management requested increased government investment in the company's fleet and operational expansion without prior conditions. Government, on the other, tended to base further decision to increase such investment on purely economic criteria. And, since 1 II ; g Bassey Udo Ekong 3' W the economic picture of the company was not a sound one, ' the‘views of both sides could not easily be reconciled. J This study was to examine the bases for such further public investments, taking into account both economic and noneco— nomic factors, and to suggest lines of actions as a matter I of national policy objectives. The economic hypotheses tested on the operational results of the Nigerian National Shipping Line involved: 1. The company's effective participation in the market and its profitability as a business venture. ii. The company's service on import substitution and export promotion principles as well as its contribu- tion to the country's balance of payments amounts. iii. The company's function as freight rate stabilizer and a yardstick for measuring the freight rates charged by other shipping companies—-indigenous and foreign. iv. The company's function in offering employment oppor- tunities for indigenous labor and the acquisition of desired technical skills by Nigerians. Tests on those hypotheses for judging the performance of the National Line indicated general failures. The public company had, between 1959 and 1972, minimal participation in the market and sustained annual average losses of 850,000 during that period of its operations. Bassey Udo Ekong The National Shipping Line's operations did not contribute positively to the nation's balance of payments in foreign exchange terms and its role in import substitu- tion and export promotion was doubtful, if not a total failure. As rate stabilizer on the conferences and other shipping lines its role was indirect, due to the patronage ‘ it enjoyed from the Nigerian Marketing Company. It main- tained no separate rates against which other rates could be measured. While it offered some opportunities for Nigerians to acquire maritime skills and for local labor to replace foreign hands, it was relatively a total failure as an employment generator per se. Thus judged purely as an economic venture by which private firms are normally exam- ined, the National Line did not measure up to expectations. At this point it was necessary to question whether on the bases of these economic criteria alone and the pic- ture of the company's total failures, further government investments and patronage should be withdrawn and the com- pany allowed to fold up. Notice was taken of other noneco- nomic reasons by which most, if not all, nations invest in and maidtaija their national shipping lines. Such reasons as national defense, security and national strategic factors 3 Bassey Udo Ekong as well as national prestige--all unquantifiable variables-- were found to be prime reasons for which all maritime na- tions support their national flag shipping lines. Most countries have over the years adopted different forms of supports, preferences, and subsidies to achieve their "na- tional shipping policies and objectives." Such reasons were in this study found to be of sufficient national im- portance to justify the Nigerian Government's increased investment in fleet expansion and operational capacity of the Nigerian National Shipping Line. From multiple regression analysis it was discovered that operating ratios (efficiency indicator) and share of cargo pool allocated to the National Line, more than other factors were seen to have influenced the profitability of the company. To ensure such future viable operations of the company, it was necessary to run a twenty-year program of investments in the company and other related areas--fleet expansion, port development, dry dock and ship repair fa- cilities and a regional nautical school. Based on the ten- tative estimates of the projects, a test analysis of costs and benefits indicated positive effects of such a massive program both for the company and the Nigerian economy. 4 SURVIVAL OPPORTUNITIES AND STRATEGIES OF A MARGINAL FIRM IN A CARTELIZED OLIGOPOLY: CASE STUDY OF THE NIGERIAN NATIONAL SHIPPING LINE BY Bassey Udo Ekong A DISSERTATION Submitted to Michigan State University in partial fulfillment of the requirements for the degree of DOCTOR OF PHILOSOPHY Department of Marketing and Transportation Administration 1974 ‘MM, Mm (,7‘1‘ H mm 1. faith, may». «human.- t“. 1;. 8 - Vary are» 0.0“ M “Wally ma-z hm. z.- udt is the United ”9.? ¢ 1). s .v M: U. lac-n. cast . ‘ - 00w, It. At. 21v. Indicated to WA!» 1* ”M 1 ~ ' , ‘I'. LL H VW“: " Bfo‘r‘ the inspiration T..- 7'. K .. '4, AND CHILDREN for “iv. 1‘1“: homo and 1°VOe “good frdv...‘1;r , . “e 5°C.?!) (I. Risk-'04:, ”a his um I‘ INK-g. -«f.n O! gratitude also goes ta: M; nan-port» ion. my new» , \j" m- Mae ACKNOWLEDGMENTS I am very grateful to the Central Bank of Nigeria for financially making it possible for me to do my graduate L'~. - work in the United States. I am especially thankful to Dr. Clement N. Isong, the Governor, and the former Director of Research, Mr. Asumoh E. Ekukinam, for the opportunity offered me, despite all initial difficulties posed from many quarters. I want also to express my special thanks to Mrs. F. A. Onipede, the Senior Administrative Assistant, Research Department, for her unflinching support, helpful cooperation, and good friendship. To the present Director of Research, Dr. Joseph 0. Adekunle, I want to offer my warm appreciation of his kind cooperation, understanding, and help whenever I needed same. To all our staff both lwithin-the Research Department and the entire Central Bank of Nigeria, I offer my warm feelings for their several and collective cooperation. My great debt of gratitude also goes to Dr. Edward I; Smykay, Professor of Transportation, my academic adviser iv and chairman of my dissertation committee, for his confi- dence in me, continued guidance, and help during my course work and this study. My thanks also go to Dr. Richard Lewis, Professor of Marketing and member of my dissertation committee, for his help which often goes beyond the call of normal duties. To Dr. John L. Hazard, Professor of Trans— portation and former U.S. Assistant Secretary of Transpor- i tation, I express gratitude for his timely advice, helpful suggestions, and willingness to assist this dissertation to this level. My thanks also go to Dr. Frank Mossman, Pro- fessor of Transportation, for his willingness to serve on my dissertation committee and for useful suggestions will- ingly offered at all times. Whatever are the shortcomings in this study are personal and are my responsibility alone. I want to express also my gratitude to the Chair- man of the Marketing and Transportation Department, Dr. Donald Taylor, a great teacher and friend. It also goes to Dr. Paul Strassman, Dr. John P. Henderson, and Dr. warren Samuels (my former academic adviser)--a11 of the Department of Economics for their valuable assistance and friendship. My warm gratitude goes to my classmates, especially Lawrence King, Thomas Speh, Mary Higby, Richard V -‘.~ Mathieson, Paul Bankit, and Chuck MacDonald. It was fun to study among them. I also seize this chance to express my very warm gratitude to members of the Mount Hope Presbyterian Church, Lansing, Michigan, for their close Christian fellowship and fruitful experiences shared together. I owe a special debt of gratitude to Da Archi Inyang for his sustaining guidance and support throughout my entire study. His assistance, offered at any time, with or without formal request, are too deep for words. Last, though by no means the least, I express a special thankfulness to my wife, Grace, and to our three kids--Idorenyin, Afiong, and Mary. Their great faith and patience with a struggling and sometimes frustrated man had given me the encouragement to plod on. I thank them for their understanding and love. vi LIST OF LIST OF LIST OF LIST OF Chapter I. TABLE OF CONTENTS TABLES e e e e e e e e e FIGURES e s e e e e a e e APPENDICES I O I I I I O ABBREVIATIONS AND NOMENCLATURE THE PROBLEM. . . . . . . Introduction . . . . Problem Definition . Objective. . . . . . Scope of the Study . Assumptions and Limitations. Hypotheses . . . . . Why the United Kingdom/Continental European Route Was Chosen. Justification for the Study. Tools of Analysis. . Plan of the Study. . . . . . . . . vii Page xxi xxii xxiii 10 ll 14 15 17 18 19 ,cn .‘l TABLE OF CONTENTS (cont.) Chapter Page II. THE NIGERIAN ECONOMY AND TRADE . . . . . . . 21 The Nigerian Economy . . . . . . . . . . 21 Nigeria's External Trade . . . . . . . . 33 Export and Import Trade Classifications. 38 Directional Flows and Trends in Nigeria's External Trade . . . . . . . 47 Conclusions. . . . . . . . . . . . . . . 58 III. THE SHIPPING MARKET SERVING NIGERIA. . . . . 60 Demand for Shipping Services . . . . . . 60 Supply of Shipping Services. . . . . . . 73 The West African Conference Lines (WALCON) . . . . . . . . . . . . . . . 80 United Kingdom/West African Lines Joint Services . . . . . . . . . . . . 85 Continent/West Africa Conference (COWAC) 88 Other Conferences Serving Nigeria. . . . 90 Tramp Operators in Nigeria's Market. . . 91 Foreign Tramp Shipping Operators . . . . 94 Nigerian Private Lines . . . . . . . . . 100 The Roles of the Conferences and Major Tramp Operators in Nigeria's Market. . 108 The Major Problems of Shipping Services in Nigeria . . . . . . . . . . . . . . 120 viii TABLE OF CONTENTS (cont.) Service Quality and Adequacy . . . . Freight Rates. . . . . . . . . . . . Service Responsiveness . . . . . . . Operational Problems . . . . . . . . Consultation . . . . . . . . . . . . Conference Pooling Arrangements and Rationalization of Services. . . Loyalty and Tying Arrangements . . . Intra-, Inter-Conference and Tramp Competitions . . . . . . . . . . . Reasons for Nigeria's Concern Over the Shipping Market Structure and Oper- ations . . . . . . . . . . . . . . . . Conclusions. . . . . . . . . . . . . . . IV. BACKGROUND AND INCORPORATION OF THE NIGERIAN SHIPPING LINE. . . . . . . . . . . . . . . Background of Commerce and Shipping Services . . . . . . . . . . . . . . . Trade Divorced from Shipping Services. . Dissatisfaction with West African Lines Conference . . . . . . . . . . . . . . The Incorporation of the Nigerian National Shipping Line . . . . . . . . Problems of Current Patterns with the Nigerian National Shipping Line. . . . ix Page 120 127 136 137 141 149 157 160 164 166 166 169 173 179 190 TABLE OF CONTENTS (cont.) Chapter Page V. EVALUATION OF THE NIGERIAN NATIONAL SHIPPING LINE'S PERFORMANCE: PRINCIPLES OF EFFECTIVE PARTICIPATION AND PROFITABILITY. 202 Effective Participation. . . . . . . . . 204 Profitability. . . . . . . . . . . . . . 220 Determinants of the Company's Level of Profitability. . . . . . . . . . . . . 254 The Model. . . . . . . . . . . . . . 256 The Hypotheses . . . . . . . . . . . 256 Discussion of the Results. . . . . . . . 260 The Company's Total Asset Values (x1) . . . . . . . . . . . . . . . 260 Average Values of Freight Rate to Cargoes (X2) . . . . . . . . . . . 262 Operating Ratio (x3) . . . . . . . . 262 Used Capacity of Vessels . . . . . . 263 Percentage of Pool Cargo Allocated to the National Line by the Conferences (X5) . . . . . . . . . 264 Average Age of the Company's Fleet (X6) e e e e e e I e e e e a e e e 264 Opportunity Costs of Investments in NONOSOL. I I O O O O O I O I O I I O O 265 Conclusion . . . . . . . . . . . . . . . 271 é‘.’~"‘~.—w ,r- - “‘ TABLE OF CONTENTS (cont.) Chapter Page VI. EVALUATION OF THE NIGERIAN NATIONAL SHIPPING LINE'S PERFORMANCE: PRINCIPLES OF IMPORT SUBSTITUTION/EXPORT PROMOTION AND NET BALANCE OF PAYMENTS CONTRIBUTIONS. 273 Principles of Import Substitution. . . . 273 Export Promotion Principles. . . . . . . 291 Conclusions. . . . . . . . . . . . . . . 295 VII. EVALUATION OF NIGERIAN NATIONAL SHIPPING LINE' S PERFORMANCE . . . . . . . 297 Principles of Freight Rates Stabiliza- tion, Yardstick for Measuring Freight Rate Heights and Movements and of Employment Generation. . . . . . . . . 297 Freight Rate "Stabilizer" Principle. . . 297 Yardstick Principles . . . . . . . . . . 311 Principle of Employment Generation . . . 327 A Note on Nigerian Government and its Agencies' Assistance to the Nigerian National Shipping Line . . . . . . . . 349 Conclusions. . . . . . . . . . . . . . . 359 VIII. EVALUATION OF THE SURVIVAL OPPORTUNITIES AND STRATEGIES OPEN TO THE NIGERIAN NATIONAL SHIPPING LINE . . . . . . . . . . 362 Summary of Economic Evaluations of Its Performance. . . . . . . . . . . . . . 362 Non-Economic Factors as Criteria for the Incorporation of the Nigerian National shipping Line 0 I I I I I I D O I O D O 368 xi TABLE OF CONTENTS (cont.) Chapter Changing Emphasis of Government Policy . New Aspects of Government Support of NCNISIL. I I I I I I I I I I I I I I I Programs and Strategies for the Future Government Programs and Strategies . National Shipping Policy Objectives. National Policy Programs . . . . . . National Shipping Targets. . . . . . Specific Programs of the Government on the Nigerian National Shipping Line . . . . . . . . . . . . . . . On Other Private Nigerian Lines' Capital Investment and Operations. On Foreign Governments and Markets . On Miscellaneous Issues. . . . . . . National Shipping Line's Programs and Strategies . . . . . . . . . . . . . . Specific Programs. . . . . . . . . . Specific National Investment Targets Supervised or Aided by the Government. vessels. I I I I I I I I I I I I I I Port DeveloPment . . . . . . . . . . Establishment of the Nautical School Page 375 379 397 397 398 401 401 408 411 412 415 416 419 419 420 420 TABLE OF CONTENTS (cont.) Chapter APPENDICES Page Ship Repair Yard and Dry Docking Services . . . . . 420 Notes on the 1976-1985 Comprehensive Development Investments. . . . .'. . . 421 Benefit-Cost Estimates of the Investmenti. . . . . . . . . . . . . . 426 Conclusion . . . . . . . . . . . . . . . 428 o a o I o O D I C I o O I 0 e I o o I o 430 BIBLIOGRAPHY . . . . . . . . . . . . . . . . . . . . 450 xiii 1°. 11. 12. 13. 14. LIST OF TABLES Population Distribution by States . . . . Gross Domestic Product at 1962 Factor Cost (N Millions). . . . . . . . . . . . . . Composition of Growth of Nigerian Economy . Index of Industrial Production. . . . . . . . Index of Manufacturing Production . . . . . . Index of Mineral Production . . . . . . . . . Index of Output of Agricultural Export Commodities . . . . . . . . . . . . . . . Nigeria's External Trade Volume (1960-71) . . .Value and Visible Balance of External Trade . Quantum Indices of Nigeria's External Trade (volme in Tons) I I I I I I I I I I I I I 1 Price Indices of Nigeria's External Trade . . Nigeria's Selected Major Exports (Quantities and values) 1962-71 . . . . . . . . . . . Nigeria's Selected Major Export Commodities (Unit Values and Composition) 1962-71 . . . N.P.M.c. Export Commodities (Volumes) . . . . xiv Page 22 24 25 27 28 30 31 34 36 37 38 41 42 44 l “Wu" LIST OF TABLES (cont.) Table Page 15. Nigeria's Imports 1962-71 (Values). . . . . . 45 | 16. Imports Analysis by End Use (At Current Prices) . . . . . . . . . . . . . . 46 17. Trade Connection Patterns between Former West African Colonies and Former Colonial Powers--l965. . . . . . . . . . . . . . . . 48 Direction of Nigeria's Import Trade (January- December) 1967-1971 . . . . . . . . . . . . 50 Direction of Nigeria's Export Trade (January- December) 1967-1971 . . . . . . . . . . . . 51 Direction of Shipments--N.P.M.C. (c.i.f.) Cargoes . . . . . . . . . . . . . . . . . . 52 Proportional Direction of Shipments--N.P.M.C. (c.i.f.) Export Cargo . . . . . . . . . . . 52 Direction of Nigerian Produce Marketing Company's (f.o.b.) Exports (Tons) . . . . . 52 Merchandise Trade Imbalance Ratio . . . . . . 56 Ships Entered and Cleared at the Nigerian Ports--International. . . . . . . . . . 67 Ships Entered and Cleared at the Nigerian Ports (International and Local) . . . . . . 68 Seasonal Variations of Nigeria's Export- Import Trade. . . . . . . . . . . . . . . . 70 Ships Entering Nigerian Ports by Produce Seasons . . . . . . . . . . . . . . . . . . 71 Shipping Activities at the Nigerian Ports by Nationalities . . . . . . . . . . . . . . . 77 XV LIST OF TABLES (cont.) Table 26. 27. 28.. 29. 30. 31. 32. 33. 34. 35. 36. 37. 38. 39. 40. Page Fleet Strength of Companies Serving Nigeria (1959) I I I I I I I I I I I I I I I I I I I 81 West African Lines Conference (WALCON) 1962/63 I I I I I I I I I I I I I I I 84 United Kingdom/West Africa Common Services (UKWAL) I c o s o o s o s s o s o s I o e s 86 Continent West Africa Conference (COWAC). . . 89 Carriage of N.P.M.C. Exports. . . . . . . . . 99 Indigenous Lines (Private). . . . . . . . . . 105 Loans and Advances Classified by Purposes (N Million) 0 s s e s s o e o o s s o a s e 112 Nigerian Produce Marketing Company's Produce Shipment and Freight (1964/65-1971/72). . . 114 Share Distribution of Carriage of Nigerian Produce Marketing Company's Exports . . . . 115 Carriage of N.P.M.C.‘s Export Produce by Indigenous Lines, 1967. . . . . . . . . . . 116 Analysis of Non-Oil Cargo Handling Operations at the Nigerian Ports--1969/70. . . . . . 129 Analysis of Non-Oil Cargo Handling Operations at Nigerian Ports--l960/61— 1969/70 . . . . 130 Days Lost to Shipping and Port Operations . . 131 Freight Rate Movements on Selected Export cargoes I I I I I I I I I I I I I I I I I I 134 Shipping Service Responsiveness to Nigeria's Trade . . . . . . . . . . . . . . . . . . . 138 xvi LIST OF TABLES (cont.) Table Page 41. The Company's Fleet 1959-63 . . . . . . . . . 185 42. Particulars of Ships Owned by the Company-- 1972. I I I I I I I I I I I I I 188 43a. Share Carriage of the Nigerian Produce Marketing Company's Export Cargoes. . . . . 207 . 43b. Nigerian Participation in the Carriage of N.P.M.C.‘s Exports. . . . . . . . . . . . . 208 Market Share of Liner Companies Engaged in West African Trade. . . . . . . . . . . . . 212 Estimated Share of Deadweight Capacity Delivered by the Lines Engaged in the West African Shipping Range . . . . . . . 213 Nigerian National Shipping Line--Shipping Activities 1968/69-1971/72. . . . . . . . . 215 Carriage of Nigeria's Trade (UKWAL) 1971. . . 216 N.N.S.L.'s Share (Carriage) of Nigeria's Export-Import Trade . . . . . . . . . . . . 218 N.N.S.L.'s Share of National Trade. . . . . . 219 N.N.S.L.'s Costs-Revenue Analysis--Ca1endar Years 0 o s s s o s s o e s e e s s o o e s 232 N.N.S.L.'s Cost Components Ratios . . . . . . 235 N.N.S.L.'s Variable Cost Components-- Percentages . . . . . . . . . . . . . . . . 236 Nigerian National Shipping Line's Financial Operations Results. . . . . . . . . . . . . 241 Profits as Proportions of Total Assets. . . '. 243 xvii LIST OF TABLES (cont.) | 55. 57. 58a. 58b. 59. 60. 61. 62. 63. 64. Depreciations and Asset Values. . . . . . Depreciations and the Fleet Values. . . . . . External Finance and Net Working Capital Movements . . . . . . . . . . . . . . 'Estimates of the Coefficients of the Determinants of Profit Level (N.N.S.L.) Comparison of Interest and Profit Earnings on N.N.S.L.'s Total Asset Values. . . . . Rates of Returns on Investments--Se1ected Industries (Comparison) . . . . . . . National Shipping Contribution to Balance of Payments . . . . . . . . . . . . . . . . Service Accounts (Section A, Items 3,4,5,6,8) Transportation (Non-Oil Sector) . . . . . . service Accounts (Section A, Items 3,4,5,6,8) Transportation (Oil Sector) . . . . . . . . Hypothetical Balance Sheet on Shipping. . . . Private Nigerian Lines' Operations (1967-68). Trade Balances and Foreign Exchange Reserves. Freight Rate Movements on Selected (N.P.M.C.) Export Cargoes. . . . . . . . . . . . . . . Freight Rate Indices on Selected (N.P.M.C.) Export Cargoes O O O O I I O I O I O I O C 0 Freight Rate Stability on the Nigeria- European Trade Route (Selected Export Products) 0 I O O O I I O I O O I I O O O O xviii Page 245 247 249 261 267 277 279 279 282 287 291 304 305 307 ‘LIBT OF TABLES (cont.) Table- Page 65. Index of World Average Prices of Major Agricultural Commodities. . . . . . . . . . 308 668. Selected Commodity Rates to Various Routes Ex-Nigeria-Indices of Rates on Cocoa. . . . 319 66b. Indices on Oil Seed Rates . . . . . . . . . . 319 67. Indices of Freight Rates of Selected Commodities--Selected Routes (Non- Conference Lines) . . . . . . . . . . . . . 321 68. voyage Charter Rate Indices on Exports of Selected Developing Countries . . . . . . . 323 69. Freight Rates for Robusta Coffee. . . . . . . 326 70. N.N.S.L.'s Marine Jobs--1968. . . . . . . . . 331 71. Officer Class Position in 1972-73 . . . . . . 334 72. National Shipping Line's Labor Force. . . . . 338 73. National Line's Per Capita (Staff) Asset Values of Investment. . . . . . . . . . . . 340 74. National Line's Per Capita (Staff) G.R.T. of Vessels in Service . . . . '.’ . . . . . 341 75. United Kingdom Per Capita GRT of Vessels in operationI I I I I I I I I I I I ‘I I I 341 76. Comparative Investment-Employment Relation- ,. ship. . . . . . . . . . . . . . . . . . . . '344 77. Crew Cost Components on a Representative ship. I I I I I I I I I I I I I I I I I I I 346 78. Development of Major Elements of U.K. Shipping Costs. . . . . . . . . . . . . . . 348 xix LIST OF TABLES (cont.) Table Page 79. N.P.M.C. Allocation of Export Produce . . . . 352 80. Aids to Shipping, 1945-1960 (Selected Countries). . . . . . . . . . . . . . . . . 357 81. Comparative Economic Performance of Selected Public Institutions . . . . . . . . . . . . 382 82. variables Influencing Institutional Inter- actions . . . . . . . . . . . . . . . . . . 387 83. Detailed Analysis of Investments in Shipping and Related Matters, 1976-1980, 1981-1985 . 422 84. Benefit-Cost Analysis of Investments 1976-1996 I I I I I I I I I I I I I I I I I 423 XX Figure LIST OF FIGURES Page Merchandise Trade Imbalance Ratios Nigerian“External Trades (Tons) . . . . . . 57 Cost-Revenue Functions in Shipping Service. . 227 Capacity Utilization in Shipping. . . . . . . 229 Capacity and Service Maximization in Shipping 231 Institutional Interactions on Ocean Shipping. 386 9“ Appendix I. IIA. I13 0 IIC. III. IV. VI. VII. VIIIA. VIIIB. LIST OF APPENDICES SHIPPING LINES SERVING NIGERIA . . . . . LIST OF SHIPPING COMPANIES IN NIGERIA'S SHIPPING TRADE . . . . . . . . . . . . PARTICULARS OF INDIGENOUS SHIPPING LINES SHIPPING STATISTICS. . . . . . . . . . . FEATURES OF INDIGENOUS SHIPPING LINES 1967-1968I I I I I I I I I I I I I I I PERMANENT SECRETARY FEDERAL MINISTRY OF FINANCE I LAGOS o o a o e o s c n o o o LETTER REGARDING SUSPENSION 0F VOYAGE CHARTER BY NIGERIAN SHIPPING COMPANIES INTERNATIONAL SHIPPING SERVICES FOR NIGERIA--QUESTIONNAIRE FOR SHIPPERS, SHIPPERS' COUNCILS AND CHAMBERS OF COMMERCE . . . . . . . . . . . . . . . INTERNATIONAL SHIPPING SERVICES FOR NIGERIA--QUESTIONNAIRE FOR SHIPPING COMPANIES AND/OR SHIPPING AGENCIES . . SUMMARY OF QUESTIONNAIRE SURVEY ON SHIPPING SERVICES IN NIGERIA . . . . . TABULATION OF RESPONSES TO SELECTED QUESTIONS ON SHIPPING SERVICES IN NIGEMA I I I I I I I I I I I I I I I I xxii Page 431 432 433 434 435 436 438 442 448 449 10. 11. 12. 13. LIST OF ABBREVIATIONS AND NOMENCLATURE N.P.M.C.--Nigerian Produce Marketing Company. N.N.S.L.--Nigerian National Shipping Line; may be referred to in the study as the National Line. COWAC--Continent/West Africa Conference. UKWAL--United Kingdom/West Africa Lines Joint Service. WALCON--West Africa Lines Conference—-the predecessor of COWAC and UKWAL. N.I.C.O.N.--Nigerian Indigenous Lines Conference, inaugurated by the Nigerian private lines to compete the then WALCON, dominated by foreign lines which were unwilling to admit the private Nigerian Shipping Lines. O.E.C.D.--Organization for Economic Cooperation and Development. E.C.A.--Economic Commission for Africa. E.C.A.F.E.--Economic Commission for Asia and the Far East. D.W.T.--deadweight tonnage. G.R.T.--gross registered tonnage. N.R.T.--net registered tonnage. E.E.C.--European Economic Community. ‘ ~_" nous ‘13:. fliiém-m-Iigoria Tobacco Company ‘ 1% | ‘ 0‘ ”a Coneh-dligorian Breweries Limited . p .‘ “l" _'_. 19y 14¢..c.-nigorian Cement Company I .- .. ' .' Z. . -. lived-4.1;“ I“ "III CLIM- "1 “Mun Ibippzasg ,x‘, M- if pow-x. in 9s w... l, ~ t'P’DTflOVJHjV'. ..-:; m a! nah an M plasma;- (a..- ¢ ”twins to: the 5r: .4 ‘ . ovgz- Oovarnmn c: sh,” “00 of the goxmracna 1. Kurt- ‘ a”. OS tho lz'e‘Y’e \. 3 a 1’ E‘?-;1~.:‘.“' :"ulzk "V 31. “or?! ..,.:. ‘16 on the gnaw-mam; an. La: Km)...“ a: mu!“ um “pf E331‘} federal m.wrmmnt W: Nut. how-a. . . 7. ‘5 M (Brush. 5 I ;_ . , . Fix-”hf - . -‘ .-‘ Wee. “mm"! aqiv -v w wa—f CHAPTER I THE PROBLEM Introduction .Resolved--that this House is of the opinion that the time has come for the establishment of a Nigerian shipping industry, and desires the gov— ernment, if possible within the framework of the country's other urgent requirements, to make any financial provision necessary for the develop- ment of such an industry in the next five-year economic planning period. Such was the final resolution of the Federal Ni- .gerian Parliament on the long debate of the private membefs motion2 calling for the setting up of a shipping enterprise by the Federal Government of Nigeria. Much against the feelings and advice of the government,3 this resolution expressed the wishes of the members of the Federal Parliaé ment.' The pressure on the government which continued 1Federation of Nigeria: House of Representatives Debate: Official Repert, Federal Government Printer, LagOs, September -10, 1957, p. 2087. 2Rev. E. s. Bens (Brass). 3Nigeria House of Representatives Debate, November 1958. 1 I“ 1"! JJ ‘ vo’-——'.3-- thereafter led to another expression of sentiments in November 1958 in the parliament that indigenous shipping industry be set up for both economic and strategic as well as national prestige reasons. The Federal government was forced to change its attitude and on February 19, 1959, the Minister of Transport announced the incorporation of the Nigerian National Shipping Line.4 The terms of the agree- ments between the government and the technical partners were explained as well. Incorporated with a capital of N 4 million,5 51 percent of which was held by the Nigerian Government, while the two British shipping firms--Messrs Elder Dempster Line and Palm Line held 33 and 16 percent, respectively. The company started operations with three ships in 1959, one owned and two chartered. It also became a member of the conference operating the West African-United Kingdom and European routes. In 1961, the Nigerian Government con- cluded agreements with the other shareholders and technical partners for the sale of their shares to the government. 4Ibid.. February 19, 1959, p. 399. ‘ quuivalent to two million Nigerian pounds (5N2 nillion). The cancellation of the six-year agreement between the Nigerian government and the two lines made the Nigerian National Shipping Line completely national as from that year. Thus the Nigerian National Shipping Line was incor- porated to be able to "break through into a field which in yester years used to be the preserve of developed maritime nations."6 Both government and the national shipping com- pany officials have on occasions supported this investment on several grounds. In fact, one such reason is that in economies where there is usually insufficiency of private capital formation and the technical expertise and entrepre- neurship without which meaningful economic activity cannot be successfully generated, government is in duty bound to participate actively in the private sector in selected industries.7 The shipping industry is one of such areas and the Nigerian National Shipping Line was born of such principles. Participation in the effective carriage of 6Nigerian National Shipping Line: Memorandum on Problems Facing Indigenous Shipping Lines to Ministry of Transpprt. September 6, 1966. 7The Nigerian Natiopgl Shipping Line Limited, In- formation Pamphlet, Nigerian National Press, Apapa, 1966, ~p. 1. , the nation's trade involves earning and possible conserva- tion of foreign exchange and the breaking into the hitherto monopolistic powers of foreign shipping cartels serving the country were some other reasons behind the investment. Strategic reasons and natibnal security were advanced apart from the knowledge that the "Nigerian flag would proudly fly over the seven seas.“ The contrast between the origins of cargo and the ownership of shipping services in the world is reinforced by the fact that developing nations generated, for example, 41 percent of the world's seaborne trade but owned a mere 7.6 percent of the world's shipping in 1969. Of the new tonnage on order in that year, 58 percent was for the developed nations, 25 percent for flags of convenience owners and “only 5.2 percent for the developing countries.8 Many of the latter were in the market for second-hand vessels. The picture was no better before and is not even better today. Despite the contrast and the comparison between a country's trade and size of its merchant fleet, there is no necessary connection, ipso facto, between the trade of a nation and 8Rochdale Repgrt: Committee of nguiry into Ship- ~.2$gg’(fler Majesty's Stationery office, Cmnd 4337, London, 1970) I p. 9. ‘ a ‘ the ownership of the vessels conducting the trade. Appar— ently, national shipping lines incorporation have become predictable results of the attainment of independence by countries in most west African maritime areas. 0n the other hand, some of the traditional maritime nations have querried the advisability of the operation of national fleets by developing countries on the grounds that z capital might be better devoted to infrastructure and other more pressing industrial sectors.9 Even in Nigeria, aca- demicians and laymen also had joined in the questioning of the investment criteria for the Nigerian National Shipping Line. In some circles, people hardly saw the need for not allowing the foreign carriers to continue to carry the nation's trade without Nigerian participation. In partic- ular, as public corporations had gained the notoriety for inefficiency and unbusinesslike operations, the new venture was hardly counted a worthy investment. The continued division of opinions has not been resolved and such resolu- tion is only possible from a reasoned study and evaluation of the investment criteria behind the venture. 9UNCTAD, The west African Shipping Range TD/B/C.QGZ, 1967. p. 49. u e ‘- '..’ Problgm Definition The Nigerian National Shipping Line authorities have consistently requested for more government support and capital provision for expansion of both the fleet and their operations.10 At the same time, the Nigerian Federal Gov- ernment had in its policy statement committed itself to the plan ”to study the economic soundness of additional invest- ment in ships with the greatest care."11 The lack of spe- cific commitment by government to the provision of needed funds for the fleet expansion is a function of lack of specific knowledge of the market and the necessity or otherwise of further investments. Indeed, the policy statement noted that "ocean shipping is normally competi- tive," and government will rely on competition to provide good service at reasonable rates. Moreover, it notes the “notorious instability of rates and profits in shipping on 12 the high seas.” When the current operational results of 10Nigerian National Shipping Line: Memorandum to the Ministgy of Transpgrt, Lagos, August 31, 1967. 11Federal Ministry of Information, Federal Republic of Nigeria Statement of Policy on Transport, Sessional Paper No. l of 1965, Government Printer, 1965, p. 2. 121bid., p. 2. A I the Nigerian National Shipping Line is considered, govern- ment skepticism can be understood.13 ‘ The government decision to increase investments in ! tonnage acquisitions and operations of the NigerianNational I Shipping Line should benefit from an analysis of the past investment and the extent to which the reasons or the cri— teria for the venture have been justified. Suchznianalysis ’ is the prime purpose of this study. It is also anticipated that the study will also provide a framework for assessing the economic efficiency as well as the noneconomic reasons for investing in international shipping when the strategic and security factors of the nation are also taken into account. Objective This study is expected to examine the thorny issues of capital allocation and investment criteria in an economy 13Federal Republic of Nigeria, Second National Developggnt Plan 1970-74, Federal Government Printer, Eigbl, 1970, P. 184. ‘ where capital is in short supply.14 It also will contri- bute to information available to public decision makers so as to facilitate their efforts to efficiently allocate scarce resources between international shipping and other competing ends, most economic and noneconomic variables being taken into account. Specifically, the study is aimed at evaluating the criteria for the incorporation and public operation of the Nigerian National Shipping Line to wit: 1. provision of effective instrument for the movement of the nation‘s increasing export-import trade based on the principles of effective participation and profitability;15 2. earning and conserving of much needed foreign ex- change through increased participation in the movement of national exports and imports on the 14H. B. Chenery, "The Application of Investment Criteria," uarterly Journal of Economic, 47, February 1953. PP. 76-96. Also, ECAFE, "Criteria for Allocating Investment Resources Among Various Fields in Underdeveloped Countries," Economic Bulletin for Asia and the Far East, June 1961' PP. 30-33. 15Nigerian National Shipping Line, Information Pamphlet, op. cit., p. 2. criteria of import substitution and positive con— tribution to balance of payments;16 3. since an economy entirely dependent on foreign shipping can be exploited and held to ransom-—in- digenous shipping acts as a catalyst by influencing freight rates charged by foreign shipping companies based on the principles of "rate stabilization and yardstick";17 4. provision of employment for Nigerians who would also have the opportunity to acquire valuable tech— } nical knowledge;18 5. assurance of defense and strategic considerations, prestige and the corollaries to political indepen- dence.19 16Ibid., pp. 2-3. 17Nigerian Produce Marketing Company, Memorandum to Ministry of Transport, Transportation of Cargoes by Indi- genous Shipping Cogpanies, C 736/107 of october 6,1966. 18A. D. Couper, ”The Geography of Sea Transport," Hutchinson University Library, London, 1972, p. 185. 19 Ibid-, 99- 185-6. “—w‘fi..- 10 Based on the fulfillment or otherwise of some or all of the above reasons for the incorporation and opera— tions of the Nigerian National Shipping Line, it will be possible to convince the public planners of the desira- bility or otherwise of further investment in this field. Indeed, when the full factors, economic and noneconomic, are taken account of it may be possible to survey the ques- tion of the adquacy of judging the indigenous shipping industry purely on the above grounds. The study should explore the options open to the public planners on further capital investments in the area of ocean shipping industry. Scope of the Study This study is confined to the capital investments and the operations of the Nigerian National Ship- ping Line between 1959/60 and 1971/72, within the Conference systems. The study will confine itself to the Nigerian- United Kingdom and Continental European trade route. ll 3. It will highlight the performances of the national line within the framework of the conferences it has been operating though its incomes and expenditures will not be disaggregated for this purpose. 4. It will attempt to isolate some of the more diffi— cult socio-political factors, like the Nigerian Civil War (l967-70)20lwhich might have had some bearings on the performances of the company. Assumptions and Limitations —— "—“« The following assumptions were made in the study: 1. IL was assumed that the public investment in the shipping industry based on the stated public and private reasons announced or unexpressed from time to time was a sound decision. This is in spite of the absence of any prior verificatory studies and 20N. U. Akpan, The Struggle for Secession 1966—70: .A Personal Account of the Civil War (London: Frank Cass, 1971). ‘ Fw- ' 12 a even with the company's appalling management and , financial pictures.21 2. It was assumed that priority considerations for the investment were based on the wishes of the people as stipulated by the Federal Nigerian legislature. Indeed, given the intent of the Federal Parliament, the study sought to ascertain the extent to which the criteria for the investment had been justified. 3. The market covered by this study was confined to the Nigerian-United Kingdom and Continental Euro— pean trade routes. The reasons for the choice of this route are discussed below. 4. The shipping market is assumed to be more of a car- telized oligopoly in structure while the Nigerian National Shipping Line is assumed to be a marginal firm in it.” 21Federal Republic of Nigeria Second National De- veloppgnt Plan, 1970-74, pp. cit., p. 184. 22K% Trace, "Underdeveloped Countries: Shipping Problems and Policies," The world Today, May, 1969. ‘ 13 5. The study was predicated on the lack of full quan- titative information which is traditional with shipping industry.23 Such lack of full available information had tended to mar the quality of dis- cussions on matters relevant to the study and much of the conclusions were based more on inferential judgments. 6. Where the data were obtainable, the emphasis with most statistical reports24 were with value rather than volume which ought to have been of greater interest from a transportation standpoint. The shipping organizations and institutions were un- willing to supply information regarding cargoes, sailings, load factors and market shares of dif- ferent firms. Since even full particulars of the . rate structures or their implementations were unpub- lished, data source consisted of official publica- tions on trade, port authorities and information 23For this phenomenon refer to S. G. Sturmey, British Shipping and World Competition (University of London, The Athlone Press, London, 1962), p. 3. 2‘1”ederal Office of Statistics, Nigerian Ports Authority, Central Bank of Nigeria. l4 bulletins of government companies and marketing organizations. Hypotheses The general hypotheses investigated in this study was that the criteria underlying the incorporation and investment of public capital in the Nigerian National Shipping Line had been vindicated by its operational re- sults and the strategic services of the company to Ni- gerian trade. Specifically, the Operational hypotheses were: 1. that the incorporation and public investment in the Nigerian National Shipping Line were justified on the principles of profitability and effective participation of that indigenous institution in the carriage of the national seaborne trade; that such incorporation and public investment were justified on the principles of import substitution and balance of payment considerations; 15 i 3. that such incorporation and public investment were justified on the principles of rate stabilization and as a yardstick for the measurement of foreign shipping effects elsewhere; 4. that such incorporation and public investment were justified on employment and acquisition of tech- nical skills by indigenous personnel; 5. that such incorporation and public investment were justified on the score of national strategic con- siderations as well as prestige. The analytical methods for evaluating the hypoth- eses will be discussed below under the tools of analysis while the results and conclusions will be the subject matter of Chapters V to VIII. Why the United Kingdom/Continental European Route was Chosen This study of the Nigerian National Shipping Line's operational performances was confined to the Nigeria-United 16 Kingdom and Continental European sea routes. The choice was based on the following facts: 1. That fairly adequate data as are relatively avail- able are up-to-date and complete enough to facil- itate analysis. The route is the most important trade route for Nigeria since it controls some 60-70 percent of Nigeria's total export-import trade.25 It is the one major route where the Nigerian Na- tional Shipping Line operates currently within the conference systems. Since the route is the most traditional for Ni- geria's trade dating from the pre-colonial and colonial days, it will help the study observe the structural changes within the route and the stages of the National Line's penetration of those markets. 25Federal Office of Statistics, Review of External frrade, Nigeria,1971. Lagos, Statements 2 and 3, pp. 5-6. .Also Central Bank of Nigeria, Annual Report and Statement 3f Accounts, 1971, Lagos, Table 52, p. 81. 17 One of the objectives of the study is to estimate the market share and the effective participation of the Nigerian National Shipping Line in the carriage of trade on the United Kingdom/North Continental European route.‘ Such an estimation taken over time on a particular route will give indication of the degree of participation effec- tiveness required. In particular, this will be more mean- ingful when taking the limited tonnage deployed by the National Shipping Line for its services and the confinement of these to the route as a matter of policy into account. Justification for the Study From a situation of 100 percent of carriage of na- tional trade by foreign shipping companies to one of some participation by a public'indigenous shipping line, Nigeria has come to a stage for evaluating its decision to invest in the area of ocean shipping. As government is hesitant26 at the moment to expand investment in this area, a study of this nature certainly will provide the decision makers with the facts to base further decisions. If the prior decision 26See footnote l3. 18 on this investment was based on purely intuitive and less objective considerations, this study will either justify that decision or else sound a note that the available Icapital be no more pumped into the area. The study will provide a basis for further evalua- tion of any future intentions to expand capital investments in the Nigerian National Shipping Line. It will also out- line a program of actions within the field of international shipping both at the public as well as within the private sectors of the Nigerian economy. Such a program.wil1 lay the groundwork for further investigations of capital invest- ment allocation criteria taking the socio-economic consider- ations of the country into account. Tools of Analysis Much of the analysis in this study makes use of tables, graphs, and opinions of experts and the practical people in the field as gathered from the sample surveys and personal interviews. ’The gaps which exist in the available information have meant that conclusions not supportable by empirical evidence have had to be drawn V a e 19 from theoretical arguments. Where available, the data have been used to explain the trends noticed in the performance of both the market and the Nigerian National Shipping Line in particular. Deductive analysis has been used in combi- nation with the interpretation of available data and the opinions gathered from standard journals and from inter- views. What emerged was a qualitative set of conclusions backed by a minimum of data as was made available during the research. Plan of the Study Chapter II examines the structure, development, growth pattern, and overall potentials of the Nigerian economy and its ability to generate external trade on which shipping activities depend., Chapter III analyses the shipping market serving Nigeria--composition, quantum, and ownership of vessels and the role of the operating conferences and ranges with spe- ¢3ific position and powers of Nigeria's indigenous marine. Chapter IV outlines the historical development of thezpublicly-owned Nigerian National Shipping Line as a 20 background to Nigeria‘s participation in the merchant marine services. Chapter V evaluates the performance of the Nigerian National Shipping Line against the aims of its incorpora- tion on the principles of effective participation (market share) and its profitability. In Chapter VI, further evaluation is made of the company's performances on the principles of import substi- tution and net contributor to the balance of payments. In Chapter VII, the National Shipping Line's per- formances are assessed on the principles of its acting as freight rate stabilizer and a yardstick for measuring the 'equity of freight rates charged by foreign shipping lines. In the second section, the principles of employment gener- ation will be used to assess this company's performances. In Chapter VIII, on the basis of the assessment of the Nigerian National Shipping Line's performances, the survival opportunities of the company will be examined and cum the choice of the options, a program and strategy for ensuring its economic survival and a national policy for generating the growth of indigenous marine outlined. CHAPTER II THE NIGERIAN ECONOMY AND TRADE The Nigerian Economy Nigeria, with a land area of 356,669 square miles and an estimated population of 65 million (Table l) is a major country on the Gulf of Guinea. The most recent come 7 pleted census of population was conducted in 1962/632 and the distribution by the current twelve states are as enu- merated below. The absolute size of the population is for the purpose of making economic projections, of less sig- nificance than the rate of population growth, which is currently estimated at 2.7 percent per annum. Population is likely to grow higher in the foreseeable future because 27Nigeria's census counts have led to conflicting *views. See S. A. Aluko, ”How Many Nigerians? Analysis of ltigeria's Census Problems, 1901-1963," Journal of Modern African Studies, Vol. III, No. 3 (October 1965). Also, Ifegwu Eke, "Population of Nigeria, 1952-1965," Nigerian .flsurnal of Economic and Social Studies, Vol. VII (July 1966), PP. 289-310. Another national census of population was undertaken in 1973. 21 of the reduced death rate and increasing or, at least, stable birth rate. 22 'IABIE l.—Popu.lation Distribution by States. Population Distribution (Millions) Area in States Square 1963 1973 Miles Actual Density Actuala Density NOrth Eastern 193,639 7.8 75.3 _ 8.6 82.9 WEstern. 29,100 9.5. 326.5 10.4 357.4 East.CEntral 8,746 6.2 708.9 7.3 834.7 Kano 16,630 5.8 348.8 6.3 378.8 North Western 65,143 5.7 87.5 6.2 95.2 South Eastern 13,730 4.6 335.0 5.2 378.7 Nerth Gantral 25,954 4.1 157.9 4.9 188.8 Khara 28,672 2.4 83.7 3.4 118.6 Berna Plateau 41,744 4.0 95.8 5.2 124.6 JRivers 7,008 1.5 214.0 1.9 271.1 Laws 5,747 1.4 243.6 2.1 365.4 Mid Westetn 14,922 2.5 167.5 3.5 234.6 Country 356,699 55.6 155.6 65.0 182.2 aEstimated. Source: Federal Census and Statistics Office. The growth of the Nigerian economy between 1958/59 and 1966/67 (before the civil war”) showed steady 28 N. U. Akpan, ibid. This civil war paralyzed the economic life of the former Eastern region (now East Cen- tral, Rivers, and South Eastern States). felt in the Midwestern and the Benne-Plateau States, Some effects were 23 increases in almost all the sectors (Table 2). The agri- cultural sector had grown at a modest annual rate of 3.1 percent, slightly above the population growth rate. Non- agricultural incomes rose at 8.1 percent per annum while the overall growth was at the average of 5 percent per annum. The fastest growing sector was the petroleum industry which even in 1973 produces over 2 million barrels of crude oil per day.29 Its share of the gross domestic product is expected to reach 17 percent by the end of 1974.30 Between 1967 and 1971, the gross domestic product accelerated in growth, particularly after 1969. From Table 2, the growth in gross domestic product at 1962 factor prices shows steady increases in almost all the sectors. The disruptive effects of the civil war show themselves in the exclusion of data for the three Eastern States from the overall national data. Directly after the particularly in the former where the theatre of war shifted for some time in 1967/68. 29Central Bank of Nigeria, Monthly Reports, January to July 1973. . 30R. Pearson Scott, "Measurement of the Impact of Petroleum Production on the Nigerian Economy" (Mimeo), .April 1969. 24 $58298 62688 to humans Humvee as 83386 to 8C8 138s "80.58 .83 .334 18.55 ..:€88m .5037. so so 83.88am 528.5» to 835 so agar. 53834538 888a .m 508 .3 nonsense o finned do no 83890 5? 86.3w 58w 8hr 2... 8885a... 81.; some 23 HEN 83 an... 3.: 48:0. 1.8.... ones «Re some SNL $3” I I I I I. 34 mm 3. mm an «N 3 o 4 assumes 53838 02 mm 8 R S s. S 8 sm em om cm 3 a. 8238 050 3 2 cm R cm 2 S cm 2 3 3 3 S S m .38: S s: 8H «S 8 mm 2.. mm on 2. Q. 3 S s... 3 838.3 .11 8m EN ca 1.2 m... 2: z: .2 NS «2 8a 8a 8 8 ”.8598 1580 .m 1...: 2: was «2 «3 s3 93 :4 62 was m: as 8 Ne 838% an... E .1. 23 2.. :4 mmm an .81. we. can Sm «mm 2... 3». NR EN 8.03330 S o- NS NS 3 Rs SH 02 92 mg on s: on 3 2. 839598 as 8:53 .m R 2 cm 3 3 N... 2 3 2 S 3 m m e “mum: as 383 .4 3... En RN N8 2: 8H a: m3 .2 m3 8H «d 3H om nomad as 885833: .m man on m8 0: m: 1 3H a: a... 3 em a. an «N on 8E c5 was. .N Sm; cm; 2m.” Em; mmmqm 2:; NE; .2; «:4 3»; Am; o8; Sta 3n; 86E 8o g8 w g3 .8385 A a Shed #32311 $312.: «$323 «QQSSWSEXH $5.62 Seems «seems «£83 Shams $3.5 833a $.st £88m “gaunt xv HOOD gm N3 uh pong 0.3g glow a 25 war, the growth in the national economy became more posi- tive, particularly in the mining and quarrying, manufac— turing and crafts, distribution and transportation and communications sectors. The impact of the peace shows itself in the rallying of the largest total gross domestic product increases between 1970/71 and 1971/72, some 11 percent or N438 million. The oil industry contributed the most. The list of sectors demonstrating the phenomenal growth rates were as follows in Table 3. mm: 3.-0atpositim of Growth of the Nigerian Eoonauy. Charmein (lxuzibumkxnto aafinrs £hctn:0wnr memdlckowflu lgnv7115rfillflx1 lkmcent Agriculume 80 2 .0 Oil 186 4 .7 mnufacmring 40 1. 0 Building and Cbnstmction 28 0 .7 Others 104 2.6 Tbtal ' 438 11.0 26 A detailed examination of the economy by major sectors demonstrates that the industrial sector had grown with a minimum of impact from the civil war. Between 1965 and 1971, the industrial growth indices had reached 313.0 (Table 4). The component elements--manufacturing, mining, and utility--had simultaneously moved within the same period to growth indices of 185.1, 480.1, and 172.0, re- spectively. Such levels of growth rates can only presup- pose increased use of resources--human and material and 'the rising employment could have impacts on the internal market expansion, income generation and increases in demand for resources. When the manufacturing is taken up by itself (Table 5) the picture of increased positive growth is evident. The growth indices for the manufacture of import substitution articles--footwear, vegetable oil, cigarettes, .and.cotton textiles which rely more on local raw'materials-- natural rubber, hides and skins, ground nuts, tobacco, and raw cotton would, in a way, affect the volumes of such raw rmaterials entering the country's export trade. The assembly plants dealing with vehicles, radios, transistors, and televisions depended on imports of semi-finished products 27 MB L—Inhx of Indastrial Productim (Base: Quarterly Average 1965 = 100) Mind I!!! mgm Manning Mining Utility 1 Total All (Electricity) Irxiustries weight 512.6 435.8 51.6 1,000.0 1963 76.5 34.9 74.8 58.3 1964 92.7 49.6 87.1 73.6 1965 100.0 100.0 100.0 100.0 1966 111.7 145.4 111.9 126.4 19672 114.2 112.4 97.1 112.5 1968 114.0 54.3 94.1 - 87.0 1969 150.2 181.5 104.9 161.5 19703 167.4 349.3 125.6 244.5 1971 183.0 480.0 159.4 311.2 1966 Int quarter 111.5 125.0 110.9 110.7 211:! ' 105.0 121.7 115.1 112.8 31:! - 108.4 156.3 105.0 129.1 4th " 121.4 178.3 117.2 146.0 1967 Int qmrter 134.9 189.6 123.0 158.1 2nd '2 132.4 194.4 98.7 157.7 3rd - 87.9 38.3 82.0 66.0 43: - 100.5 28.2 84.5 68.2 1968 131; qlnrter 105.9 26.1 91.6 70.4 2nd ' 108.2 36.0 94.6 76.0 3rd ' 108.2 . 44.3 92.5 79.5 4th ' 132.6 m.2 98.3 121.5 1969 1st quarter 134.0 179.7 101.7 152.2 2nd ' 136.1 178.8 107.9 153.0 and " 157.5 161.4 102.5 156.4 4th ' 167.1 205.9 113.0 181.2 1970 lst quarter 153.3 261.1 115.5 198.3 2nd ' 158.4 310.7 125.1 223.1 3rd ' 175.5 386.9 127.6 265.2 4th - 180.9 438.5 234.7 295.9 19713 lst quarter 180.9 465.8 147.7 303.3 2nd - 181.2 501.6 154.8 319.5 3rd " 182.5 472.4 163.6 307.9 4a: ' 185.1 480.1 172.0 313.0 10053111911411 2PrormctimfigtmesofestablisrlnmtslocatedintheEastemStatesarenot incluled, franmid-lS67amtforpetroletmproductimwtdd1resunedin unliberatedareasofthesestates fraud-1968. 3Prwisianl Note: misindexhasbemmrisedudthebaseyearchmgedtomfizitis linkedwimtheoldimmmeyearnfi)toemureomtimity. Sauce: Central Bank of Nigeria. Annual lgport, 1971. 28 555555555 555--.5.5 m Hucoam5305mm .noma mo umpuusv unacu «nu EOuu nausaocq 90: 55¢ uaomum :Huunuo «cu :5 mucufinmdanaumu non nousmwu coduus60555 H.mma «.5HN m.wo m.mh v.amw v.5m ~.wm m.mh~ v.hN~ m.no~ o.mmm n.~mm h.~ma H.ww h.mmm v.mmH u sue 5.555 5.555 5.55 5.55 5.555 5.555 5.55 5.555 5.555 5.555 5.555 5.555 5.555 5.55 5.555 5.555 . 555 5.555 5.555 5.55 5.55 5.555 5.55 5.555 5.555 5.555 5.555 5.555 5.555 5.555 5.55 5.555 5.555 . 555 5.555 5.555 5.55 5.55 5.555 5.55 5.555 5.555 5.555 5.555 5.555 5.555 5.555 5.55 5.555 5.555 5555555 555 Huma 5 5.555 5.555 5.555 5.55 5.555 5.55 5.555 5.555 5.555 5.555 5.555 5.555 5.555 5.55 5.555 5.555 . 555 m.th m.mh~ H.woa h.wn N.omm H.om m.voa m.mma m.mmm o.mn~ o.om¢ m.nmm H.Nma h.ow m.vo~ o.HHH 5 05m 5.555 5.555 5.55 5.55 5.555 5.55 5.55 5.555 5.555 5.555 5.555 5.555 5.555 5.55 5.555 5.555 . 555 m.mmH H.0mH n.mo~ m.hm N.o~m o.oa «.moa n.HhH m.hHm v.mo~ m.mvm m.mom o.~HH H.vm m.owd m.~oa Huaumsv uma 5555 5.555 5.555 5.555 5.55 5.555 5.55 5.55 5.555 5.555 5.555 5.555 5.555 5.555 5.55 5.555 5.555 . 555 5.555 5.555 5.555 5.55 5.555 5.55 5.55 5.555 5.555 5.555 5.555 5.555 5.555 5.55 5.555 5.55 . 555 H.oma h.HHN m.m> w.mm m.m- m.ah m.mh h.oHA m.mma c.5wa m.Hmm 5.5mm H.oma m.mm m.m¢a m.maa : ucm 5.555 5.555 5.555 5.555 5.555 5.55 5.555 5.555 5.555 5.555 5.555 5.555 5.555 5.55 5.555 5.555 5555555 555 5555 o.~ma n.5ma h.moa m.vm h.mo~ H.wb v.aoa m.awd m.Ho~ h.woa o.hm~ m.mv~ H.mm N.om o.moa m.moa 5 saw 5.555 5.555 5.55 5.555 5.555 5.55 5.55 5.555 5.555 5.55 5.555 5.555 5.55 5.55 5.555 5.55 . 555 ~.moa m.v~a o.mm n.0m w.~ha m.mh H.Hw o.wm~ H.¢~H m.voa m.mha «.5ma >.hm o.vw w.mHH H.om 5 UGN 5.555 5.555 5.55 5.555 5.555 5.55 5.555 5.555 5.555 5.555 5.555 5.555 5.55 5.55 5.555 5.55 5555555 555 wmma 5.555 5.555 5.55 5.555 5.555 5.55 5.55 5.55 5.555 5.55 5.555 5.555 5.55 5.55 5.555 5.55 . 555 5.55 5.555 5.55 5.555 5.555 5.55 5.55 5.555 5.555 5.55 5.555 5.555 5.55 5.55 5.55 5.55 . 555 5.555 5.555 5.55 5.55 5.555 5.555 5.55 5.555 5.555 5.555 5.555 5.555 5.55 5.555 5.555 5.555 . 555 5.555 5.555 5.55 5.55 5.555 5.555 5.555 5.555 5.555 5.555 5.555 5.555 5.55 5.55 5.555 5.555 5555555 555 homa 5.555 5.555 5.55 5.55 5.555 5.555 5.555 5.555 5.555 5.555 5.555 5.555 5.55 5.555 5.555 5.55 . 555 5.555 5.555 5.55 5.55 5.555 5.55 5.55 5.555 5.555 5.555 5.555 5.555 5.55 5.55 5.555 5.55 5. 555 5.555 5.55 5.55 5.555 5.555 5.555 5.55 5.555 5.555 5.555 5.555 5.555 5.55 5.555 5.555 5.55 . 555 5.555 5.555 5.55 5.555 5.555 5.555 5.555 5.555 5.555 5.555 5.555 5.555 5.55 5.555 5.55 5.55 5555555 555 5555 5.555 5.555 5.55 5.55 5.555 5.55 5.555 5.555 5.555 5.555 5.555 5.555 5.555 5.55 5.555 5.555 5555 5.555 5.555 5.555 5.55 5.555 5.55 5.555 .5.555 5.555 5.555 5.555 5.555 5.555 5.55 5.555 5.555 5555 5.555 5.555 5.555 5.55 5.555 5.55 5.55 5.555 5.555 5.555 5.555 5.555 5.555 5.55 5.555 5.555 5555 5.555 5.555 5.55 5.555 5.555 5.55 5.55 5.555 5.555 5.555 5.555 5.555 5.55 5.55 5.555 5.55 5555 5.555 5.555 5.55 5.55 5.555 5.555 5.55 5.555 5.555 5.555 5.555 5.555 5.55 5.55 5.555 5.55 55555 5.555 5.555 5.55 5.55 5.555 5.555 5.55 5.555 5.555 5.555 5.555 5.555 5.55 5.555 5.555 5.55 5555 5.555 5.555 5.555 5.555 5.555 5.555 5.555 5.555 5.555 5.555 5.85 5.555 5.555 5.555 5.555 5.555 5555 5.55 5.555 5.55 5.55 .5.5 5.55 5.555 5.555 5.55 5.55 5.555 5.55 .5.5 5.55 5.55 5.55 5555 5.55 5.555 5.55 5.55 .5.5 5.55 5.555 5.555 5.5 5.55 5.555 5.55 .4.5 5.55 5.55 5.55 5555 5.555 5.55 5.55 5.5 5.5 5.55 5.55 5.5 5.. 5.5 5.5 5.55 5.55 5.55 5.55 5.5 5555.: 5 . - 5%. H 5 55.....- - m m n. m m. 5 m - 5m .l 55 a x m m.” m c .5. n m _ mum .. 5555.5 5:. 5:55.: 882 55555 5555 585555.. 855 .. 5555 555522 5553.515 "5555. 5655556555 55555555555: 56 5555.5 {.5 555. 29 while some fabrications like roofing sheets and most of the steel materials and building construction equipments tended to boost imports. The greatest foreign exchange earners (Table 6) were the natural gas and petroleum crudes which production indices reached an all time levels of 185.6 and 53856, respectively, on the index scale. The index of output of agricultural export commod- ities indicated a mixed picture. Between 1968 and 1971, major increases showed up in respect of cocoa beans, benni- seed, coffee, palm oil, and kernels for trade purposes. Some degree of decline in exports was noted for groundnuts, rubber, soya beans, timber, cotton and hides and skins, presumably due to increased domestic processing activities (Table 7). The overall impact of the trend is that either a reduction in quantum terms or a change in composition of the agricultural export items must be expected in the 55 future. The current trend cannot tell the whole story since increased agricultural productions are expected from the state governments' farm estates and plantations31 and privately expanded farms undertaken in the late 1950's through the 1960's. 31The former Eastern, Western, and Northern re- gional development corporations' estates. 34) ms 6.-— mm at Mina-a1 Prodmtiml (Bass: Quarterly Average 1965 . 100) 98:10:! and weight Cassitsrits Coal 00111115106 Gas Linn-m Permian 'lbtal (Tin Ora) (Natural 685)]- 36.7 7.8 3.9 1.9 3.9 381.6 435.8 1963 91.5 77.8 73.2 30.8 62.3 27.9 34.9 1964 91.5 94.2 85.1 52.8 76.0 44.0 49.6 1965 100.0 100.0 100.0 100.0 100.0 100.0 100.0 1966 97.5 86.3 80.8 182.8 85.1 152.3 145.4 19672 97.9 13.0 70.0 179.7 64.6 116.4 112.4 1968 101.1 - 41.3 152.4 50.1 50.6 54.3 1969 90.3 1.8 54.3 66.2 54.2 197.1 181.5 19703 82.1 8.2 57.9 115.1 52.7 389.1 349.3 1971 75.7 20.5 47.5 185.6 49.3 538.6 480.0 1966 Int quarter 103.6 7.8 85 6 163.7 93.2 128.2 125.0 2nd '2 91.0 81.4 78 6 164.2 86.4 126.1 121.7 3rd " 101.9 92.3 85.3 175.6 98.5 164.1 156.3 4th - 93.6 72.7 73 8 175.6 61.9 190.9 178.3 1967 lst.quarter 103.5 51.9 70.6 288.5 89.5 202.4 189.6 2nd - 84.0 - 72 6 304.8 70.9 211.0 194.4 3:0 - 103.3 - 77.9 33.7 50.7 31.2 38.3 4th " 101.0 - 59.0 91.2 47.4 20.9 28.2 1968 1st quarter 106.5 -- 34.9 93.9 52.3 18.2 26.1 2nd ' 94.4 -- 33.0 151.2 47.7 30.4 36.0 3nd - 101.6 -- 46.1 211.0 47.4 38.4 44.3 4th ' 102.1 — 50.9 154.1 52.9 115.4 111.2 1969 1st quarter 105.2 - 43.8 110.0 52.0 193.6 179.7 2nd * 82.5 1.1 42.1 81.7 54.2 194.9 178.8 3nd ' 88.6 2.7 58.7 35.1 47.1 174.5 161.4 4th - 84.8 3.3 72.8 37.8 63.5 225.3 205.9 1970 1st quarter 92.3 3.8 .4 51.9 47.4 288.0 261.1 2nd - 79.9 8.7 58.7 109.6 48.6 345.3 310.7 Brd - 76.3 6.6 68.4 123.2 57.0 432.5 386.9 4th ' 80.2 13.7 53.1 175.5 57.6 490.8 438.5 19713 1st quarter 83.0 12.6 42.6 173.8 57.9 521.8 465.8 2nd - 69.3 9.8 43.8 181.2 57.0 564.1 501.6 3:0. ~ 74.7 29.5 56.0 201.5 40.9 529.7 472.4 4th - 75.7 30.1 47.5 185.6 41.2 538.6 480.1 zProducticn figures of establislmts located in the Eastern States are not included fm the third quarter of 1967 through 1969 (war period), but petrolem mm Eran the Rivers State is inchflsd as frun the third qtmtcr of 1968. 3nnav1816na1 m: mmmmmmmmmwwmes;1818mmmuuoldnuex(base yearn63)tomcor¢muity. Comragahubunwmmclwlmsm. Source: antral m of. Nigeria, Amual m, 1971. 1960 = 100). TABLE 7.—Index of Output of Agricultural Export Commodities (Base: (4) over (3) Percentage Change (4) over (2) 1971 (4) (3) 1969 1970 (1) (2) 1968 Whight Oommdity (6) (5) 19.8 + 320.8 8.1 47.8 88.0 100.9 80.9 104.9 Aggregateimmt 30.3 7.2 26.4 1.29 55.8 58.1 153.3 0.04 23.29 27.1 + 20.4 26 .4 153.7 36.2 127.7 103.7 75.1 142.2 Castorseed 0.3 + 10.7 + 38.3 64.0 16.7 103.9 184.2 57.8 50.3 0.33 0.68 6.45 0.07 24.45 mffee Copra 46.3 44.5 + 49.1 31.1 246.3 58.5 30.1 163.7 154.1 57.8 69.7 Cotton (seed cotton) 31 38.0 27.5 297.3 254.2 Gnourdxmts ‘3906 51.1 90.8 54.8 40.4 112.1 159.0 18.5 47.1 + 16.1 - 120.3 71.3 76.4‘ 49.6 3.14 15.26 Hides and Skins Palm kemels Palnuoil 2.6 11.6 61.5 69.6 71.4 45.8 16.3 87.5 14.6 102.0 7.4 98.3 41.9 2.2 89.2 9.28 9.87 0.29 5.56 14.2 11.0 38.8 7.4 53.0 36.1 82.6 72.4 7.7 47.1 32.6 30.1 44.6 T. Annual Report 1971. 19eria, CentralBankofN Source: .l 32 Despite the short term reduction in the agricul- tural export commodities noticed in the war and post-war years, it is expected that there will be increases in the output of such products. The studied forecasts of experts and consultants32 have tended to support this Optimism. The only fact which is difficult at the moment to quantify is how much raw agricultural products and raw materials will continue to enter the export market in the future in view of the increasing domestic manufacturing activities based on these raw materials. The future trend is not one of decreased production of agricultural raw materials but of increased use in domestic manufacture while mining and quarrying will greatly become the major foreign exchange earner in the years ahead. 32FAO, Agricultural Development of Nigeria, Rome, 1966 (FAQ Report). G. L. Johnson, 0. K. Scoville, G. K. Dike, and C. K. Eicher, "Strategies and Recommendations for Nigerian Rural Development 1969-1985," Consortium for the Study of Nigerian Rural Development, East Lansing, Michigan, l969 (CSNRD 33). Also Economic Associates Limited, Traffic and Development (2 VOlumes), London, 1967. NEDECO, Development of the Ports of Nigeria, 1970- 1990, The Hague, 1971. f..’ 33 Nigeria's External Trade The civil conflict between 1967 and 1970 has made the overall analysis of the nation's foreign trade between the 1950's and 1970's through the 1960's an uneasy task. For, the general trend in the growth of Nigeria's external trade was interrupted by the war, and, the post-war growth has been based on a new and different political and eco- nomic structure of the country. In this context, the analysis will become meaningful if divided into the pre- and post-war periods. The periodized analysis will be compared with the overall assessment so that appropriate conclusions can be drawn on the effects of the civil war on the country's external trade. The external trade between 1960 and 1971 showed positive increases in volume terms for all the years except for the period of the civil War--l967 to 1969. The annual averages of the exports and re-exports between 1960 and 1971, overlooking the effects of the civil war, was over 18 million tons (Table 8) while the imports were over 3 nfillion tons. This involved a total trade of over 21 mil- lion tons of cargo. Taken separately to illustrate the absence of war effects, the exports and imports between 34 TABLE 8.—Nigeria's External Trade Vblune (1960-71) (Thousand Tons). Exportsa and Year E l Imports Total 1960 3,094 3,149 6,243 1961 3,784 2,410 6,194 1962 5,617 2,973 8,590 1963 6,082 2,967 9,049 1964 8,214 3,324 11,538 1965 14,475 3,588 18,063 1966 18,080 3,512 21,592 1967 5,083 2,188 7,271 1968 2,146 2,788 4,934 1969 28,447 3,227 31,674 1970 52,705 3,635 56,340 1971 72,089 4,622 76,711 Annual Anerages 1960-66 8,478 3,132 11,610 1967-71 32,094 3,292 35,386 1960-71 18,318 3,199 21,517 a'Cbntains crude oil and.natural gas components figures rounded to the nearest.unit. Source: 'Nigeria Trade Summary. 1960 and 1966 were annually of the magnitude of over 8 and 3 million tons, respectively. The war and post-war periods 0967-1971) came to the unbelievable 32 million tons for exports and re-exports as well as over 3 million tons for imports on annual averages. ' l '"I- n. . ‘O- u u I I. 4 I. o Q“. ~.. ~ ‘0 e 11 35 The phenomenon of greatly increasing exports volume depicted the oil content which had shortly before and after the civil war gained in importance in the export trade com- ponents. It may be noted that in 1967 and 1968 when the war brought a halt to the oil drilling and exports as well as some other exports from the three Eastern States, the total export volume reduced from over 18 million in 1966 through 5 million to a little over 2 million tons in 1968. The surging increased drilling and export of petroleum crude from the Midwest, Rivers, and the South Eastern States as well as the offshore fields added to the agri- cultural products to swell up the post-war export trades from 1969 to 1971. In value terms, the increases have been consistent even when analyzing as far back as 1954 (Table 9) to 1971. The annual averages of export values for 1960-71 period were nearly N500 million while imports were nearly of the same magnitude. The post-war values (1967-1971) were an- nually estimated at over N700 million for exports and over N600 million for imports. The pre-war years' were annually valued at less since oil crudes were not major items in the export trade. One significant fact is that while the 36 TABLE 9.-Va1ue and Visible Balance of External Trade (N Million). ' Exports and Balance Year Imports Re-expcrts of Trade 1954 228.0 298.8 + 70.8 1955 272.2 265.0 - 7.2 1956 305.4 269.0 - ‘36.4 1957 304.8 254.8 - 50.0 1958 332.6 271.0 - 61:6 1959 356.8 327.0 - 29.8 1960 431.6 339.2 - 92.4 1961 445.0 347.2 - 97.8 1962 406.4 337.0 - 69.4 1963 415.2 378.6 - 36.6 1964 508.6 429.2 - 79.4 1965 550.6 536.6 - 14.0 1966 512.8 568.2 - 55.4 1967 447.2 483.6 - 36.4 1968 385.2 422.2 + 37.0 1969 497.4 636.2 + 138.8 1970 756.4 885.4 + 129.0 1971 1079.0 1293.2 + 214.2 Smnxe: lfigerflulTrm233mmmmy. volumes and values of imports had tended to increase by slight annual degrees, the volume of exports made phenomr enal increases with unit values tending to be decreasing over time. This situation is shown in Tables 10 and 11 where quantum and value indices have been illustrated. Indeed the fact is further amplified by the continued im- tmlance in trade between 1955 and 1964 after which the 37 ensuing favorable balances can be ascribed to crude pe- troleum factor in the export trade (Table 9). TABLE 10 .--Quantun Indices of Nigeria' 3 External Trade (Volune in Tons). Balance/ Year Imports ::32:;:r::d Imbalance Ratios 1954 100 100 1.0 1955 124 99 1.3 1956 138 110 1.3 1957 134 106 l 3 1958 151 105 1.4 1959 164 126 l 3 1960 192 124 1.5 1961 195 147 1.3 1962 182 156 1.2 1963 177 162 1.1 1964 213 181 1.2 1965 230 319 1.4 1966 225 398 1.7 1967 140 112 1.3 1968 179 47 3.8 1969 207 627 3.0 1970 233 1,161 5.0 1971 296 1,587 5.4 Source: Basedwon.figures frcutfifignmianLTrade:sunnemyu TABLE 11.-Price Indices of Nigeria‘s External Trade (Value in N). Exports and Terms of Year Imports Re-expcrts Trade 1954 100 100 100 1955 98 88 90 1956 100 83 83 1957 102 84 82 1958 99 85 86 1959 97 89 92 1960 102 90 88 1961 102 84 82 1962 101 80 79 1963 101 84 79 1964 110 86 78 1965 n.a. n.a. n.a. 1966 n.a. n.a. n.a. 1967 n.a. n.a. n.a. 1968 120 89 74 1969 131 100 76 1970 205 89 43 n.a.-not.available. Source: Based.onLNigerian,TradeaSMnnemy'figures, Lagos. Export and Import Trade Classifications Since the major interest of shipping is mostly trade volumes first before values (though one cannot be divorced from.the other) it is pertinent to make an ele- mentary analysis of the principal cargoes involved in the 1 now- 4 navu 1. . U u 4 O. o 39 nation's trade. The principal export cargoes of Nigeria may be classified into three categories: 1. traditional produce (including timber logs) 2. ores and minerals 3. mineral oil The traditional produce comprise vegetable oils-- groundnuts, sheanuts, palm oil and kernels, coffee, cocoa and plants, and timber logs. The major ores and minerals include columbite, limestone, and cessiterite (Table 6). The most important now in volume and value terms are the millions of tons of petroleum crude and liquified gas ex- ports. The Nigerian industries are not yet engaged in export product promotion since they have not saturated the internal market which is currently immense in potentiality. Nonetheless, the trend for the future portrays changes in the export trade in manufactured goods though the present semi- manufactured processes involving groundnut crushing into cakes as well as tanned skins and hides are fast becoming important. An examination of these major export commodities over the last decade, 1962-1972, indicates that some r .u xlu- be." I vvnl 4 a... . in“ ' . Qp. ~' "Il ‘ \ T- . 5.. " 40 vegetable oils are fast declining as export items. Other declining items (by volume and value) include timber logs, plywood, groundnuts, natural rubber, raw cotton, hides and skins. On the other hand, cocoa beans, crude oil, palm kernels and oil are increasing in volume and values on the export list. Cocoa, crude petroleum, palm oil and kernels are continuing to be consistent as items which enjoy foreign exchange earnings (Table 12). A survey of some selected major export commodities sold during and after the civil war shows that most oil seeds are still declining items. The same is still true of timber and plywood, hides and skins, palm kernel cake and meal and other cocoa products including semi-manufactured cocoa butter. The same trend is indicated by their unit values as well as their total values as percentages of the national export volumes (Table 13). What has emerged is that even when increased agricultural products are expected, a relatively declining quantity of these will be exported as real raw materials. This is due to domestic semi- and total manufacturing activities which mostly thrive on these erstwhile export produce. When the volumes of total export commodities (agri- mnxmmal) handled by the Nigerian Produce Marketing Company 41 .ggég «g «.3 «.3 «.R «.R «.«N «.8 «.«~ c.«~ «.5 «.3 « n 3 d d .2 3 fl 3 « it: c8085 «.3 c.«e «.«H «.2 «.3 c.«~ «.8 «.3 «.«N «.8 c... «m «m m... «c 2. «« fl. «« 8 83s «4" cs: «.« «.« «.9 «.« «.« «.Q can «.1 «N «a 3 3 «m 8 3 «a 3 «a 838.5 «.« cd «.3 «.« c.« T... «.3 «.m 4.... «.« R 8a «3 RH and «2 a «Q «« «« £883.38 «.fi 93 «.N «.9 «.3 «.3 c.c~ «.3 «.9 «.8 d «« § «3 d. «S S 8 3 «« gang «.3 «.3 «.fl «.2. «.2. «.3 «.E. «.8 «.2. «.3 «3 Ba Zn «3 8m «B «d... 3... «3 «3 5.8590 c.«~ c.«~ «.fl «.8 «.3 «.3 «.3 «.8 «.d «.«m «R «3 «2 «ma «3 3n «d. can «an Gm Elia Em c.~ «.c «.c «.~ c.- «.«n «AN «.3 «.5 8 « « n «a «3 cfl «Q «as «d annum c.«3 93423433181 «.«« «.3 «.8 «.3 «.3 3m «3 a: «on «3 can «we. 8" «2 «an 888 «Ame «.«cn «.Gm 9!. «J: «.33 «.«Q «.3 «.3 «.«m «8.2 «8.3. 85.8 Sci «RS «3.3 «8.2 «San «««.« «Rum don—Ea Sn 2. «8a «9.: e 3: «8H 33 «RH «NFLBH «SH 3% mi 33 «9m «2: 33 33 18.9.43. 8 «88> .88. «8.. «08388 SE Aha—Hg “an; ‘3 gage g Unn- mlubQ—dm Pawn—1.3 NE 42 .H5mH «OEMHB HMCHmuxm mo 3wfl>mm .mUHumHuwum «0 mOflwwO Hmumflom "monsom m.H m.m v.v w.o m.m m.m 5.m m.m m.v H.v o.ooam o.vmom o.vm5N ®.HMVN VwOHmN 5.mme H.mO5N 5.5N5N o.om5H m.5M5H Hmumz flaw who CH8 o.H o.N H.m H.m m.N H.v H.¢ 5.m H.w 5.9 o.mv~ o.Hom o.~vm N.mvN N.moN o.mmm m.o~m m.mmm w.v5m o.oov Hmong“ m.o m.H H.H m.H 5.N N.H N.H m.N m.¢ m.m o.oom w.H5v v.m5v N.mw¢ m.vmm o.ovv v.H5v o.mwv o.m5v o.mam COUUOU 3mm m.o M.H m.H v.N w.H 5.H o.N H.N v.H «.H «.mm N.mw m.mm v.5m v.vm 5.05 o.~m N.wm m.mm v.vm meU uDCUGSQHU o.H w.N m.m w.v o.m m.m m.m m.m v.m m.m m.vom N.NQN N.mHN N.M5H v.NON m.me m.aHN m.NON n.amH m.mmH HHO HDC@CDOHU m.H $.V V.HH v.mH m.va 5.¢H m.vH o.oH a.mH N.mH e.cmH W.HmH v.mmH o.mHH N.©MH v.N¢H 5.5va H.mNH N.mHH M.NNH muscflGSOHU o.N m.N H.m m.v m.m o.m H.0H m.m m.OH 0.0H N.mOH N.mHH m.OHH o.NOH 0.0m 5.MHH w.mm o.ooa m.¢OH H.Nm mHQCme Edam m.o H.o H.o H.o m.o m.m N.m v.v m.v m.m 0.05H m.omd «.mOH N.mm o.mmH m.mmH 5.m5H N.H@H N.mVH m.omH HflO Edam N.HH N.mH 5.wH o.mN o.mm H.0H N.@H w.mH 5.0H m.mH v.wmm N.omm o.mHm ¢.mom m.5vv m.5mN m.vmm H.5oe m.05m w.avm MOOQU v.v5 H.0m m.H¢ m.5H m.om H.mm m.mN H.ma m.oa m.m ©.MH o.OH 0.0H m.OH m.m 5.m m.OH H.HH m.OH m.m HHO OQSHU H5¢H o5mH moma moma 5mmH ooma moma voma mme NomH H5mH 05mH mme mme 5wma woma mmma vwma mood momH fluomxm H309 mo mmmucmonwm Cc 83> ug smog: 33958 .H5malmwma "$338550 p.596 Mont: kuomamm n.a..flmmezléa 5mg. ... n.- 1 o a I tr 0.8-. ."l. .“- 43 are analyzed (Table 14), a somewhat declining trend is noticed between 1964/65 and 1971/72 produce seasons. When it is noticed that the volume handled by the Nigerian Pro- duce Marketing Company is on the annual average of some 750,000 tons, or 30 percent of the non-oil exports, the significance of the declining trend can be better imagined. And, since the bulk of the N.P.M.C. cargo consists of cocoa, groundnuts, palm oil and kernels and raw cotton, among others, the tendency is once more a confirmation of the declining importance of agricultural raw materials in the composition of Nigeria's exports in the years to come. This trend may, however, not be conclusive in view of the short period involved and also the expectation of increased production of agricultural produce from public and private plantations as the investments of the 1950's and 1960's increase their yields. The major imports by S.I.T.C. sections (Table 15) indicate a mixed trend. Over the decade (1962-1971) while tonnage volumes are not readily disaggregated, estimates for 1969/70, for example, was at 2.9 million tons.33 In 33Nigerian Ports Authority, Annual Report, 1969-70, p0 760 {I 44 TABLE 14.--N.P.M.C. Export Oommdities (Volunes) . \kflumescfi man: Ptodmanhhxxd ('IbnS) 1964/65 985,215 1965/66 1,223,815 1966/67 872,276 1967/68 887,383 1968/69 853,284 1969/7O 769,428 1970/71 819,068 1971/72 578,985 Annual man 873, 681 Saute: ILPTMJL, Hume. priority terms, machinery and transport equipments, manu- factured goods, chemicals and food have been dominant imports. Drink and tobacco, minerals, fuels and lubricants are at the same time declining items due to domestic pro- duction substitutes. Capital goods34 for industries and reconstruction took up to 58 percent of all imports on the average during the period (Table 16). Of the consumer 34Central Bank of Nigeria Exchange Control Author- ities give priorities in foreign exchange allocation to such items which promote and expand industrialization. This is in accordance with the Federal government's policy. See Federal Government's Statement on Industrial Policy, Sessional Paper No. 6 of 1964, Government Printer, Lagos. 45 #53” .839 accumflfi mo 333m .nofivmflmum mo teammo Hancock "00.58 «.«««H «.««« «.««e «.««m «.««e «.««m «.««m «.««m «.««e «.««e Hence «.3 «.3 «.«« «.«« «.« «.« «.« «.« «.« «.« 803g 33.—Hmong .m «.«« «.«« «.«« «.«« «.«« «.«« «.3. «.«« «.«« «.«« «88 8880823 . «8883832 .« «.««e «.««« «.«3 «.33 «.«3 «.33 «.43 «.«3 «.33 «.«« 20833 fignagufi .1. «.3... «.««« «.43 «.«3 «.WS «.«3 «.«3 «.«3 «.«3 «.«3 «888.3885 .« «.33 «.«« «.«« «.3 «.«« «.«« «.«« «.«« «.«« «.«« 363.86 .« «.« «.« «.« «.« «.« «.« «.« «.« «.« «.« «no 03808>c§3eta .« «.«« «.«« «.3 «.3 «.3 «.3 «.3 «.« «.« «.« «39838.5 .« «.« «.«« «.«« «.«« «.3 «.« «.«« «.«« «.«« «.«« 8835338538832 .« «.« «.« «.« «.« «.« «.« «.« «.« «.« . «.« 808835338 .3 «.«« «.«« «.«« «.«« «.«« «.«« «.«« «:2. «.«« «.2. «Be .« :3 ««3 ««3 ««3 ««3 ««3 ««3 33 ««3 ««3 ««.«« . Egan“: 5 H5mHI~mmH 3.395” PawummcHZIIdH a 46 45H «E 338% «0 Edam .«oflmflflm «0 «ammo gm "830m .m.«.o «=««> o.oo« o.o«« o.oo« «.OOH o.oo« o.««« «.««m «.««« «.««« «.«««H «mugs «cage «.« «.« «.« «.« «.« «.«« «.« «.« «.«« «.«« «gnu ummqmmmmm .« «.«« «.«« «.«« «.«« «.«« «.««« «.««« «.««m «.««m «.«H« «mugs «.« «.« «.« «.« «.o «.«« «.«« «.«« «.«« «.« «Hmsm .«. «.2 «.«« «.«« «.«« «.«« «.«« «.«« «.«S «.««H «.««« «Eu—mumzzmm .o «.« «.« «.« «.«« «.«« «.«« «.«« «.«« «.«« «.««H unmemwsvm «nommqmye .n «.«« «.«« «.«« «.«« «.«« «.««H «.«o« «.««H «.««« «.««m unmemwswm H«p«««o .« «coco «muflmmo .« «.«« «.«« «.«« «.«« «.«« «.««H «.««H «.««H «.«o« «.««m «mung «.« «.« «.« «.« «.« «.«« «.« «.«« «.«« «.«« ««opw 3.5200 @388 .n «.«« «.«« «.«« «.«« «.«« «.«« «.«« «.«« «.«« «.««H «guano .««« «.«« «.« «.« «.« «.« «.«« «.«« «.«« «.«« «.«« «maauxma .«« «.«« «.« «.« «.« «.« «.«« «.«« «.«« «.«« «.«« «oomw .« ««oo« 38 wfimflfioz .m «none nasamqoo .« «««H «««« “«««H, «««H «««H «««H «««H «««H «««H «««H «fiamofiflfieg c0232 2 5 05.25 . $8me uanSU .33 mm: E R mam»; «agnléa a "u - ‘q 47 goods, the nondurables were averaging 30 percent at the same time. Raw materials for industries which were growing directly after the war are fast stabilizing, possibly indi- cative of the increased use of domestic materials. The fact that consumer goods are relegated to a third position of priority indicates a policy of industrialization which can only spell increased fabricated materials content of Nigeria's export trade in the future. The intensity of this policy of fast industrialization can be noted in the "Nigerian National Oil Corporation Decree 1971 (Decree No. 18) and the "Nigerian Steel Development Authority De- cree 1971 (Decree No. 19) which have the focus of Nigerian activities in the oil and steel areas of production. Directional Flows and Trends in Nigeria's External Trade Nigeria, before and immediately after her indepen- dence, maintained a typical trade connection with the United Kingdom and the British Commonwealth of Nations, such as the French and Belgian ex-colonies did with their ex-colonial masters (Table 17). The largest fractions of 48 TABLE l7.—'1:rade Connection Patterns Between Former West African Colonies and Farmer Colonial Powers 1965 (Percentages). F£;:ts To Brfljsh Enamm. Bekfian Irmts Fords Peru; Former British West Africa 44 . 6 Former Hench West Africa 48.6 Former Belgian Cbngo 48 .8 ID Bnhfish Brenda Bekfian nnxnts F Ports . Ports , Ports \ Homer British West Africa 56.0 Bonner French West Africa 67 .5 Pbrmer Belgian Congo 73.2 qufilediknmckua.fumIthststAirflxulShuxfinglbmge. UJN. Publication, 1967, pages 12 and.23 (TDVB/C.4/32). the national external trade were held with Britain up to‘ l965--56 percent of imports and 45 percent of exports. Directly after the trade agreement with the European Eco- nomic Community,35 Nigeria's external trade broadened such 35Federal Ministry of Information, Agreement Between the European Economic Community and the Republic of Nigeria, Government Printer, Lagos, July 1966.” 49 that the dominance of United Kingdom as Nigeria's major trading partner started to decline. As a bloc, the E.E.C. steadily increased its lead and is today Nigeria's greatest trading partner, with the United Kingdom as the close second. Within the E.E.C. which is now enlarged to include the United Kingdom, Nigeria, for example, sold 60 percent of her exports and bought over 57 percent of her imports in 1971 (See Table 18). When the volume of exports handled by the Nigerian Produce Marketing Company36 are examined (Table 19a) the destinations receiving the greatest magni- tude are the United Kingdom, Western European continent, the French ports, the Mediterranean ports, and the Adri- atic. Exports sold to the Commonwealth countries as a bloc have shown mixed trends with those of the United Kingdom declining proportionately. The United States is fast in- creasing her imports from Nigeria from 7.8 percent in 1967 to 28.5 percent (of Nigeria's exports) in 1971. The Euro- pean Economic Community with or without the United Kingdom 36The government corporation responsible for the external sales of the major agricultural export produce. For criticisms of the institutional activities, see Peter T. Bauer,West African Trade, Routeledge and Kegan Paul, London, 1963, part 5. pp. 263-343. m 18a.—Directim of Nigeria's Trade 3mm, 1967-1971. 50 mitedKingdan Eng Kong Other mums“ United States of Marion Japan E.E.C. Belgiunandhncamosn'g Netherlarfls Italy E.E.C. Oosmtries Walt-h Countries n age-NNN as now mooNMN r~ Hvoosomm m on o O I. II... I O O 0 so coHHom <- 300 HQ‘VHV m NONmoco v o o 33 m H N so 3 co oastom N ugh €30:th so Hr-iaslnlnm or: o o O O O \O HOHOM h H") Hhév-(Q' l‘ HOHVOO Fl H O as m m H H N H so 0 i H H ‘3 a tho-lh N “3‘” sovan N soHvam H '7 q C 0 so vcHom 3 Hm ommHv m OONmoH as o o 33 m H H N H m ,9. o I‘va-(so so LQN omMHm r: hHaoaoq-so a: st: 0 l‘ éoHON m vso MVMNM so oonom m o o 33 m H H N so 3 H H mmsoHao N ov QQr-il‘fl' N so :aqu-m as v; q 0. CI 0 0 ‘II I‘ Fin-IF'IOH a Q'Q NMVHM m C :HMOG N O O o a H H N \O o H H C p NqiNcow: o coso vq-coaoso o oosoONo v on N s‘; assosncc ' 6K 'Hafisfiafi tr; use; 'soNh :4 or; I: a H a son NH H :1 :1 m ‘03 3 m cososoNso co sov ¢o¢soso so NNsuiNaoN so cc: N 0 0| 0.... O O 0 so «1va m «<- thsom so V'CSl‘sDr-‘N h m m a a H v «H vNH H 3 H m on S H N m sosocosoN co woo QOOQ'N «- mvova co on <- °‘ «which» oi «as «3.466% u; «66:4«5' «3 or; :4 E 31 an mNH N 2' HH sn g} as 8 cocoa-co o sov cooNNoo on osocsooso so on <- 53 «6:36 a: 02:4 uho'so o3 afio'écéém' a; or; ' I a m H 2) so oc- cs NHN a HN h co 3 N H <- h Nsovoso on we vaDONN so soNNsoNua <- oo o H «16:44.3: :5 HA Hdéafin’ H 658.648. g «3 R 5 HH H as MQIVu-IM h m h a 3 3% :3 H N H so 3 " a ' + fi % S .. 'IbtalAllComtriee gibcltfles South Africa hCalp 'sing Czechoslovakia, Eastern Germany, Finland, Hungary, Poland and U.S.S.R. *Negligjble +Estjmated 51 Danestic Egrts (f.o.b.) mHHMH H \DO‘V‘Q’O‘S N N VLD H O\ O I‘ o o o o o o o o e o o o o e o o o o \D GOOOV V omen-4N O O ON‘KN In C a N m <‘ H \D O H H HNH m thoan O In H\D m In C m e o o o o o o o e o e o o o o o e \D 0‘00” «1 Obsoanm \D O ovam \D O m m m V‘ H KO O 3H H 32 F 0 NVQ‘ \O H‘DHWM m V O‘ V‘ O “40‘ e o o o o o o o o e o o o o e Oso F-IIOOM H \DV‘OHM tn smav' oo o a N m H m H \D O H 4- " NHm N ”('1th H Hm H 00 O o o o o o o o o o e o o o o o o o F ”#000 In \Oflmom h ON‘KH V O a N m m H \O O H 0‘ ”5‘0 [0 mQO‘lfil‘ o 0‘ fi In 0 91 o o o o o o o o o o o o o o o F H’OOID m mq‘vom 0‘ *N‘IO‘ H O as N N H H m l‘ o H H \OVNVW N V‘NQV‘KD V' (”V N O N [N I o e e o o o o o e o o e I o o a ‘0 SOCHG N omvsoH H HN‘BQ V‘ \D as H \D NV \0 O‘ H In H 1‘ H H H H m V‘ m ‘Doo ¢ mNomo (n Q'Q' N \D O m o o o o o o o o o a o o o o e o \D M'IOHM co IOWMHV 8 OCka v m m N H m MNNHM H ‘0 I‘ H EH H H H N <9 3 \D 0W0 CD \DOVDCQ O N O V‘ N m e e o o o o o o o o o o o o o W M‘RHNH m ”GHQ? \D ‘KH-IV O as H H ‘1' \D 8 o Lg so oosooo co Nooco . so coco o N o e o e o e o o 0 em 0 o o e o a E arm’s °° was”: :3 oz“: 8 2 31 N 8 m m on m ovv V \O‘DV'NO a) (D V” \O V 00 H ' 60603 If; osédsoso a: u; cho' 0: sn' I ° g N H <‘ H 0‘ (21‘ TABLE 18b.-Directim of Nigeria's Trade January-Decent, 1967-1971. Countries UnitedKingdan India Other Oountriesg I-kmchmg United States of Mice Omnnmvealth Countries Japan E.E.C. Countries Western Germany Italy Belgian and Imbourg Netherlands France E.E.C. Countries Iceland Norway China (Mainland) Eastern Europeh Israel hConflprising Czechoslovakia, Eastern Germany, Finland, Hungary, Poland and U.S.S.R. *Negligible gmcludes South Africa +Estjmated Noncatmorwealth Countries 'Ibtal All Countries Other Countries Total 4. Parcel Post .325 8308 no nan—59m 3569690 gin-Dag 8.23.53: 89qu 684.8 ..I 36.2 33.9 «at. 68.3 8&3 n3 mad. m2... Sad REE 68 a «8.3 >36 #33 I.. 86... 68.3 ..| E622 82 38 386 g Iona 818 32. 83¢ £28 a uflaufi 885.833. in 66 2.38 £82 138 .9098 in: .3893 36.3 n.a.-9.8 8g 368.. .3832 go glofl was. in.— 32 g 33 "dog 84 86 86 86 26 «H6 36 36 26 86 5a 84 I 86 86 36 . 26 86 :6 $6 36 #35 84 I 36 S6 S6 36 S6 86 86 S6 6562 84 II .I 66 36 .36 36 36 a6 36 $363 84 I. I. 86 86 :6 26 :6 36 -6 63.5 84 I. .I 36 S6 36 86 £6 86 :6 $68“ 84 I. I.. 36 86 :6 S6 S6 . 36 «H6 ooxmoa 86 I. . I.. 36 36 :6 86 R6 26 :6 moxza 2 8nd! min 8.50 aha £2380 5 38. £68 83¢ g a 5:33.88! on. 66 on. 66 fihz 8.38 a!» .83... teen 34.2 6.26.336 go 8323 EELS «IE. ..§3§3§§8§ .82: .308393383 8868 8662. 86.: 86; 5.6a 86.: 362 5.8 «8.2.4 5.3” 36.3 i! E 3663 86 S 86; 8%: «3.8 and. 68.3 «3.3 «~38 an; «55 6868 I.. 68; 62.3 6362 . 8.63 68.2. 828 63.2.6 «9:5. #32” 563,. ..I go a 5.9. 36.3 $.15 n.a.. 68.3 8668 2.6.5 2.3:: 68.86 .I .I 3.3 36.2 36.3 on... 5.2: ”8.3 6.3.3 638" 83.8 I... I. 2.1: 86.3 362 ”8.: 68.5 «368 813 855 2.3.8 ..I .I 818 68.2. 86.3 .86» 2.66: 96.3 68.3 ax; 3.33 I. .I :66... $36 68.3 68.: «86” than «8;: 8333 3.36 I. I. 312 «3.8 5.3 68.3 8668 23.3” «8.3 mag 82.! I «In lilo Bi 33.8 189 £36 .39 avg 8» 585.88! a... 66 a! .36 £3: 3:38 g .883 3.3.3 666...: 3 gal-a a 53 is the most important trading partner to Nigeria with Nigeria's exports to that zone rising from 36.5 percent in 1968 to 39.0 percent in 1971. West Germany, Netherlands and France are increasing imports from Nigeria at the same time. The Eastern European countries are also increasing the intake of Nigeria’s exports as is also Norway (Table 18). When the exports of the Nigerian Produce Marketing Company is examined in directional flow trend context, the greatest bulk is shipped to the Northern continent of Europe (Table 19a). On proportional basis, northern Euro- pean continent took up between 1964/65 and 1971/72 an an- nual average of 34 percent with a range of between 32 per- cent in 1965/66 to 52 percent in 1971/72. When the United Kingdom and Eire is included (the E.E.C.) an annual average of 47 percent was taken up during the period. Except the French ports and the Mediterranean countries, the other destinations of these exports were relatively minor (Table 19b). Since most of Nigeria's exports are traded c.i.f., the proportion allowed on £.o.b. basis is rela- tively very little indeed--some 15 and 35 percent of total exports for 1970/71 and 1971/72 produce seasons, respec- tively (Table 19c). 54 The United Kingdom and the British Commonwealth are the greatest suppliers of imports to Nigeria (Table 18). The European Economic Community as constituted before the British entry came a close second in value terms. The United States, Japan, and Mainland China are steadily in- creasing their exports into Nigeria. Of some significance also are the Eastern European countries which are steadily becoming a force in Nigeria's markets. The major imports are machinery, industrial, and transportation equipments, nondurable consumer items and pharmaceuticals. The direction of trade from the planning of ship- ping focus also brings in the problems of traffic balance37 in both directions. In the absence of volume,38 of trade in each direction and by countries of origin and destina- tions, it may be necessary to use aggregate annual figures to estimate the imbalance in traffic. Between 1960 and 1970, the traffic imbalance ratios have varied between the lowest point of 1.02 for 1960 and the highest of 15.60 for 37See S. A. Lawrence, International Sea Transport: The Years Ahead, Lexington Books, Mass., 1972, pp. 64-65, for the measuring techniques. Volume terms are more de- pendable factors for traffic planning. 38The analysis in Nigerian Trade Summary makes it difficult to consolidate by volume per destination. 55 1971 (Table 20). The great disparity between the heavy and the light legs are due to the national oil and gas components of Nigeria's exports. Were natural oil and gas tonnage removed from exports, the conventional trade tonnages in both directions might have approached rela- tively more balance ratios. This natural oil factor is noticed after 1962 when petroleum drilling in the country started to yield significant output. The civil war years 1967 and 1968, when petroleum drilling was adversely af- fected, can be seen in the traffic ratio of 2.32 and 1.30. Thereafter, the ratio became excessively imbalanced. Even a breakdown into annual means between 1960-66, 1967-71, and even 1960-71 continue to exhibit the oil factors in the imbalance picture. These imbalance ratios mean that for planning of shipping, most ships would have to run one of the legs in ballast, assuming that Nigerian ports were the only West African ports of call from Western Europe. Profitable shipping ought to be based on almost equal weight of trade cargoes in both directions. Only balanced flow of cargoes can make shipping, particularly liner shipping, a less hazardous venture. 56 fiMfl£:20.-thchandise TradeeInbalance Ratio-Nigerian External Trade. Exportsa and Imports Absolute Imbalance Year difference . b re-exports (000 tons) (000 tons) Ratio (000 tons) 1960 3,094 3,149 55 1.02 1961 3,784 2,410 1,374 1.57 1962 5,617 2,973 2,644 1.89 1963 6,082 2,967 3,115 2.05 1964 8,214 3,324 4,890 2.47 1965 14,475 3,588 10,887 4.03 1966 18,080 3,512 14,568 5.15 1967 5,083 2,188 2,895 2.32 1968 2,146 2,788 642 1.30 1969 28,447 3,227 25,220 8.82 1970 52,705 3,635 49,070 14.50 1971 72,089 4,622 67,467 15.60 Annual Averages 1960-66 8,478 3,132 5,346 2.71 1967-71 32,094 3,292 28,802 9.75 1960-71 18,318 3,199 15,119 5.73 aContains crudeloil and.natura1 gas components. bRatio of heavy leg to light leg. Source: [Nigeria Trade Summary. Cbmpiled.froanable 18. 57 J l J [ 1962 1963 ' I 1964 . l 1965 J 1966 1967 J 1968 19 69 1970 _1 fl * _| -_ ~ — 1971 FIG. 1.--Merchandise Trade nrbalance Etio: Nigeria's Ebcternal Trade (tons) . Source; Compiled from Table 20. 58 Conclusions The Nigerian economy is a rather dynamic one and has already demonstrated growths in almost all the sectors. Population is growing though slowing down in the 1970's. The gross domestic product is currently moving forward at over 10 percent per annum. The oil sector followed by agricultural output is making substantial progress too. The pattern of industrialization is such that most of the erstwhile agricultural raw materials in the export trade will in the future be locally processed into semi- manufactured or fully manufactured goods. Mining and quarrying will continue to expand with the oil crudes ex- ceeding the preSent over 2 million barrels per day output. At the same time output of electricity and energy resources are showing signs of greater positive increases particu- larly with the oil base, and the New Kainji Dam just com missioned. Such has been the economic base on which the na- tional export-import trade thrives. The accelerating growth of trade is such that increasing volumes of cargo will be available for the shipping industry. Over the decades between 1950 through 1960 to the 1970's (but for 59 the minor interruptions of the civil war) export-import trade had been growing in volume and value terms. Ships entered and cleared at the Nigerian ports have demonstrated the same trend. The spread and directions of trade have been widely diversified though Western Europe has continued to handle the largest magnitude of share. The pattern of shipping by directions have followed the same trend. The one problem noticed is the imbalance in cargo flow and hence shipping movement and capacity utilization on a number of the trade routes. While it is clear that the economy is a dynamic and growing one and likely to continue to nurture and nourish vigorous foreign trade, the directions of trade and the contents of such trade may alter. But the one fact that is not altering, at least not in the most immediate future, is the dominance of western EurOpe as Nigeria's foremost trading partner and the source and consumer of the major shipping services needed. 0. '2 CHAPTER III THE SHIPPING MARKET SERVING NIGERIA Demand for Shipping Services The demand for shipping services is a derived39 one since such demand is not for its sake but stems from the activity of the many exporting and importing merchants and commercial houses acting independently or collectively in the market.40 These demands arise from and are influenced by the pattern of international trade and passenger move- ments. The pattern of international trade and passenger movements has its root in the level of prosperity, consump- tion patterns and the level of success of commercial pro- motions both at the countries of origin and destination of trade. 39Carteen O'Loughlin, The Economics of Sea Trans- port, Pergamon Press Ltd., Oxford, 1963, p. 41. 40B. N. Metaxas, The Economics of Tramp Shipping, The Athlone Press, University of London, 1971, p. 30. 60 61 According to Metaxas,41 the magnitude of demand for shipping services is a function of many factors some of which are: a. The volume and structure of international trade. b. The geographical pattern of world production and consumption of raw materials, mostly agricultural and industrial commodities. c. The level of demand for the commodities transported by ships at the countries of origin and destination. In general, therefore, there is a noticeable positive rela- tionship between the demand for shipping services and the increases or decreases in seaborne trade and prosperity. This does not underrate the effect of exogenous forces, 4llbid., p. 32. Also see Charlotte Leubuscher, The West African Shipping Trade, 1909-1959, Sythoff, 1963, p. 12. ' 42O'Loughlin, op. cit., p. 46, maintains that pros- perity through income elasticity of demand is more appro- priately applicable in the case of passenger traffic where the substitution effect of airline in place of shipping has been mostly positive and high. The rate of increase in expenditure on travel in developed nations has often ex- ceeded that of income. Freight demand for shipping services where bulk and weight are significant is on the other hand more or less inelastic. 62 that is, factors like political stability, wars, and the ravages of nature--earthquakes and blithing weather which are outside of the shipping freight markets. The demand for shipping services in Nigeria is the sum total of the needs of varied sectors of the economy having to do with the outside world through movements of their raw resources or products. The ex-colonial firms like the United Africa Company, John Holt, Paterson Zochonis and even the post-war ones like the A. G. Leventis and the Union Trading Company have played major parts in the demand for shipping spaces and services. The government-owned Nigerian Produce Marketing Company, with statutory obliga- tions for the external marketing of the country's selected major export products, handles over half a million tons annually and is a significant factor to be reckoned with in the shipping market for Nigeria's exports. The new and budding Nigerian export-import private firms, specifically groomed by the new indigenization decree43 are taking over the external trade in certain commodity areas from erstwhile alien firms. When the demands for service by the 43Federal Ministry of Information: Gazette Notice, Lagos. 63 industrialists44 are included, substantial demand is made on shipping services both for import and export trade. The prosperity occasioned by the oil industry and the increas- ing earnings of the export crops like cocoa and palm pro- duce (subject to income distribution strategies)45 are likely to expand more the demand for shipping services. A proper analysis of the demand for shipping serv- ices requiresaadisaggregation of trade volume by categories of commodities. Such categorization by NEDECO46 on Ni- geria's export/import trade in 1965/66 showed that 11 per- cent were of dry bulk commodities, a negligible fraction was liquid bulk, and 89 percent was general cargo. A further breakdown of the general cargo showed that bagged, crated, and cartoned cargoes were still a major proportion. This classification nonetheless is mainly important for 44Particularly with incentive systems built into the promotion and expansion of industries and private enterprise system. See the National Development Plans 1962-68 and 1970-74 and the Federal Government's Statement on Industrial Policy, Session Paper No. 6 of 1964. 45See Sunday Matthew Essang, unpublished Ph.D. thesis, "The Distribution of Earnings in the Cocoa Economy of Western Nigeria, Implications for Policy," Michigan State University, 1970. 46NEDECO (refer to footnote 29), ibid., pp. 1-21. 64 forecasting the demand for types of ships and port facil- ities to be developed. But given the annual volume and types of trade--exports and imports--the demand for ships, determined by bale capacity or deadweight freight tonnage can be estimated.47 Such an exercise will have to study the composition of trade load factors and the net load of a typical freighter. According to estimates by the Government Inspector of Shipping48 Nigeria's exports and imports would have reached 124 and 0.8 million long tons respectively by 1980. The greatest proportion of the exports would have been crude oil exports and some semi- and completely manufactured items. By this analysis, 10,000 tons is considered the average size of dry-cargo ships while 100,000 tons is "the smallest feasible economic unit size for tankers." Indeed, according to the analysis, sea cargoes have now shifted to the 20-30-40,000 DWT category for economy of operation purposes. If the oil components are isolated from the 47Carleen O‘Loughlin, The Economics of Sea Trans- port, Pergamon Press, Oxford, 1967, p. xi. 48Captain H. A. Agate, A paper presenting Nigeria's Shipping Development Plans up to 1980 as prepared by the Federal Ministry of Transport, Lagos, 1968i 65 total exports, annual freights of some 3.5 million long tons are available for northbound shipments. If the esti- mates of 5,000 tons are carried per ship on northbound trips, it should require some 700 ships. When the extra crude oil tonnage of 15 million per year is examined, allowing an average load of 30-35,000 tons per tanker, this export item requires between 450 and 500 tankers a year. It may be presumed that imports which maintain some 3.5 million tons per annum should require between 770 and 780 ships a year. So that on the whole, a total of some 1,280 ships including tankers should be entering the Ni- gerian ports annually for trade purposes. The above estimates are based on the optimistic carriage of between 4,500 to 5,000 tons of cargo each way per trip. When the seasonality of Nigerian export products, the stiff contest among lines for cargoes and the load factor problems are taken account of, more than 1,500 ships should annually enter the Nigerian ports. In actual fact, allowing for more than one trip per’ship per year, the actual number of ships required should be really smaller. Further, when specialization in shipping49 is 498. A. Lawrence, op. cit., pp. 97-103. Also see S. G. Sturmey, British Shipping and WOrld Competition, The Athlone Press, London, l962, pp. 24l-244;_255-258. 66 taken account of, oil tankers, bulk carriers, paletized ships and refrigerated ships taken together, there will be a lot of differences in the needs of Nigeria's trade. Between 1960 and 1971, the annual number of ships entered have been around 1,974 or nearly 2,000 with some 7 million net registered tons. The post war annual figures have been around 1,500 being adversely affected by the civil war between 1967 and 1970. When coastwise trade and seasonal factors are assessed, no less than some 15 million net registered tons are annually required (Table 22). It is not, however, clear whether this level of shipping ton- nage is optimal since a private survey study by the Central Bank of Nigeria in 1971/72 showed that most major shipping lines complained of working with excess and unused capa- cities.50 While most of this can be ascribed to seasonal factors relating to the nature of agricultural production, the weather effects on loading and unloading operations at the ports will have effects on how much is done annually.51 50Central Bank of Nigeria, Statistics and Surveys Division of the Research Department Annual Survey of Shipe ping and Airlines Operations in Nigeria, 1970L 1971, 1972. As high as between 58 and 63 percent of capacities were re- ported by responding lines to be unused. 51For details of this concept see Dag Tresselt, The West African Shipping Range, United Nations, New York, 1967, pp. 25-26. 67 Daniel Marx52 ascribes this underutilization of capacity to the inherent intra- and inter-conference competition which in the absence of pooling and rationalization of services must leave most ships running at less than full loads. TABLE 21.-Ships Entered and Cleared at the Nigerian Ports International Ships Entered Ships Cleared Year Net Net rhmdxn: Ragistered tundra: Registered Tens ('000) Tans ('000) 1960 2,194 5,845 2,291 6,092 1961 2,176 6,531 2,144 6,419 1962 2,419 . 7,546 2,418 7,509 1963 2,175 7,184 2,136 7,053 1964 2,255 8,380 2,159 8,069 1965 2,367 10,869 2,378 8,242 1966 2,483 12,411 2,485 12,412 1967 1,572 3,636 1,191 5,460 1969 1,529 ' 2,945 1,531 4,604 1970 1,403 5,343 1,385 4,997 1971 1,590 4,953 1,584 4,834 .Annual .Awerages . 1960-66 2,295 8,395 2.327 ’ 7,655 1967-71 1,524 4,001 1,408 3,979 1960-71 1,974 6,564 1,896 6,123 Sauna» thndanthmde!immarflaL 52Daniel Marx, Jr., International Shipping Cartels, Greenwood Press, New York, 1969, pp. 255-260. .0]- I...-v o |§ .-\/\ Ink. 68 .815 .moflmfifim mo 8E8 H838 "8H8 3 all Illll .II III' ll- 5 I. ll- 5 mam a «ha a and—:5 m me I vw mo¢.N mam va.a ooaem cam omm.a ahma b aaw-I ma th.~ Nam mmm.a vom.m aom mo¢.a chma m h N I mmm.~ hum amm.a mom.~ «mw mmm.a mwma Nma ma hha memea mmv hwm.a hmo.N mam «mm.a mmaa mmm NN amm bam.a mun ama.a th.N aon th.a hwma mamal mamal N I 55¢.a mmmea mmv.m mma.m ohm mm¢.N coma Na I am I aa I amm.¢ mmm.a mhmem mma.¢ NNm.a hmM.N mama oaa om mm oma.m abh.a ama.~ mvo.v amhea mmN.N wwma «ma I _oma I m hmo.¢ aom.a mma.~ amo.¢ aomea ova.N mwma vw mm m cmm.¢ mcm.a maven vmv.¢ mooem maven «mma «5 av Nm mvo.¢ mmmsa ava.m baa.v avm.a wha.N aoma ma am ha I bh©~¢ mmm.m amN.N amo.v h$¢- vma.N coma 378 3:8 8:8 CV A3 5 A3 A8 A3 3.3 8.."3 3082 3.3 93H? amuon. lummoo vacuum adobe lummoo DH. H.309 1530 g .58» mocmummman_ umumwao umnmucm .Aamooq can amcoaumgumuch muuom Gdaummaz may at umummau new nmnmucm mmHnMII.- mgmmy 69 The seasonality factors in the shipping trade of Nigeria tend to affect the volume of cargo loaded and un- loaded. With the open berth system, foul weather is likely to disrupt port operations, and hence, the ships handled. Where the seasonal factors are involved, they nearly always affect agricultural products, whereas mineral oil products are immune to such weather and seasonal ef- fects. Because of the ebb and flow of most agricultural products, apparently shipping is mostly demanded between March and September for exports. The same pattern appears to be noticed for imports which should under normal condi- tions not feel the seasonal effects. Apparently weather problems connecting with port operations were likely to be more significant as determinants of such shipping oper- ations (Table 23). When demand is related to ports, Lagos and Port Harcourt assume premier positions (Table 24). Between the 1963/64 and 1969/70 produce seasons, ships entering Lagos have annually averaged 1,909, while they averaged 1,096 for the four normal seasons for Port Harcourt. This pat- tern seems to emanate from the pattern of port development strategy adopted by the government. The so-called minor Ru: 0“... -.~. .c I. I... I. IVA... ‘C‘IIZ ‘ I. ‘II‘ ..I side. ..|\. 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I I I I 39595 on~.a amm.pmo.m v8...” Nav.o~h.~ Ba nmmfimfim «no; gum anon enqmafiv ono.~ nomdwhé mmw.a «$486 21.4 «whémmfi 8m...” vmvémofi vmm.a voodflfi mom.a awning...“ m8.~ moms 003.58. Kim “5538. and.“ g mag moi—:8. mama—«m g 63.5 g and“ 05:8. Edam .moa uwz «0 .oz .5 umz yo .oz .3. .52 no .oz .32 uuz mo .02 Ta .32 no .oz .5 no: no 62 .mua uuz no .02 onumwma $.33 3:33 5:33 8.33 miwma $.33 _ 3.3m flan-om good 3 38m .3832 neg anemia Sufi 72 ports deserve major development, at least, to relieve the congestions in Lagos and Port Harcourt but the observed trend is for more intensive investments in the already crowded ports of Lagos and Port Harcourt. Bonny port is very important as crude petroleum export terminal, taking in an annual average of 369 oil tankers between 1963/64 and 1966/67 and a post-war figure of 567 in the 1969/70. On the basis of these concentrated demand for shipping in Lagos and Port Harcourt, the perennial problems of port conges- tion there may linger more unless some decentralization is attempted on port developments. Such decentralization will be related to the internal layout of transportation and the flow of trade. A more serious factor likely to influence the level of demand for ships in numerical terms is the current and future frontiers of shipping technology and innovations. As NEDECOS3 noted, in its report on port development, An ever increasing volume of cargo will be shipped in containers carried by specially constructed container vessels. A number of shipping companies . . . have investigated 53NEDECO, op. cit., p. 3. This is also confirmed as a major factor on demand by the government Inspector of Shipping-fees footnote 48. Unpublished paper, pp. 6-7. 73 the possibility of introducing container traffic in the trade to and from Nigeria. Probably, this feature may have more relevance to supply than to demand but will certainly influence shipping serv- ice consolidation. The bulk handling methods for agricul- tural produce exports and raw material imports—~palletiza- tion and high capacity bulk facilities will be extensively used. This will affect the quantum of ships demanded for trade purposes. The major fact is that demand will be directly correlated with trade volume and services needed. Supply of Shipping Services The supply of shipping services, like all supply schedules, are related to the cost-earnings relationships. These earnings are linked to the current freight rates, the volume of traffic and the time and distance matrices of the journeys. Benathan-Walters54 hypothesis is that tramp operators are induced to supply services based on demand considerations (allowing for competitive conditions) while S4Esra Benathan and A. A. Walters, The Economics of Ocean Freight Rates, Praeger, New York, 1969, Chapter 4. 74 the liner operators link the supply of their services to cost determinants alone. Whatever the merits of these hypotheses, cost-earnings relationships determine the decision to supply shipping services. Investment in ship- ping is also stimulated by direct subsidies to nationals in some nations and for ship buyers throughout the world by direct and indirect credit aids extended by major ship building countries to promote the export of their shipyard businesses.55 In most cases, additional financial assis- tance are offered by nations as in Japan while in a number of others, companies find outlets for investments abroad to avoid repatriation of funds earned abroad or to utilize blocked currencies. The major suppliers of shipping services to Nigeria range from the operators having contacts with Nigeria from the colonial days through the post WOrld War II foreign lines along with the few Operating Nigerian indigenous 55Financing terms applying in 1967 are summarized in UNCTAD study, Establishment or Expansion of Merchant Marines in Developing Countries (UN publication e 69 11 D 1) p. 45. Terms have been tightened. OECD governments are curbing liberal sales arrangements. From January 1, 1971, builders require 20 percent cash payment, 7-1/2 percent interest rate with 8 year repayment terms on ship mort- gages. 75 lines. For the purpose of this analysis, only major lines and their organizations will be examined while the market between Nigeria and Europe will be studied in some detail. According to the Federal Ministry of Information in Lagos, a total of 38 foreign and indigenous shipping lines56 were serving Nigeria and overseas trading activities (see Ap- pendix I). Of these, the major conferences in which they operated were: i. The West African Lines Conference (WALCON) serving between Nigeria. and Europe (including the United Kingdom. ii. The American west African Freight Conference (AWAFC) serving U.S. Atlantic, Gulf ports; Canadian Atlantic and St. Lawrence seaway ports. iii. The Far East west African Conference (FEWAC)--a very loose rate agreement association serving Far East and west Africa. 56Only-the Nigerian National Shipping Line Limited (of the 32 Nigerian indigenous shipping lines found on the Registry of Business Names by 1967/68) was published in the Ministry of Information release. See list of Nigerian private lines in Appendix I. 76 iv. The Italian west Africa Conference or the Mediter- ranean Conference (IWAC) serving Nigeria and Mediterranean ports. v. The French Conference (COLINAU) consisting of French shipping lines mainly serving French- speaking countries in Africa but stopping in Nigeria as well. Beside lines organized on conference basis, other shipping lines can be organized on nonconference basis and may be classified as per the nationality of their incor- poration.57 For a selected number of years, the ships entering Nigerian ports by nationalities are outlined in Table 25. The dominance of the British lines can be no- ticed and the decline in the proportion of British ships over time is a function of the positive activities of other western European and other West African lines. Since the E.E.C. is emerging as the dominant trading partner with Nigeria, evidently their ships will increasingly carry more trade between Nigeria and western Europe. 57For details of those lines see Charlotte Leu- buscher, The West African Shipping Trade: 1909-1959, Leydon, 1962, pp. 55-58. 77 .figgé duce .3632 "88.8 o. 02 mmm .m o. 2: :m J o .2: m3 .1. o .2: mme .4 38 o. 3 ms; SR mom; «.3 3m 3: e8 gusto m4 we m.~ RH in H2 NJ on g in HS «6 NR «.« a m.m mfl antes de emu Ha can as mam Tm. mmw g8 page sum SN Sm SN m.m m2. a... «mm sued we 8m 93 «we 3: one Rm 8.. 33502 «.5 m2 Sm mmm 5. man HS 2: .333 RS Se «.8 m3; ta 8TH m.2 ems; define 3. «3 9m e3 ea «on «A 84 engages a ceased a @383 1. Sage a $393 bungee 8.38 223.832 mm um Ensues magmas, «.0 352 . “mummy @3839 mmflaamcoaumz an muuom 3.832 mnu um moaua>aug< ganglia mama. 78 Looked at from another angle, the supply of ships and shipping services may be based on historical evolution. The historical and economic and political evolution of Ni- geria would have close links with the history of her ship- ping services. The pattern of Nigeria's trade and hence shipping services date back to the pre-colonial, colonial, and even post-colonial days. Britain was the major sup- plier of shipping services up to 1960. Occasionally other western European ships called at Nigerian ports. It was more of ships from the colonial powers offering services to the colonies. Tresselt58 termed them as "colonial lines" since they flew the flags of the colonial powers. This club, comprising Britain, Belgium, France, and Germany, shared the virtual monopoly of the West African trade and the shipping services. Most of the lines either belonged to colonial merchant houses or banks or served the interest of those “colonial" enterprises. The most prominent of these were: Elder Dempster Line British Guinea Gulf Line British 58 Dag Tresselt, op. cit., p. 38. 79 Palm Line British Chargeurs Reunis French Compagnie Maritime Belge Belgian woermann Linie German The Werld War I disrupted most of the German fleet and virtually eliminated that nation from the West African trade. In their place, the Dutch came in vigorously to replace the Germans through the inauguration of the Holland west Africa Line (HWAL). The second werld war once again destroyed what German fleet was rebuilt later on that trade route while the Scandinavian countries gained greater foot- hold on this trading zone. The Scandinavian west Africa Line (SWAL) was inaugurated for participation in the west African trade. As a result of the competition which ema- nated, first among the British lines and, later, among the various European lines, the settlement was concluded in the general membership of the West African Lines Conference (WALCON).S9 59For historical development of the shipping services and the assessment of the West African Lines Conference, see Charlotte Leubuscher, west African Shipping Trade, op. cit., pp. 13-80. 80 It was these members of the west African Lines Con- ference which virtually monopolized the shipping market in West Africa in general and Nigeria in particular in the post World War II years. West African countries were neither independent nor had the resources and political powers to own and operate ships of their own. Even before and after the passage of the Statute of westminster in 1931, the problems of colonial territories and the ownership of shipping services were constrained by many inhibiting factors. Such colonies could neither own nor regulate shipping services. It was only after the post-war inde- pendence of ex-colonies in West Africa that the west Af- rican nations joined in the operating of shipping services. The Black Star Line (Ghana) and the Nigerian National Ship- ping Line (Nigeria) inaugurated respectively in 1957 and 1959 led to the first local share in shipping services. The west African Conference Lines (WALCON) Reconstituted in 1924 the West African Lines Con- ference was made up of the major shipping lines incorpor- ated in Western Europe but were joined by the two West 81 African based 1ines--The Black Star and the Nigerian Na- tional Shipping lines. By 1959 (Table 26) the dominant lines in the conference were Palm Line, Elder Dempster, and woermann Linie. It was evident that in terms of fleet or tonnage basis, the West African Lines were of insignif- icant effects. And when the agreements which normally bind conference members together are allowed their full play, the West African members had limited powers of operations. It was also significant that the British lines controlled, by shipping tonnage, a total of over 68 percent of the market. TABLE 26.-Fleet Strength of Oarpanies Serving Nigeria (1959) . . . . No.cfi’ Penuanage (fixesfnxm 51‘1me I‘m“ Vessels of Total ('000) Elder Denpstera 44 33.0 269 'Wbermann Line 22 16.5 66 Holland West Africa Line 10 7.5 37 Palm Line 25 18.8 144 Guinea Gulf 5 3.8 23 Scandinavian West Africa Line 10 7.5 44 Hoegh Line 8 6.0 35 Black Star Line 5 3.8 19 Nigerian National Line 4 3.1 20 Total 133 100.0 657 aExdhfibdwmafibraulIine. Source: Charlotte Leubuscher, West African Slumping Trade 1909-1959, Sythoff, 1963, p. 99. 82 Before 1965, the trade with Eastern EurOpe was be- coming substantial and the Eastern European shipping line, the Uni-Africa, was taking part in this trade principally in bulk cargo--cement and ores. When the Polish Maritime Institute published a critical analysis of the influence of WALCON on West African trade6o stressing the conference's monopolistic practices, the WALCON members, principally the British lines, had to reconsider the future look of things. Some of the other competing tramp operators were becoming formidable on the European-West African trade route. The level of competition outside of the conference gave much cause for concern,61 that the WALCON members had to adopt new measures to safeguard their interests. The normal tying arrangements to throttle independents and tramps or exclu- sive membership policies to prevent new lines gaining 60M. Krzyzanowski, An Economic Analysis of Shipping Lines Connecting European and West African Ports, Gdansk, 1964, Edited by Maritime Institute of Gdansk, V01. III, No. 33, pp. 36 and 36 quoted in Tresselt, 0p. cit., p. 50. 61The Nigerian National Shipping Lines' management had complained bitterly of their experiences with weermann Line and Hoegh Line as "being a bitter one." Where Hoegh, a nonmember of WALCON competed against them in the 0.x. and Antwerp/Hamburg range, WOermann Linie (a member) activated a most unbending discriminatory attitude of industrial houses in Germany in favor of German flags. Memorandum to Ministry of Transport, Lagos, August 1967, paragraph 10. 83 admission to the conference did not seem adequate. Price war did not appear attractive since most of the Eastern European and West African competing lines were state owned which could go any length to withstand the price warfare. Even though their power was substantial on the European- West African trade route (in tonnage and share of the market terms) a divide and control policy was eventually adopted. With the virtual 90-100 percent monopoly control of the trade with the United Kingdom and some 60-75 percent control of Western European trade with West Africa,62 the WALCON broke up the one conference into two different con- ferences. The United Kingdom-West Africa Common Services (UKWAL) and the Continent-West African Conference (COWAL) were the outcome of that break up. The West African Lines Conference which by 1962/63 had a total of 274 ships on their joint fleet also had a joint control of some 60 to 70 percent of the total trade traffic between West Africa and Europe. The major reasons for the break up into the two conferences were apparently to secure the British market 62Confirmed by N.N.S.L. Management and UKWAL rep- resentative (Interview in Lagos, August 1973). 84 TABLE 27.-West African Lines Conference (WAKDN) 1962/63. Fleet Ckoss Inaxmnt Maflxuanufi» Ebthuuity Str II Imgtmxxed oflfleet Tmimge StnyQMh Elder Dempster Lineal British 54 353,301 19.7 Guinea Gulf Lineb British 36 280,141 13.1 PaLm Line BritiSh 24 145,863 0.8 HdUadekmt Africa . Dutch 63 369,529 22.9 DdlIEqume Africa 1' 'en Genran 14 131,135 5.1 S 3' . Brush West Africa“ I Norwegian 68 852,537 24.8 Swafish Black Star Line Glanaian 10 54,182 3.6 Nige‘m‘ mm“ Nigerian 5 29,292 1.8 aIncludes Henderson Line serving Far East. bIncluies Alfred Holt and Ourpany (Blue Funnel Line) Ocean Steam Ship Oarpany. Source: Compiled from International Shiming and Ship Building Directory. for the British firms while still retaining a share of the other European markets for them. To the extent that the UKWAL is a common services organization with pooling ar- rangements, rationalization of shipping arrangements, and 85 sharing of incomes on fixed proportions among members is a demonstration of what monopoly powers can achieve.63 United Kingdoerest Africa Lines Joint Service When the west African Lines Conference (WALCON) was dissolved, one of the two emerging conferences covering the British market was the UKWAL. Six shipping lines became members of that shipping common services for West Africa. The three dominant British shipping lines virtually control the conference while the two West African based shipping lines and the Norwegian shipping line were members. The member lines are: 1) Elder Dempster Line: 2) Palm Line; 3) Guinea Gulf Line; 4) The State Shipping Corporation: 5) Nigerian National Shipping Line; and 6) Hoegh Lines and Company A/S. Details of their fleet strength and nation- alities are outlined in Table 28. Once again, the member- ship of this conference and the restriction of the British 63Daniel Marx, Jr., cp. cit., p. 263. The forma- tion of tariffs and the charges of discriminatory prices or rates are the fruits of the achievement of sufficient joint monopoly powers even to include the powers of ex- cluding rivals from the market. 86 . guano DEE mo E0366 3.63 m .888 .23 5868.6 messages at madman 88368.3 .888 .dem can some . mg Hag mmBaBHo 0.8a I I «3 I egg .138. .8 in :88 «ma 0 e ~ ~ g a m am mam boa a new mmm me .8332 89.3 3008 8.3 Fig .. a a QMHHMOHZ . m m one oma mmm .3 ma . . accojmz 3.332 . . . 8.3% m m onmm ma mow vm ma cog Egg 33m mfi. m.ma 4...: awaémm mm smauaum soda nag nag m. m 53.3 hmméva ma nmflaum moan annum mém 893m ommKam on nmauanm 8.3 H8693 umoam smash was...” H 88:8 1.88.5 scavenged 883200 some @0ng woman no mood Benz «0 astound . m m 5 nmofiu dmooo Faamgoauwz . 34923 mmogm SOs-=00 gonad ummz 565 flagella“... an. 87 market to the conference tend to strengthen suspicions that the three British lines have taken actions to protect their home market. They also, in combination, control the con-' ference in which the Nigerian National Shipping Line main- tains only 8.3 percent of the fleet strength. This conferenCe has its head office in Liverpool, England. It operates on deferred rebates for six months. For southbound traffic, the conference maintains both con- tract and noncontract tariff rates. For the former, pay- ment of tariff rates less 7-1/2 percent are immediate while for the latter, tariff rates less than 7-1/2 percent are paid with such rebates being deferred for six months. When the northbound traffic is considered, deferred rebates are held on six monthly periods, April 1 to September 30, and October 1 to March Blst. The deferrment for southbound leg lasts between January 1 to June 30, and July 1 to December Blst.64 4Croner's world Dictionary of Freight Conferences, 1972. 88 Continent-west Africa Conference (COWAC) The fourteen shipping lines which constitute the Continent-West Africa Conference are enumerated with some of their details in Table 29. The conference is mostly made up of European shipping lines of which the British, taken together, are dominant. Four French lines are in the conference as well as three West African lines, the least of which by number of ships is the Ivorian Line. It is equally significant that the three British lines which dominate UKWAL also dominate COWAC by sheer number of vessels in their aggregate fleet. Hamburg, Germany, is the conference headquarters. Tariff arrangements are broken into two-~between Europe and Dakar/Port Noire and Congo/Angola ranges. The deferred rebates are 7-1/2 percent of southbound freight rates to Dakar/Port Noire and 10 percent of the rates for Congo/Angola ranges. Such deferrments last for six months. For northbound traffic, such deferred rebates are a blanket 10 percent of rates for six months. Such deferrment for timber alone is 2 x 10 percent and held for only three months. Normally, the conference holds rebates twice a year, January 1 to June 30, and July 1 to December 31. III‘: ‘III! I Iviltit ‘ on- n 89 NE a o H s @flfimflm ragga 303ch gflmfiflm no 3938.. u .163 3838 .839 88 En Tendon 93 339 33833-88 oxucumuom . Agav 3033383338 3.....an E30320 .3800? AM HOSE .38»? £8 coma 882a Maw? Emu-580 hhhhhh «««««« mmmmmm mmmmmmm HHHHHH NH smug 5 £5.38 nag 335.2 g g 303” 503 5.33m 390382 .338 fiflua 868 32: g g 083 83¢ “8: 833888 3&8 83mg 33m 8355 3:2 5382 “.88; 8 349.2 8.88 862033 38903888 5...: g 8 TEES" 3368 .>.z 3382 8.3.3.5. 83 58 3259898 8833.33.88 sauna; 833.52% .8353 cogs—Edged“. .4653 5408333260 «Egg confining 32.632 gag .28. 8.28:8 8.32 a! $3.3 a 90 For timber, the rebates run in three monthly installments-- January 1 to March 31, April 1 to June 30, July 1 to September 30, and October 1 to December 31. Other Conferences Serving Nigeria Outside these two conferences, Nigeria is served by numerous other conferences in other directions of trade. The majority of those conferences follow trade and include: i. American west African Freight Conference. ii. Conference Export-Import des Lignes de Navigation Dessevant Madagascar, etc. iii. Italian west African Freight Conference. iv. United States Great Lakes/St. Lawrence River Ports- West Africa Agreement. v. West Africa-Japan Rate Agreement. vi. West Africa-South Africa Freight Agreement. 91 Structural changes among these major conferences can be examined by reference to Appendix I. For the pur— poses of this study, only those conferences on the West African-European trade route will be given detailed study. Tramp Operators in Nigeria's Market Apart from intra- and inter-conference competitions, tramp operators constitute a major factor which the confer- ence lines have to contend with. According to Daniel Marx, Jr.,65 the distinction between tramps and liners is real but not definitive. A distinction of ships based on func- tion rather than on vessel type is more meaningful, since a great more ships are used interchangeably. Indeed the principle feature which distinguishes liners from tramps is the regularity of service. It may be worthwhile to ac- cept the definitions given by the U.S. Maritime Commission 66 on Tramp Shipping Service, to wit: 65Daniel Marx, Jr., op. cit., p. 223. 66U.S. 75th Congress, 3rd Session, House Document No. 520, Report of the United States Maritime Commission on Tramp Shipping Service (1938), P. l. 92 A liner is any vessel that operates over a fixed route on a regular schedule of sailings. On the other hand, a tramp, or general trader, as is sometimes called, is any vessel which has no fixed route and no regular time of sailing and which is ever seeking those ports where profitable cargo is most likely to be found. Cargoes67 likely to attract tramp shipping normally (1) have value sufficiently low so that the cheapness of transport outweighs the value of speed and regularity of delivery; (2) have relatively great bulk or weight; (3) re- quire no exceptional facilities of the carrier for handling or preserving; and (4) have availability for shipment in full cargo lots, or capable of being handled in bulk and combined with other shipments without merit or count. Fur- thermore, commodities subject to seasonal or highly vari- able movements are likely to attract tramps. Such tramp commodities include grains, coal, ores, sugar, cotton, lumber, fertilizers, etc., but, despite these attributes, competition between liners and tramps are likely to be high. Cuffley68 distinguished eleven categories of tramp goods and included raw materials for fertilizers and chemical 67For details of discussions on tramp cargoes see Daniel Marx, Jr., op. cit., pp. 223-226. 68C. E. H. Cuffley, Ocean Freights and Chartering, Staples Press, London, 1962, pp. 334-335. 93 industries, wood products, cement, esparto grass, or alfa grass, copra and iron and steel products. The kinds of markets served by the tramp operators, the liners, and the bulk carriers may be indistinguishable. For as liners do, the tramps can also specialize function- ally. The competition between liners and tramp operators depends on the market situation. When trade is active and demand for space is high, liner vessels will often charter additional vessels, some of which may have been operating as tramps. During such periods, tramps will have been placed on the berths for general cargo by their agents. The decision of the shipper here to use the services of the tramps often at cheaper rates depends on the extent to which the liner conferences and their tying arrangements can be overlooked in money terms. In general, however, tramp rates are believed to be lower than liner rates though tramp service is unsuitable for many commodity types. Speed and predictable regularity are lacking in the tramp service and specialization though possible is not general with tramps. Actual and potential competition between tramps and liners may be confined to certain commodities, its importance on the Nigerian-western European route does not appear to be serious. This 94 weakness tends to contribute to the dominant monopoly powers apparently enjoyed by both UKWAL and COWAC on the Western European-Nigeria (West African) trade route. The Nigerian Federal Ministry of Information bul- letin in 1967 indicated that a total of eleven foreign shipping lines were independents69 or tramps in the service of the Nigerian shipping market. In addition, some thirty- one Nigerian private incorporated lines (Appendix II) were active tramp operators at the same time. These foreign and Nigerian private tramp lines competed against the liner conferences. Some detailed analysis will be undertaken on these tramp operators with particular reference to their roles on the West Africa-Western European trade route. Foreign Tramp Shipping Qperators The major foreign tramp operators which serve in the Nigerian market (without direct association with the Nigerian National Shipping Line) were published by the 69Appendix I. Federal Nigerian Ministry of Information70 95 followingzv 1. Bank Line 2. Port Line 3. Blue Star Line 4. Shaw Saville and Albion Co. 5. New Sealand Shipping Line 6. Hoegh Line 7. South American West Africa Line 8. United Arab Maritime Co. 9. United West Africa Service 10. M. Sidarma ll. Brodopas west Africa Line to include the (U.K.) (U.K.) (U.K.) (U.K.) (U.K.) (Norway) (Holland) (Egypt) (Poland) (East Germany) (Yugoslavia) In addition to the above, the Nigerian Produce Marketing Company (N.P.M.C.) listed the following lines71 as recipients of the company's produce for foreign ports during the 1971/72 produce season. 12. Splosna Plovba 13. Scan Uniafrica l4. Scan Polish 15. MISR 16. Mitsui 0.S.K. 17. K.K.K. 18. ZIM Line 19. Farrel Line 20. Nppon Yushen Kaisha 21. East Asiatic Company 22. Maersk72 70 See Appendix I. 71 on other trade routes (See Appendix I). 72 (Yugoslavia) (Poland) (Poland) (Japan) (Japan) (Israel) (U.S.A.) (Japan) (Denmark) (Denmark) Ministry of Information Bulletin, Lagos, 1967, Some are serving with other foreign conferences Nos. 12-23 are based on the Summary of Annual Re- turns of Monthly Shipments of N.P.M.C. Export Produce. 96 A further addition is provided by the returns of the questionnaire studies of the Central Bank of Nigeria,73 an annual survey of shipping services which have included the following lines: 23. Chinese Ocean Shipping Co. (China) 24. Scindia Steam Navigation Co. (India) 25. Westwind Africa Line (Liberia) 26. Lombardi Ligure SRL (Panama) 27. Compagnie Maritime du Zaire (Zaire) 28. Nautilus Line (Switzerland) 29. Lloyd Trietstius S.D.A. (Italy) 30. Barber Line (Norway/U.S.) 31. Greek west Africa Line (Greece) 32. Veb Deutsche Secrederei (Germany GDR) 33. Polish Ocean Line (Poland) 34. Oivind Lorentzen (Norway) 35. A. P. Moller (Denmark) 36. Lloyd Brasileiro (Brazil) In addition, the following oil tanker and fishing operators were noted as active in the Nigerian market: a. Texaco Tankship (U.S.) b. Bulgarian Fish Company (Bulgaria) c. Friendship Shipping Company (East Germany) d. Transcoban e. Piedmont Nigeria Limited (Italy) f. R. T. Briscoe g. Societe Abidjanaise de Cabotage (Ivory Coast) h. Niger Greek Shipping Agency (Greece) i. Zapata Maritime Service (Greece) j. Dietz Maritime Corporation k. Navigation Maritime Bulgare (Bulgaria) 1. Comexas 73Research Department of Central Bank of Nigeria: Shipping Service returns for 1971/72. 97 The dynamics of the shipping market is such that some of the one-time tramps may at other times operate as liner members on certain trade routes. The Hoegh Line, for example, at one time outside the West African Conference Lines (WALCON) has found it worthwhile to join the COWAC conference. Indeed, it may not be inconceivable for some liner conference members on certain routes to operate some of their boats at opportunity tramping on other routes in what has come to be called cross trades. In particular this is true during market booms on specific trade routes. The dynamics of the shipping market are such that changes are continuously taking place and such changes blur the specialized functions and attributes which in theory dif- ferentiate tramps from conference liners. Of the foreign tramp operators, it is estimated that their combined fleet by 1972 was around 800 with a total net tonnage of over 8 million.74 The Japanese vessels have, apart from the Scandinavian liners, main- tained the largest fleets. But on the European-West Africa trade route, the British seem to dominate the area with 74Estimated from International Shipping and Ship- building Directory, 1972 and verified from the Nigerian Trade Summary, 1972. Figures are rounded to nearest units of million tons. 98 their net tonnages. For the share of Nigeria's trade as a whole between conference and nonconference and between non- conference foreign and indigenous lines, estimates are not available. But if the allocation of export cargoes by the Nigerian Produce Marketing Company whose volume of ship- ments is over 30 percent of national export trade is an indication, the pattern of allocations to conference and nonconference lines should throw some light on the market share. A typical example of such allocations (Table 30) shows the nondominant share of the two conferences which control the western Europe-West African route. For the nonconference operators, the shares of the foreign tramps were higher than those of either the conference (WALCON) or the indigenous Nigerian private lines. The dominant position of the foreign tramp oper- ators noticed in Table 30 is greatly strengthened in the market as a whole when it is understood that most of the indigenous private Nigerian lines had failed between 1968 and 1971 and ceased to function due to the effects of the two memoranda75 from the Ministry of Fin‘a'KEe to the 7SSee Appendices IV and V. 99 TABLE 30.-Carriage of N.P.M.C. Exports. CangaTmmuge Ikarenuxfieof Shfixnd Tbflfl.Canfied Shnxfingsts may arise from inefficiency or high factor costs or from absence of public assistance in any form. At times the high cost operators make considerably satisfactory prOfits while the low cost operators reap supernormal prOfits from existing rate structure and freight traffic. Theoretically only when the low cost operators are making Very low profits though receiving adequate volume of cargoes (assuming costs cannot be further reduced) can rates be 128 adjusted upwards. But since in practice, operators are not likely to disclose their costs, changes in costs general to all operators--port costs, handling charges, fuels and bunkers costs, and shipbuilding may induce changes in rates. Other factors likely to affect costs of shipping services in Nigeria include costs of handling services. This will be reflected in the proportion of cargoes moving from ships into storages and those moving into other direct transport facilities. For 1969/70, as an example, 73 per- <=ent of imports were handled into storages while 49 percent of exports were handled from storages (Table 36) . Of the total traffic of nearly 3 million tons (dry cargo), some 61 Percent were involved in port storages which meant multiple handling operations. This trend is noticed for 1960/61 to 1969/70 (Table 37) . Arising from this tendency are the effects of delays to ships at the ports. In the three produce seasons--l967/68, 1968/69, and 1969/70, days lost by ships while awaiting berthing were 1:219; 2,262; and 2,477, respectively (Table 38). Alter- natively, days during the period when berths were empty were 1"122; 449, and 2,477, respectively. This can only be due to Poor steming procedures, faulty communications systems, 129 .sodmm sesscc_susuocs:< mason cpssmmszw "coupon N means .ssnu .umoms cos onsets cos mono cos noo.oo cos «sores cos senscs cos essence snubs so csc.~cn.s sc eno.o ms nn~.on so moc.mms on smm.ce co o-.mmc.s «saucepan spam som\eo moscm em coo.mno.s a one an som.os cs cos.sm se o-.~e cc omc.cca snususcmp sense .nsysce nascm osmmmmWanmmm cos cmo.osm.s .n run cos smm.m~ cos on~.s cos mes.m~ ocs mco.mo~.s space .0 cc sco.cmo nu nun no ccc.es m oms no ~me.ms we coo.coo «masseuse pupa .n sm mac.ono .n in: me ooo.ss no mms.e mm sna.n so oms.mno smusoscm> 550 .s... gag as nausea mmmmmmm cos oc~.nmc.s ocs mon.o cos smngnc cos mmm.nms cos oom.on cos nos.shs.s snaps .0 mn moc.~oo.s sc neo.o no cec.mm no mem.mms om ooo.ce «n emm.mco «nonsense upcmn.n an snm.cmm o cmo ns soc.n ms voo.m~ we ooq.em on oon.n~m smususnyp .350 .m an.dscm scnm_uumnso mmmmmmm a nape « nape c naps a cape a a page a a all. REM—DR! specs eggs unansnu nacpnco nouns osusnna g cn\nons..nssccqenspnmszqnco_uo nocsnnpnooimcssocnm.cmsno.scvingscc.naussncc.iacm.mgmss 131. .3232 mason assume? .3392 spasm scum omsseao assoc nfismm success smm.v ono.m one.~ cmm.s cmm.s .m.c mmm mmm In: omm.~ mos nbv.~ oh\mmms ssn.~ mes mc~.~ .m.c .m.c .m.c mmm mmm in: mmm.m oms ~o~.~ mo\moms sem.~ mms.s ms~.s coo esc com com com In: mmm.s moo mmm mo\~oms use: code node nfiuwm massm annum passe suntan noun Eton new pg assess s38. aspen assess s38. assess . assess s82. pg pg mfihdm mossm mayhem messm 93.83 mmflm mfiuwm madam m: .25 new a nauseounqs massages— neumosgno magmas— Avfi+no s82. 8. so 3 uncoonmm anon mmsorgsHtfldo >u50_mmmmm .mccsumuwdo usom use meadmshm on umoq mmmoii.wm mamas 131. .3332 33m 3832 .3893 Hg 58m 83960 .maco usuumm uuogEHH Hmm.w who.~ www.~ mmm.a mmm.a .m.: mmm mmm In: omm.m moa 55¢.m oh\mwma Han.~ mvv mmm.m .m.: .m.: .m.c mmm mmm III mmm.~ mma ~m~.m mm\wmma va.~ NNH~H mH~.H och ¢Hv emu mom won In: mmm.H Nov mmm mm\~oma pans mafia 8.2m mfiumm mafia mfiumm mafia Hmfiuwm Eda mfiuom n.a.. pg ”.32 38. fig pg H309 pg . ug 38. fig pg mnuuwm mmfizm mnunmm mmflnm msuuom mmflsm mnuumm mmHzm __ m Hum M mm mama ”63 2 “68 mama mm ”53 mama mm .53 mama Ao+n+mv Hmuonr any any emv unsoonmm 930m mmso_msupmgo muse momma gauge ta Em SEE s as 331.3 E 132 or major seasonal factors. Whatever is the case, their costs in real terms are excessive. For example, Mr. A. A. Ayida114 estimated that it costs some N 1,000.00 a day while a ship waits to off-load or on—load. The estimate showed that a total of N 2.6 million in monetary terms was lost when a total of estimated loss of 2,600 days was in- volved in 1964/65 as ships awaited berthing. From this estimate, one can see why freight rates in Nigeria are constantly being raised and these passed on to Nigerian consumers in terms of reduced earnings from exports or in- creased costs of imports. While the conference liners have claimed stability of freight rates for their operations,115 apparently it is difficult to accept this on face value. Even though freight rate schedules are carefully hidden secrets among shipping lines, a search and interview among shippers and shipping lines seem to turn out some facts. The Nigerian Produce Marketing Company's records show that rates on certain com- modities between 1966/67 and 1972/73 have not been gyrating 114A. A. Ayida, "Report on the Reorganization of the Dock Labour Industry in Nigerian Ports," Ministry of Emonomic Development, Lagos, 1968, p. 9. 115UKW’AL-COW’AC, Bulletin, op. cit., p. 13. 133 very significantly (Table 38). While the cases for some increases are easily appreciated, there is little to ex- plain the fall of the indices in rates between 1971/72 and 1972/73. While the table shows rate movements in the case of a few selected export cargoes, very little is available on imports nor are data available on general commodities on the Nigeria-western European trade route. Indeed, the case is one in which the rates reflect the price fixing in a bilateral monopoly--the Nigerian Produce Marketing Com- pany and the Conference being each a sort of monopolist in their own rights.116 In the questionnaire survey among the principal shippers and shipping companies on rate stability in the market (Question 5) 34 shippers or 85 percent of responding shippers claimed that freight rate increases are generally too frequent and too regular. None of the shipping come panies responding agreed with this view. The response then became a matter of selfish interests, depending on who come pleted the answer to the question. When asked whether 116Note the dominance of the conference on the U.K. and Europe-Nigerian routes while the N.P.M.C. is the only statutory body handling sales of prime agricultural export commodities of Nigeria. 134 $598 83wa50 830.8 3.3me "00.58 mm. 33 3.03 3.03 3.03 3.03 3.03 00.03 30 5mm 3.33 2.33 «003 00.03 00.03 00.03 00.03 no.3 8an00 03.03 3.03 00.03 00.03 00.53 00.03 00.03 momom .36 2.33 30.03 8.3..” mmé3 8.03 3.03 00.03 308 mimhma 2.303 .9303 02003 00303 00\$3 00303 5.39.50 8809..me moo? ”Em—52% 3mm flog . . . . . . . 3:30 00 32 mm 3x mm .32 mm .32 mm 33 mm 3: 0m 3x .50 Edam 00.0mm Nat—Hz «0.32 00.0.5 00.0.; 00.32 00.32 93 8500 00.25 3.32 3.32 0m.3z 0m.3z 0m.32 8.0 2 muoom do 00.3: «0.3: 00.25 00.3z 00.3z 00.3z 8.32 880 mh\~>3 NSRH 30000.... 02003 00303 00\$3 $303 $3.80 mocha 358380 05 on: B 3332 89$ 08% m $5950 03¢me 03? 5.3032 . mmomumo P896 @3038 so mug; 3mm unmwmhmul. mm a 135 rates were generally too high for the standard of services, the respondents fell into the same positions once again, reflecting personal interests also. Shippers agreed while shipping lines disagreed with the view. When questioned whether dual rates and deferred rebates were used simulta- nesouly, 31 shippers or 78 percent of responding companies agreed while all shipping lines agreed as a matter of fact. The fact that there is hardly any consultation prior to introduction of new rates presupposes the possession of market powers which can possibly be used whenever there is reason or no reason to justify its application in freight increases. From the returns by shipping lines, rate increases have been estimated to average 15 percent every year be- tween 1960 and 1972. This allegation must, however, take account of shippers' bias at the same time. Whatever the level of rate increases, it ought to be related to costs which shipping lines had been called upon to bear. Port delays to ships had been tending to increase over time re- flecting greater losses which shipping companies (confer- ence and nonconference) may not absorb with ease. Handling costs had been on the increase too since the Nigerian 136 commerce is dependent on two ports (designated as major ports) Lagos and Port Harcourt. When evacuation problems are included, the intense concentration of port facilities without corresponding internal transportation easement tend to spell doom to all efforts aimed at reduction of port traffic congestions. In the absence of cost data to ship- ping companies, it is difficult to assess the movement of rates which have been estimated to grow at 15 percent annually . Service Responsiveness Service responsiveness relates the changes in the quantum of service to changes in the quantum of cargoes and trade requiring the services.117 The indication of the dj-J'Section of such responsiveness or otherwise is the simple correlation between annual changes in the total number of 8hips entered to total volume of trade cargoes handled (Presuming equal deadweight average capacities for each \ 11701 _ 00 Where: Q = quantum of trade (tons) Sl - So S = quantum of vessels in service 137 ship). Between 1960 and 1971, service had tended to be responsive to trade needs by some 72 percent (Table 40) of the times. In particular, during the civil war (1967 and 1968) the falls have occurred on both sides. The lack of responsiveness for 1960/61, 1962/63, and 1969/70 may be due to gaps in advanced information which is possible in communication systems in less developed economies. Operational Problems This relates to the questions in Section 8 of the questionnaire (Appendix VII). All the responding shipping lines accepted having problems. But their problems varied in coverage and dimensions ranging from berthing delays, shed congestion to lack of security on the wharves. For remedial measures, all of them recommended containerization which was the most favorable choice of the liner conference members while the tramp respondents opted for expansion of the berths, shed, and increased efficiency of stevedoring.”8 118Ayida studies recommended the integration of stevedoring and shore handling operations. See A. A. Ayida, "Report on the Reorganization of the Dock Labour Industry in Nigerian Ports," Lagos, 1968, pp. 15-19. Also see Economic Associates, Nigerian Ports: Traffic and Develop- ‘ment, London (2 vols.), 1967, pp. 252-259. 138 TABLE 40.-Shipping Service Responsiveness to Nigeria's Trade. Year 5:53:23 Annual Ships b Annual Coefficient.of (000) Variances Entered Variances ResponsivenessC 1960 3,094 2,194 } + 690 } - 18 - 38.3n 1961 3,784 2,176 } + 1833 } + 243 + 7.5p 1962 5,617 2,419 } + 465 } - 249 - 1.9n 1963 6,082 2,170 } + 2132 } + 85 + 25.0p 1964 8,214 2,255 }- + 6261 } + 112 + 55.9p 1965 14,475 2,367 } + 3605 } + 116 + 31.1p 1966 18,080 2,483 } - 12997 } - 911 + 14.3p 1967 5,083 1,572 } - 2937 } - 48 + 61.2p 1968 2,146 1,524 } + 26301 } + 5 + 526.0p 1969 28,447 1,529 } + 27818 } - 126 - 220.7n 1970 52,705 1,403 } + 19384 ' } + 187 + 103.7p 1971 72,089 1.590 aFrouiTable 7. hTromT'able 15. cp = positive response where the changes in.export.volume over changes in Ships entered.are positive. n.= nonresponsive situation. Source: ‘Nigerian Ports Authority, Lagos. 139 All the respondents, however, agreed with the need to simplify customs formalities.119 Consultation The need for regular consultation between shippers and shipowners at the representative level is relatively recent in origin. The popular debate on this issue fol- lowed the resolution adopted on the 15th of March, 1963, by the Western European Ministers responsible for shipping-- merely concerned with European-based shipping conferences and the collective needs of shippers they serve. Following on this, the United Nations Conference on Trade and Devel- opment (UNCTAD) adopted "The Common Measures of Understand- 120 ing on Shipping Questions" in 1964. Again, the report of the Committee on Shipping adopted by the Trade and 119Reduction in red tapism, paperwork, and formal- ities see Economic Associates, ibid., and Central Bank of Nigeria, Memorandum on Port Congestion to Ministries of Transport and Finance, Lagos, 1969. 120See Proceedings of the United Nations Confer- ence on Trade and Development, V01. 1, Final Act and Report (U.N. Publication Sales No. 64.11.B.11), pp. 54-55. 140 Development Board of 29 April, 1965,121 set out the recom- mendation for the establishment of national and regional consultation machinery. National shippers‘ councils have thereafter sprung up, mostly in the developed nations.122 In Nigeria, and for that matter, West Africa, shippers' councils are novel and consultation among shippers and shipowners is virtually minimal. Apart from contacts between individual shippers and their respective trade carriers, nothing on the representative level is feasible. As the UKWAL and COWAC have said . . . any dialogue requires two parties. While it is the responsibility of each party to look to their own arrangement for representation and to provide adequate mandate for those nominated or selected for the task,123 121See official Records of Trade and Development Board, Third Session, Supplement No. 2, Annex 1. 122For organization of Western European consulta- tion machinery and shippers councils, Australian, etc., see United Nations, "Consultation in Shipping: Establishment of National and Regional Shippers' Bodies, Consultation and Negotiation Between Shippers and Shipowners," TD/B/C4/20/ Rev. 1., New York, 1967, pp. 27-45 and 73-90. 123UKW’AL/COW’AC, ”Liner Conference System in West Africa," Lagos, p. 23, and UKWAL/COWAC, ibid., Ivory Coast has set up a shippers' Council in 1970, first in West Africa. 141 It is only the shipowners who have secured a medium of con- sultation among themselves. Thus, indeed, there is no con- sultation between shipowners and shippers on anything, not even for freight increases on a general scale. Among the responding shipping companies, over 43 percent admitted that there are no shippers' councils and they did not see opportunities for Consultation. As a matter of fact, shippers are only consulted, not before decision to raise freight rates, but are informed before the effective date of implementation of new rates. Conference Pooling Arrangements and Rationalization of Services A shipping conference was defined124 as a meeting in which competitors face one another with the object of achieving that minimum of cooperation which will suffice to prevent such chaotic competition as might render impracti- cable the liner system of working ships. Each member of a conference is seeking the minimum surrender of his competitive freedom which is compatible with that 124R. H. Thornton, British Shipping in the Orient' 142 objective while the member's attitude in debates is deter- mined by the sources of strength which lie behind its di- plomacy. While the conference system denotes no single method but is a generic term for a wide variety of common services and common obligations undertaken by shipowners serving particular trades, the basic objective seems to be to (1) control competition among its members and (2) to strengthen the members through cooperative action in their competitive fight against nonmember carriers.125 Regula- tions of competition among conference members are by a. rate agreements b. control of sailing schedules c. pooling d. good faith or performance bonds. At the same time, outside competition is often minimized by (l) agreements, (2) use of fighting ships, and (3) tying agreements with shippers. One of the most successful methods adopted by con- ferences to minimize intra-conference competition on a 125W. L. Grossman, Ocean Freight Rates (Cambridge, Maryland: Cornell Maritime Press, 1956), P. 62. 143 trade route has been the pooling arrangements and service rationalization. Pooling takes many and varied forms rang- ing from control of sailings of each pool member to actual control of cargo carried or revenue earned.126 In most cases, cargo and revenue are pooled simultaneously. This "self-imposed restriction" is designed to optimize the use of shipping tonnage capacities, reduce wastes in operation and ensure for each member reasonable levels of profits on operations within the group. Pooling agreements vary but the details only reflect the nature of trade routes, com- modities carried and the relationships among the pool members. Among the COWAC and UKWAL members, pooling arrange- ments are ostensibly designed to "obtain economies of rationalization to the benefit of both cargo and carrier."127 The method adopted is cargo and revenue pooling with "allo- cation of a definite share to the Nigerian National Ship- ping Line." Thus the COWAC and UKWAL situation is one in 126UNCTAD Secretariat, "The Liner Conference System," TD/B/C.4/62/Rev. 1, Geneva, 1970, p. 42. 127UKWAL/COWAC, bulletin, Lagos, p. 16. Their combined fleet of 192 and 356 vessels for UKWAL and COWAC respectively are managed as a single fleet by Central Committees. 144 which member lineS'sailings are controlled, ostensibly to "prevent overtonnaging the berth" and "to regulate intra— conference competition" so as to "optimize the use of ships' freight-earning space." On this score, the confer- ences in question have adopted a joint booking system with a coordinating system of positioning ships by joint deci- sion. This in effect makes the fleet of the different con- ference members the joint fleet of the pool. This is the case of fleet and operational integration by relinquishing the rights of individual owners to decision making and placing such powers in a central management. Members, thereby, share pro rata according to their capital contri- bution in the overall operating profit or loss. Dag Tresselt128 estimated that in 1964/65 the Ni- _gerian National Shipping Line's share of the West African trade was around 4.4 percent. By 1971/72, it was noted129 that the share of the Nigerian National Shipping Line in the UKWAL was, after negotiations, intended to be increased from 18 percent in 1972 to 23.50 percent by 1977. At the ‘ lzapag Tresselt,_The west African Shipping Ranggp OE. cit., p. 39. 129Nigerian National Shipping Line, Annual Report. Lagos, 1972, p. 7. . ' 145 same time, the shares within COWAC moved from 15.19 percent in 1972 to 20.19 percent in 1977. Indeed the report130 stated that the COWAC agreement provided for pool share from the North Continent of Europe to West Africa. The rationalization program is noted as being practiced by COWAC. The optimism over prospects of "better financial results" from the scheme was expressed by the National 131 Evidently this indicates a substantial Shipping Line. bargaining strength for N.N.S.L. in the Conference. A further variation of this pooling system is the joint ownership of the African Container Express Limited by the UKWAL. This containerized fleet is to ply United Kingdom (and possibly Europe) west Africa route. Each member holds a capital share in the venture and profits are expected to be shared on agreed ratios. This again is another move from the individualization of shipping opera- tions which is characteristic of tramp shipping or tradi- tional maritime services involving competitive conditions. While regularity of sailings and improved ships have tended to improve shipping services, through claims ~ 130Ibid. l3lIbid. 146 of freight rate stability and adequacy of services for conferences, it is a question yet to be resolved whether the needs of international trade have been better met in cost and frequency terms by the current pooling systems. For, by eliminating competition among members and eventu- ally destroying other competitors by joint actions, the conferences have tended to build inefficiency into the system and freight rates have thus not been responding to efficient procedures and lower costs but have been raised to cover expenses which are anything but relating to effi- ciency. Once more, this is another manifestation of monopolistic powers in a trade characterized by declining costs, discriminating pricing, and protection of excess capacities.132 While this self regulation by the shipping industry is significant it was discovered by the Royal Commission133 and the Alexander Committee}34 among others, that 132 Daniel Marx, Jr., op. cit., p. 289. 133Royal Commission on Shipping Rings, Report of the Committee 4668-70, 4685-86 (5 Vols.), London, 1909. Recommendations in vo1. l, Cmd. 4668. 134Investigation of shipping combinations--Comr mittee on merchant marine and fisheries of House of Repre- sentatives, Washington 1913/14. Vol. 4 on recommendations. 147 conference practice "usually neglects the interests of shippers" and "that serious abuses occasionally arise."135 But possibly, joint service agreements might have helped small shipping companies to compete with larger concerns and often helped to eliminate wasteful competitive prac- tices, but they, nevertheless, intensified the danger of abusive monopolistic practices. While in such strong positions and with the tying arrangements, it is difficult for weak independent shipping companies to break the liner rates without serious consequences. This is why there is little difference between rates used by conferences and the tramps in Nigeria's trade. Indeed, the frequent freight hikes and high rates have their foundations in monopolistic practices of-the pooling systems.136 While the major advantages of the pooling arrange- ments as claimed by the conferences involve a "comprehen- sive coordinated service of the conference as a whole at 13sDaniel Marx, Jr., op. cit., p. 289. 136Since high rates must be maintained to accom- modate inefficient lines with higher operating cost schedules. 148 the disposal of the trade," the UNCTAD Secretariat deduced that such advantages to shippers137 should include a. a proper pooling arrangement which leads to better coverage of shippers' space requirements; b. help shippers to plan shipments; c. close liaison with shippers for better coordination between supply and demand for space: d. economies in vessel operation culminating in lower freight rates than in the absence of pooling; e. improved coverage of all ports and less attractive cargoes. But in real terms, these assumed advantages have not occurred in the Nigeria-European trade route. Rather, froma series of interviews most Nigerian shippers complained of the reduction in the frequency of conference services, after the introduction of pooling arrangements. Choices of ships are restricted for shippers and refusal of certain 137UNCTAD, "The Liner Conference System," p. 48 quoting shipping Conferences Past and Present (India- Pakistan Conferences), London, p. 8. 149 cargoes have been frequent. Indeed, some shippers complain about deteriorations in the quality of service due to false sense of security by member lines. The uncertainty about the passing of the economic advantages of pooling to shippers has tended to intensify concerns among the shippers and the trading public. Loyalty and Tying Arrangements The various methods which conferences have employed to bind shippers to the conference lines and to render the entry of a new carrier difficult are referred to as loyalty arrangements.138 These devices include preferential con- tract, deferred rebate, agreements between conferences and shippers associations and exclusive patronage contracts. Loyalty arrangements are expected to ensure that all liner cargoes in the sphere of operation of the conference are reserved for conference members and that nonconference competition does not exist. The UKWAL/COWAC bulletin139 138For historical developments of loyalty see Daniel Marx, Jr., International Shipping Cartels, p. 201. 139UKWAL/COWAC bulletin, p. 11. 150 admits that the prime purpose of these loyalty arrangements is to consolidate and, ideally, secure the exclusive support of shippers so as to restrict, as effectively as the conference is able to achieve, the field open to competition from nOnconference carriers whether an isolated vessel or another liner operator bent on enter- ing the trade at the expense of existing parti- cipants, assuming they have it adequately and efficiently covered. The loyalty arrangements have been defended by con- ferences on the grounds of heavy capitalization, speciali- zation of services and forward planning.140 The UKWAL/COWAC pamphlet sees the necessity for the loyalty arrangements as emanating from a modern liner's complex vessel designed and equipped to accom- modate in separate and suitable storage a variety of cargoes ranging from heavy machinery to delicate instruments, liquid cargo, refrig- erated cargoes and explosives, cargo highly sensitive to contamination and cargoes condu- cive to same, all of which present peculiar problems of handling and carriage.1 1 The demands involve comparatively heavy capital intensive investment in trade suited ships, which liners can offer only at predictable cargo volumes secured by some tying l40"The Shipper and the Conference System," Pamphlet No. 1 (London, U.K. and Continent/India and Pakistan Con- ferences, 1963), p. 11. ' l4lUKWAL/COWAC, ibid.. p. 11. 151 arrangements. The volume of traffic sufficient to support the operation of such heavy capital investment must be secured outside competitive arena. The methods to secure such loyalty involve con- tracts for immediate freight rebates or the alternative of deferred rebates. The other form of loyalty device is the dual rate system where two freight rates operate--the lower rate for shippers maintaining contract arrangements for long term exclusive patronage of conference vessels while the higher rates are for shippers who use conference vessels spasmodically. On the Nigeria-European trade route, rebate system is enforced142 and the shipper is limited to deferred or immediate refund of percentage of freight paid depending on whether the shipper has entered into contract tying his shipments only to the conference boats. For southbound traffic, the UKWAL maintains both contract and noncontract rates. Rebates on the former is 7-1/2 percent of freight and may be paid to shipper immed- iately. For the noncontract the rebates of 7-1/2 percent of freight is held by shipping lines for six months and are 142Ibid., p. 10. 152 paid to shippers at the end of the deferrment period. In the case of northbound traffic, such deferrment lasts for six months and are paid to shippers only on September 30 and March 31. Refunds on southbound traffic are made on June 30 and December 31. With COWAC, tariff arrangements are broken into two ranges--Europe to Dakar/Port Noire and Europe to Congo/ Angola. Deferred rebates on Europe-Dakar/Port Noire are 7-1/2 percent of freight and are held for six months but 10 percent rebate is offered for the Europe-Congo/Angola range. But blanket 10 percent rebates are offered for northbound traffic. Certain commodities enjoy specific rebate rates, e.g., timber with 20 percent lasting for three months. Rebates are paid twice a year and four times for timber a year. The UNCTAD studies have outlined the fundamental difference between deferred rebate system and contract/ noncontract rates system which are generally applied to Nigerian shipping trade. Deferred rebate is not covered by any contract while contract rates are predicated upon 153 The differences are outlined as follows. Deferred Rebate System a. b. Rebates are rewards for loyalty without contract. Shippers are obliged to be loyal during shipment and deferment periods. Terms and conditions can be varied by conference unilaterally. Onus of proving loyalty rests with shipper. Penalty--involves forfeiture of accumulated rebates No provision is made for shipper to withdraw sup- port for conference ships by advance notice and‘ receive accumulated rebates due. Contract/Noncontract Rates System a. Contract shippers pay lower rates than noncontract shippers under the contract. Shipper is obliged to be loyal only during contract period. ' Any revision in terms of contracts need consent of both parties. Onus of proving disloyalty is on the conference. Penalty--involves liquidated damages based on ship- ment made on nonconference ship plus contract cancellation. 143UNCTAD Secretariat, "The Liner Conference SYStem," OE. Cit. '-IIJPQ 180 contractual arrangements between shippers and conferences};3 154 f. There is provision for terminating contract arrangement by either side on due notice. It appears that the greatest punishment for noncon- tractual shippers is the forced retention of rebates for six months, the repayment of which is on the loyalty to the conference determined by the conference. The value of Nigeria's annual exports to the United Kingdom averaged (Table 18) N265 million between 1970 and 1971. Assuming a 10 percent freight value on such exports (assessed ad valorem), such freight was worth N26.5 million. A 7-1/2 percent rebate on noncontract shipments would be worth N2 million approximately. Nearly N1 million would be held at any one time by the shipping lines without interest and may be forfeited on the slightest shipment by nonconference lines, no matter the gravity of the trade pressure. Even when it is fully repaid without interest, the shippers would have lost interests (at 3.5 percent simple interest on ordinary savings with commercial banks in Nigeria) valued at N35,000 a year or N17,500 for each half year. Indeed, the loss of the funds can deplete the needed work- ing capital of the shippers. On imports valued at annual rate of N289 million, the rebates would be higher and the loss of interest 155 earnings (at commercial bank rates) apart from loss of use for investment purposes would exceed N40,000 per annum. When the lost powers of choice of carriers by shippers are assessed, the inequity of the system is tremendous. The fact that the liner operators made heavy capital investments in ships, staff and equipments are immaterial to the prac- tice of tying the shippers to patronage of certain lines. Such level of investments are made in other industries which cannot stiffle the freedom of their customers. The situation is only possible with the possession of monopoly powers, perfected with pooling arrangements and rationali- zation of services apart from the tying arrangements of shippers. When the questions were put to shippers and ship- ping companies on the desirability of abolition of the tying arrangements (Question 17) the majority of shippers agreed while the majority of shipping lines responding disagreed with such measures. Obviously, the division was on self-interest lines. Probably, if entry of outsiders into the trade were not barred by these practices and other extra-business methods, some credence would have been given to the claims of necessity to maintain regular services at stable rates. Mbreover, the claim that shippers are not 156 forced is not credible since the shippers walk very tight ropes in choosing between nonconference lines and the loss of accumulated rebates.144 And since shippers deal with the lines as individuals and not as a group, the purported freedom of choice is an illusion. In a trade where UKWAL has some 100 percent monopoly power on the Nigeria-U.K. route and COWAC has some 75 pere cent monopoly powers on the Nigeria-Continent of Europe route, entry of new lines is difficult, if not impossible. Loyalty arrangements make it hard for outsiders to convince the shippers of their ability to charge less than confer- ence rates in the future or to reimburse such shippers for losses of accumulated rebates or legal damages claims for violation of loyalty contracts. Such an outsider faces prospects of rate war should he prefer lower rates to entice customers to his services. The question of the necessity for the tying arrangements from Nigeria's point of view involves major policy issues on which opinions of experts are sharply divided. 144UNCTAD Secretariat, The Liner Conference System, ibid., p. 220 157 Intra-, Inter-conference, and Tramp Competitions Typical of most oligopolies often ending as cartels, intra-conference competition is not via price of services. The nonprice competitions involve advertising of otherwise homogeneous services and the projection of qualitative differences in the nature of their services or some spe- cialization in aspects of the services. Elder Dempster advertises more in the passenger area with the usual "Go Ed" which seems to have a permanent space in the "West Africa" magazine. Others merely advertised on space for freights to United Kingdom and Europe. In the absence of price competition, no line within the conference seems to wish to rock the status quo. Apparently on the Nigeria-United Kingdom and Europe, there is little or no inter-conference competition of any type. While the UKWAL covers the U.K. trade and the COWAC covers trade to the continent of Europe, each conference seems to concentrate on its route. With the rationaliza- tion of services on these routes, competition among con- :ference members seems to have been diminished to near zero. 158 The only competition which these conferences face, and that most insignificantly, comes from tramp or indepen- dent operators. The UKWAL/COWAC representative145 in west Africa admitted during the research interview that compe- tition on the U.K. route is virtually nill. On this route, UKWAL maintains complete monopoly within zero competitive market. On the European Continent route, some semblance of competition exists principally put by tramps dealing with bulky goods--gypsum, imported cement, etc. Such tramp operators termed "outsiders" by conference members146 are always cornered by conference liners through "steps to safeguard trade against loss to casual tramping incursions and opportunistic liftings by nonconference liftings." UKWAL/COWAC bulletin agrees that tramp operators seeking a return cargo on almost any terms in order to work an otherwise empty ship back in the direction of her next fixture can quote well below economic rates when the alternative is a return voyage in ballast as anything over and above the time and cost of working the cargo will amount to a "profit" under the circumstances. Competitive and other limitations on the monopoly power of shipping conferences have generally prevented them 145Mr. A. J. E. Christopher in Lagos. 146UKWAL/COWAC bulletin, op. cit., p. 10. 159 from securing for themselves monopoly profits. While the lack of data may prevent definite statement, there is no reason to believe that liners do not earn satisfactory re- turns on their investments.147 Potential competition,148 while checking on liners from earning monopoly profits through too high rates, have allowed rates to be left where attractions to new entrants are minimal. Whatever the situation, potential competition while checking exploita- tion does not enable the consumer to reap the benefit of the reduction of profits since even newcomers charge exist- ing rates and tend to avoid price wars. No information is made available on the degree of intra- and inter-conference competition. With tramps, these competitions are visible though their impacts in monetary terms cannot easily be determined. But since on the Nigeria-U.K. and European routes, pooling agreements flourish, highly remunerative situations develop with the virtual absence of external and internal competition. 147Costs and earnings differ among firms such that while some have needed subsidies, others have not. 148J. M. Clark, The Economics of Overhead Costs, University of Chicago Press, Chicago, 1933, p. 444. Con- cept involves latent powers which may be used in practice. 160 Daniel Marx, Jr.,149 believes that "even without pooling, highly effective tying arrangements and other means of ex- cluding newcomers do permit the earning of monopoly profitsJ' Competition on these routes is minimal if not nonexistent and the two conferences--UKWAL and COWAC exercise utmost market controls over there. Reasons for Nigeria's Concern over the Shipping Market Structure and Operations The structure of the shipping market and the cur- rent operations demonstrate a major control by the foreign lines which make up the majority of the existing conferences and tramp operators. These conferences decide on the ef- fective frequency and quantum of services offered and are responsible for what freight rates will be offered. Ni- gerians share in the general dry cargo carriage but not in bulk--dry and liquid cargoes. The major registration of concern for the situation was by the affirmative resolution of the Federal Parliament in 1957, 1958, and 1959 which 149 p. 266. International Shipping Cartels, op. cit., 161 gave birth to the Nigerian National Shipping Line.150 Ever since then open concerns have been expressed by various organizations and public institutions on the structure and . . 151 Operations of the shipping market. The major reasons for concern in the structural pattern and operations of the shipping lines have been that i. freight rates on various commodities (export and imports) have been fixed unilaterally without prior joint consultation and agreement of Nigerian . 152 shippers. ii. Using their combined strength, the conferences have often used their powers to effectively control com- petition from the nonconference members. Indeed, at times such actions have often been found 150See footnote 1. 151MemorandumfromNigerian Indigenous Lines Con- ference (NICON) Ministry of Transport, Lagos, 274 September 1967. Also memo of N.N.S.L. Management to Ministry of Transport, 30th January, 1968. 152Apparently, in absence of shippers' councils the major conferences hardly bargain but merely inform, possibly weeks or days in advance, of the new rates. Only such corporate shippers as the Nigerian Produce Marketing Company and the United Africa Company do have negotiation powers and opportunities. 162 detrimental to the growth and well being of Ni- gerian private lines.153 There were complaints that the West African Lines Conference made "calcu- lated attempts to cripple the growth of indigenous shipping lines."154 iii. Shippers are compelled to patronize the conference lines through such preference devices as the de- ferred rebate system, loyalty agreements and such other means which have given the shippers no options such as a competitive situation would have offered ‘under the tramp operations. iv. The Conference lines charge general cargo rates (which are generally high) for such commodities as do not find a place in their schedule of tariffs}55 v. The secrecy with which the foreign shipping lines operate gives cause for lack of confidence on the 153Part of the complaints leveled by Okafor Line against WALCON which included, among others, black listing of indigenous lines in foreign ports. Letter to Ministry of Transport. 22/4/66. 154London Financial Times (July 14' 1959)“ 155Nigerian Indigenous Lines Conference (NICON), Memorandum to Ministry of Transport. See footnote 82. 163 part of the shippers and the general public who are led to believe that the shipping firms are respon- sible for the decreased earnings from exports and the high costs of imports. vi. Among the Nigerian private lines, the lack of pa- tronage by foreign shippers reinforces the belief that a planned assault is made on the economy to the detriment of indigenous enterprises and they yearn for the regulation of the shipping trade. vii. Others still fear for the security of Nigeria's foreign trade once its carriage lies squarely within the hands of the foreign lines, and the fact that Nigerians are almost always employed at the lower cadre of foreign shipping firms tends to intensify their fears. viii. The apparent inconsistency of the policies of the Federal Government on maritime questions, particu- larly as touching promotion of indigenous partici- pation, raises fears in several quarters.156 156Memoranda of the Central Bank to Ministry Of Finance in 1967, 1969, 1970. 164 The above are but part of the underlying causes for concerns among the Nigerian pe0ple about the structure and operation of the shipping market. The fact that the people have no handsiJainfluencing those factors capable of changes seem to intensify their concerns. The fact also that the Nigerian National Shipping Line is a member of the confer- ences has not effectively helped to influence decision making openly within the conferences, at least, to the best visible interest of Nigerians, from the layman's viewpoint, tends to compel a reasoned study as to the desirability or otherwise of changes both affecting the National Shipping Line and the conferences. Conclusions The analysis in this section reveals the dominant position of foreign shipping lines and tramps in Nigeria's shipping market. On the specific Nigeria-U.K. and European trade route, the UKWAL and COWAC enjoy near monopoly posi- tions, respectively. The share of the Nigerian National Line in tonnage and carriage of trade is minimal. The position of the Nigerian private lines is worse since the 165 mortality among them between 1966 and 1973 had been very high. This leaves the field free for the two conferences that have adopted all orthodox monopoly shipping methods-- loyalty and tying arrangements, pooling and service ration- alizations, unilateral differentiated freight rates, and absence of negotiations with shippers, among others, to reap unassessable monopoly profits at the expense of the Nigerian shippers. While no quantitative data are available for the assessment of service quality and their prices, nor are profit margins known, it has become known that the country is passing through conditions of great uncertainties in her trade carriage since the conferences are too strong to offer information to the public on rates or service condi- tions. The annual hikes of rates coupled with inability of Nigerians to invest in shipping have created concerns in the minds of Nigerians. There is even doubt whether the National Shipping Line (a member of the foreign-based, foreign-dominated conferences) is even justifying the public investment. The assessment of that justification or otherwise is the subject of the analysis in the pages_ that follow. CHAPTER IV BACKGROUND AND INCORPORATION OF THE NIGERIAN NATIONAL SHIPPING LINE Background of Commerce and Shipping,ServiCes Nigeria's commercial contacts with Western Europe dates back to the fifteenth and sixteenth centuries when Portuguese traders and adventurers sailed into a number of the west African coastal havens. The landing stages of Elmina in Ghana (then known as the Gold Coast), Lagos, Calabar, Akassa, and Nunn in(what is now) Nigeria served then as the links between the open sea and the hinterlands of west Africa. Elephant tusks, ivory, gold dust, and a few tropical products then constituted the articles of trade in exchange for European beads, guns and gun powder, and strong drinks. When North America was effectively being colonized and occupied by migrating Europeans, slave trade across the sea was introduced into Africa to provide cheap labor for the North American settlements. The par- tition and effective colonization of Africa which followed 166 167 the Berlin conference led to effective abolition of slave trade and the introduction of European political rule and economic control of the African territories. Before the effective declaration of Nigeria as a 157 what preceded was the establish- British colony in 1899, ment of European trading stations all over the territory. After the 1914 Act of Amalgamation 0f the Northern and Southern protectorates, British trading posts were multiplied and both the commercial and sea transportation control of the territory had become relatively effective. After nearly over sixty years of competitive trade amidst in fighting and rivalries among Europeans, the Royal Niger Company and the African and Eastern Trade Corporation (among others) later to be amalgamated into the United Africa Company in 1929 were dominant. This branch of the Unilever of Liver- pool--the United Africa Company became a major firm in Nigeria for nearly half a century and at its peak was estimated to have handled alone 40 percent of the country's total imports and a wide spectrum of Nigerian exports--palm oil and kernels, cotton, benniseed, cocoa, wood, and minerals. —_ 157Declaration at Lokoja by Sir Frederick Lugard: Governor in December 1899. 168 Other British firms of note in the Nigerian trade was John Holt (also of Liverpool), the Patterson-Zochonis, and the Union Trading Company were important while recently, after the WOrld Wars, A. G. Leventis (a Greek firm) managed to have achieved a high trading volume. While the area seemed to have been dominated by British firms, trading companies of other European colonial powers were able to locate and trade in Nigeria. The colonial firms of French origin, Societe Commerical de l‘Quest Africain (S.C.O.A.) and Compaignie Francaise de l'Afrique Occidentale (C.F.A.o.) have been trading in Nigeria as well as in the purely French African colonies. So powerful were all these foreign trad- ing firms that export and import businesses handled by them amounted to about 90 percent of the total.158 In the late 1950s, the largest fifteen import houses in that part of the African continent were six British, one Anglo-Greek, four continental European, three American and one Asian.159 158George H. T. Kimble, Tropical Africa, vol. 1, Land and Livelihood, Doubleday and Co., New York, 1962. 159Dag Tresselt, The West African Shipping Range, UN, New York, 1967, p. 31. 169 Trade Divorced from Shipping The carriage of trade by the early, more substantial European west African merchants was in the merchants' own boats. John Holt, for example, entered trading in west Africa in 1860 but acquired their first ocean-going vessel in 1868.160 The major factor which forced a divorce of trading from shipping activities was the replacement of sailing boats by steam ships which involved substantial capital outlay. Indeed by the 18708, trade on this route was becoming substantial to the extent that sailing accord- ing to a regular time table was feasible. One of the first to perceive this possibility was MacGregor Laird, who. established the African Steam Ship Company in 1852 and started operations with five ships (ranging from 250 to 1,000 tons dead weight). This was followed by the estab- lishment of the British and African Steam Navigation Com- pany in 1868 by Alexander Elder and John Dempster, who founded the shipping firm of Elder Dempster and Company in Liverpool. It was not until the advent of Sir Alfred Jones' management of Elder Dempster in 1890 that the African 160John Holt and Co., Ltd., The Merchant Adventure, 170 Steamship Company was completely amalgamated with Elder Dempster by 1900. Since then Elder Dempster "held a vir- tual monopoly of the West African trade.161 The challenges which the German shipping firme- WOermann Line of Hamburg--posed to the Elder Dempster monopoly in European-West African trade led eventually to the suspension of their rate wars and to the formation of the first West African Shipping Conference of the two lines in 1894. The peculiarity of this conference included the two-line membership agreement and possibility of greater coherence, the control of trade in both directions (north and southbound) since exports and imports were controlled by the same merchants: and the exertion of the monopoly * powers against the colonial governments through the British Crown agents. The monopoly powers exerted by this confer- ence came under sharp attacks as were other conference 162 activities on other colonial trade routes. This led to the appointment of the Royal Commission on Shipping Rings 161Leonard Fay, Elder Dempster Lines Limited, Re- produced from "Sea Breezes,” September 1948, Charles Birchall and Sons, Ltd., Liverpool. 162For details of the complaints see His Majesty's Special Order Cmd. 4668-70 and 4685-4686, London, 1909 (His Majesty's Stationery Office, London). 171 in 1906,163 to deal with complaints of the commercial in- terest against shipping activities of conferences. Despite adverse findings against the conference's mon0poly powers by both the majority and minority reports, the British government to whom the reports were presented allowed,in the words of Professor Charlotte Leubuscher, the "valuable . . . information which the Royal Commission had 164 The publicity, brought to light to sink into oblivion." nonetheless, of the shippers' complaints led to some in- ternal redress within the conference itself. Sir Owen Philips who became the chairman and managing director of Elder Dempster and Co. abolished trading on ships"ac- count165 when Alfred Jones died in 1909. But this did not prevent John Holt and the Niger Company from operating their own ships between Britain and West Africa since the 163For recommendations see Vol. 1, Cmd. 4668 and Daniel Marx, Jr., International Shipping Cartels, op. cit., pp. 60 ff. ' 164Charlotte Leubuscher, op. cit., p. 27. 165Practice by which shipping lines competed with shippers as shippers in certain commodity lines which they carry, i.e., acting as both shipper/trader and carrier at one time . 172 major complaints which the traders brought up against Elder Dempster Line, Ltd., were still not fully redressed. It is significant that the Royal Commission found evidences of conference misdeeds or possibilities of such ndsdeeds. The majority report stated that: it is obvious that in view of the power which the system gives to shipowners . . . there may always from time to time be arbitrary actions of which shippers have reasonable grounds for complaint.16 The minority report saw the power to charge "what the traffic will bear" as power to tax prosperous industry which may be extended to all customers at the expense of the trade for the benefit of the monopoly. All the reports saw rate stability and service regularity as necessary to trade expansion but could not define at what costs the maintenance of such rate stability and service regularity were achieved. 166cm. 4668, op. cit., p. 74. 173 Dissatisfaction with West African Lines Conference Specific to Elder Dempster Line and the West African Trade the accusation was that the shipping line "held much sway on the merchandise trade by acquiring control over ac— tivities other than shipping." Elder Dempster was also accused of unfair control over the Bank of British West Africa through the Chairmanship by Sir Alfred Jones over the Bank. Since the Bank had a monopoly for the import of new silver coins, merchants had to apply to the Bank and 167 This deviated from pay fees for obtaining the coins. the former practice by which merchants imported coins at no cost through the same bank, and, this close connection between Elder Dempster and the Bank of British West Africa through Sir Alfred Jones was regarded with extreme suspi- cion by merchants. The fact that Sir Alfred Jones was simultaneously the managing director of Elder Dempster Line: the chairman of the Bank of British West Africa: and the President of the British Cotton-Growing Association-- an association of Lancashire Manufacturers to promote 167Before the setting up of the West African Cur- rency Board in 1912. 174 cotton growing in Nigeria--was suspected as being respon- sible for the high rates charged for Nigerian cotton. Indeed, Alfred Jones' position as shipowner shifted his interests more for high freight rates than for encouraging cotton growing in Nigeria. The excessive rates charged on trade between Ni- geria and Britain (compared with rates to Germany) were confirmed by the Governor of Southern Nigeria168 and by John Holt and other trading firms. These accusations ap- peared to have been largely ignored and the Royal Commis- sion allowed Sir Alfred Jones to give his testimony or rebuttals in Camera, none of which was ever published. Even glaring evidences that the conferences altered rates and introduced new conditions at short notice without any previous consultations with shippers were overlooked. In particular, it was alledged against Elder Dempster that the line forced shippers to accept its contract out of lia- bility for damage to cargo caused by bad storage or other negligence of its employees.169 The Commission avoided recommendations of measures involving state intervention 168Sir Walter Egerton. 169Charlotte Leubuscher, op. cit., p. 22. 175 in the shipping industry. This attitude contrasted sharply with the United States' policy on shipping involving regu- latory'measures.]'70 The continued dissatisfaction felt by the merchants and shippers with the services of Elder Dempster in partic- ular and the west African Conference in general, intensi- fied the operation of own or chartered vessels by John Holt and the Niger Company between the United Kingdom and West Africa after the 1914-18 werld war. The African and Eastern Trade Corporation-~the amalgamation of Lever Brothers, Swanzy, and other firms also operated their own shipping services between Britain and West Africa. At this time, too, other European shipping lines entered the west African trade and competed with Elder Dempster and weermann Line. The west African Shipping Lines' Conference, earlier sus- pended during the 1914-18 war, was reconstituted in 1924 and the much-hated deferred rebate, contract out of ship- owners' liability and other menacing issues once more fea- tured in the new agreements. So unpopular had been the conference practices that the National Congress of British 170See recommendations of the Alexander Committee Report on Steamship Agreements and Affiliations in the American Foreign and Domestic Trade--Summary in Daniel Marx, Jr., op. cit., p. 65. 176 West Africa (of leading West Africans) met in Accral7l to discuss certain administrative, educational, and judicial as well as commercial reforms, and shipping being one of them, came under critical review. Some of the resolu- tions172 adopted were: that in view of the difficulties here to exper- ienced in the matter of space on British bottoms by legitimate African traders and shippers, this conference welcomes competition in the shipping line, with particular reference to the Black Star Line.173 that this conference desires to draw the par- ticular attention of the directors of Messrs. Elder Dempsters' Line of steamers to the indig- nities that British African passengers suffer on their boats, and that representation be made in the proper quarter to correct the evil. Further amalgamations of a number of merchant firms trading in West Africa culminated in the absorption of the African and Easter Trade Corporation by Lever Brothers into the United Africa Company in 1929. At the same time Elder Dempster Line had become financially linked with the Royal l7lwest Africa, 1920, p. 1242. 172Resolutions 5 and 6. 173Line founded in the United States by the Pan- Africanist leader Marcus Garvey. This name was later used by the State of Ghana for its national shipping line founded in 1957. 177 Mail Packet Company under Lord Kylsant into the Royal Steam Ship Company with over 2.4 million gross tons of vessels. The old discontent with conference rates and service condi- tions culminated in open clash between the United Africa Company and Elder Dempster Line in 1929. The U.A.C. oper- ated own fleet and after ten years of wars with Elder Dempster emerged as an operator of a separate shipping line--the Palm Line. John Holt, also an operator of vessels in the carriage of its trade, later inaugurated a firm of common carriers--the Guinea Gulf Line as the U.A.C. had done. This success was due partly to the high proportion of the West African trade they controlled as well as to the special conditions by which they controlled both exports from and imports into West Africa. The post 1939-45 war years saw Palm Line and Guinea Gulf Lines not only as common carriers, but also as members of the west African Lines Conference. U.A.C. and John Holt which had actively participated in the Merchants' Freight Association, on becoming common carriers, seemed to have exerted little influences in making rates low nor did they see the conference from the standpoint they once did prior to their shipping conference membership. This question is 178 significant since the turning of U.A.C. and John Holt into common carriers as well as merchants had tended to weaken the position of the Freight Association as well as the bar- gaining powers of the smaller shippers. The post-war West African Lines' Conference was not merely the question of Elder Dempster Line and weermann Line as in the days before the 1914-18 WOrld War. It was neither the case merely of competitions from the Dutch, the German, and the British lines on this route. The Conference this time consisted of the three British lines, the Dutch-Holland West Africa Line, the German-WOermann Line, and later the Scandinavian West Africa Line, as was also the Hoegh Line. The new reconstituted West African Lines Conference did not change in concept any of the shipping practices and agree- ments adopted by the pre-world war shipping conferences. The deferred rebate system, the loyalty agreements, and the exclusive dealings as well as restrictions on entry into the trade--all of which came under severe attacks before the Royal Commission as well as before the Imperial Shipping Committee--were once more revived in the Nigerian shipping trade by the west African Lines Conference. 179 The Incorporation of the Nigerian National Shipping Line So objectionable were the dealings of these confer- ence practices--practices which were initially criticized by the National Congress of British West African in the 1920s--that their repetition after the 1939-45 war provoked fresh outcries. Indeed, prior to 1958, 100 percent174 of the shipping services required by Nigeria's export-import trade were offered by foreign shipping lines. This was until the first Nigerian indigenous shipping line made its 175 The case for the appearance on the international scene. Nigerian National Shipping Line was expressed in the Ni- gerian Parliament for years.176 As a result of the final resolution on the private member's motion177 in the Federal 174Charlotte Leubuscher, op. cit., p. 101, Table 46. See also Appendix IIC. 175Nigeria Line--joint venture of the Finnish Ship- ping firm of Nordstrom and Co. and Mr. Patrick Osoba, a Nigerian merchant; the ships were all Finnish and as the company enjoyed no government backing, its operations were stiffled by the conference rivals and it ceased operations in 1960. 176House of Representatives Debates, Official Re- ports, September 1957, November 1958, and February 1959. 177See footnote 1. page 1, Rev. E. S. Bens (Brass). 180 Parliament, grounds were laid for an indigenous shipping industry in which the government became the sole owner. The public sentiments on the desirability of incorporating a national shipping line were so strongly expressed that the debate on this question, started in 1957, was resumed in 1958 and 1959. As a result of the intense public pressure, the Federal Government was forced to act by implementing those resolutions. The Nigerian National Shipping Line was the outcome and its effective services started in February 1959. The conditions of the incorporation and agreements among the partners were explained to Parliament by the Minister of Transport.178 According to the parliamentary report, the agreement was apparently signed on the 19th December, 1958 and the provisions included the distribu- tion of capital shares as follows: 1. The Nigerian Government held 51 percent 2. Elder Dempster Line held 33 percent 3. Palm Line held 16 percent. l78Hon. R. Am'anze Njoku, see Official Report, November 1959, columns 785-786. pm.” 181 In the agreement, both Elder Dempster and Palm Lines were appointed technical partners for reasons which the Minister held as "what would be in the best interest of this country."179 The technical partners were charged with the "training of Nigerians as navigators and engineering officers and as other sea-going and managerial staff." The Minister's report touched next on the issue of shares which initially was set at $400,000 but which was author- ized later up to £2 million. Responding to questions from members, the Minister's report was confirmed as also a notice of direct implementation. The emphasis in terms of operation was on cargo business which apparently is con- sidered the more lucrative aspect. The passenger business was to be taken up as a major area with the future expan- sion of the shipping line.180 Both the partnership agreements and the appoint- ment of the Chairman of the Board of the Nigerian National Shipping Line, announced by the Minister of Transport in the Parliament, were greeted with various criticisms. 179House of Representatives Official Report, February 1959, Col. 786. These lines staked their money in the venture. 180Ibid., col. 789. Notice was taken of air trans- port competition in this particular area. 182 181 the main point of According to Professor Leubuscher, attack came from the close association of the new line with the two established British shipping lines, appointed as technical partners. Most members had been apprehensive of the near monopolistic powers of the two foreign lines in Nigeria's external trade carriage. The new arrangement, to these members, greatly strengthened the position of the foreign lines in question. As Sir Odumegwu Ojukwu was its first chairman, criticisms were also leveled at the new appointment since it would be impossible for him to direct his full energy to the new shipping line.l82 Obviously, the apprehension that the Nigerian National Shipping Line» under the technical partnership and capital share holding of Elder Dempster and Palm Lines183 would not be truly in- dependent was based on the national aspirations of the 181Charlotte Leubuscher, The West African Shipping Trade 1909-1958, A. W. Sythoff-Leyden, 1963, pp. 68-69. 182Sir Odumegwu Ojukwu became chairman of five public corporations at the same time: 1) Eastern Nigeria Marketing Board, 2) Nigerian Produce Marketing Company, 3) Nigerian National Shipping Line, 4) Eastern Nigerian Development Corporation, and 5) African Continental Bank, Limited. 183 . These lines, of the twelve consulted, were the only ones willing to risk any substantial Sums of their own capital in the venture. Apparently this must have been some sacrifice! ‘ I. it ‘14. 3DL 3. mm an“. 182 181 the main point of According to Professor Leubuscher, attack came from the close association of the new line with the two established British shipping lines, appointed as technical partners. Most members had been apprehensive of the near monopolistic powers of the two foreign lines in Nigeria's external trade carriage. The new arrangement, to these members, greatly strengthened the position of the foreign lines in question. As Sir Odumegwu Ojukwu was its first chairman, criticisms were also leveled at the new appointment since it would be impossible for him to direct his full energy to the new shipping line.182 Obviously, the apprehension that the Nigerian National Shipping Line, under the technical partnership and capital share holding of Elder Dempster and Palm Lines183 would not be truly in- dependent was based on the national aspirations of the 181Charlotte Leubuscher: The WESt African Shippipg Trade 1909-1958, A. W. Sythoff-Leyden, 1963, pp. 68-69. 182Sir Odumegwu Ojukwu became chairman of five public corporations at the same time: 1) Eastern Nigeria Marketing Board, 2) Nigerian Produce Marketing Company, 3) Nigerian National Shipping Line, 4) Eastern Nigerian Development Corporation, and 5) African Continental Bank, Limited. 183 These lines, of the twelve consulted, were the only ones willing to risk any substantial Sums of their own capital in the venture. Apparently this must have been some sacrifice! v ' 183 critics who wanted a truly independent Nigerian shipping line. The criticisms of Sir Odumegwu‘s appointment as the new line's chairman was justified on the problems of di- vided personal attention. But whether it was wiser to place the Nigerian National Shipping Line under the opera- tional guidance of its commercial rivals is cpen to argu- ments that can only be clarified by expert studies. The criticisms notwithstanding, the Nigerian Na- tional Shipping Line started operations in 1959 with three vessels, one purchased and two chartered. When the Board of Directors met on February 19, 1959, in Lagos, it author- ized the technical partners to purchase the MS La Sierra and MS North Cornwall, built in 1950 and 1954 with respec- tive gross tonnages of 5,571 and 6,183, and to rename them Dan Fodio and Oduduwa. It was also decided to commence negotiations for the new shipping line to become a member of the West African Lines Conference (WALCON). On the basis of those negotiations, an agreement was reached by which the Nigerian National Shpping Line was permitted to operate six vessels in 1959, eight in 1960, and ten in 1961.184 In actual fact, both Dan Fodio and Oduduwa sailed 184This slow negotiation process for increasing carriage is in contrast with the Black Star Line in which it It.“ s 184 from Europe on the 25th and 28th of May, 1959, respectively, for Nigeria with their first cargo consignments. When the Board met again on June 25, 1959, the issued and paid up capital was raised from the initial £400,000 to 51,400,000. By March 1960, three used vessels Tyria, Siverdere, and El Hacienda were also purchased and respectively renamed King Jaja, El Kanemi, and Oranyan. These were all motor vessels built in 1955, 1956, and 1953 with gross tonnages of 5,869, 5,660, and 6,009, respec- tively. All of them were of the half million range bale cubic foot capacities with speeds of between 12 and 13.5 knots.185 Only Ahmadu Bello had any real passenger accom— 186 (See Table 33). Within the first two full modations years of operation the company made net profits of £155,000 and £294,000 (after depreciation) or N310,000 and N588,000. Apparently, the general criticisms of Nigerians, in and out of the government circles, led to fundamental the Ghanaian authorities declared that a certain share of its trade be carried by its own line. 18.sThe Nigerian National Shipping Line: Informa- tion pamphlet. 186Dan Fodio and El Kanemi have space for two passengers each. See Information Pamphlet, p. 3.~ 185 . $3 .uuommm g 95on 093 gmmEm Hmcoflmz cmwnmmaz 8988 S 3 Emacs 085mm «38 Rim .9: $3 38m 985m N 2 omega 0853 GS; 896 .81. $2 6332 E u 2 6.353 0853 21m moans .84 $3 888 . NH madam m-.mmm Sew H36 .43 $3 8.868 u 0.3 83% 88.3... 23a Gem .38 3.3 8.86 9E m 2 SENS 893m 031m 88m .mma 83 885 a m m.2 H345 mmmfim mama $16 .83. 82 9.88 :8 .mfi. 1&3 New my...“ 882 .828 88 a... .5 Homcwmmmm mofifiww compo madm umz mmOHU Hum» 82.82 ”8.2 6.8688 93.3.: Emma 186 changes in the two areas which attracted most of such criticisms. Sir Odumegwu Ojukwu was replaced as Chairman by Chief Kolawole Balogun. In March 1961, the Minister of Transport arranged discussions with the technical part- ners with a view to taking over their shares by the Ni- gerian government. Final agreements on the repurchase of these shares were arranged in London in July 1961 while the handover was effected on September 1, of the same year. At the same time, the technical partners were to hand over the technical organization and management of the fleet to the National Lines management personnel. This action was smoothly carried out. Probably, influenced by its degree of operational success, the company's board of directors ordered for two new vessels (for the first time) from the Northumberland ship builders--Swan, Hunter, and Wigham Richardson. These were delivered in 1963 and christened Nnamdi Azikiwe and Ahmadu Bello. With the renegotiation of the conference membership agreement for the next five years, after the expiration of the old in 1961, the company was able to expand its fleet participation to twelve in 1962. The financial success of this year led also to a net profit 187 after depreciation of N598,948. Apparently, the company became interested in expanding operations beyond the United Kingdom and Western European routes and opted for member-. ship of other international conferences. For, not only did the company join the French conference (Colinauv) but commenced operations to the port of Dunkirk in May, 1962. Two months later, it joined the Italian conference and the Marseille Conference, expanding its services to Southern France and Italy with one sailing every two months.187 Evidence of such success and expansion became visible with the removal from its first small office in Lagos to the more impressive Development House on Wharf Road, Apapa. It even expanded its operations into the American West Africa Freight Conference (AWAF) which covers United States and Canada-West African trade route. In 1972/73, the company owned twelve vessels with a total gross tonnage of 81,939 covering an aggregate bale cubic feet capacity of 6.3 million (Table 34). Additional 4 vessels were on long-term charter. By 1971, the company‘s expansion scheme included the incorporation of a wholly- owned subsidiary--the Nigerline, based in Liverpool, United 7Nigerian National Shipping Line, First Annual Report, 31.st March, 1962, Lagos, p. 4. 188 .888 N35 .23 .95 988.6 80862 3832 ”8.88 we m.mN\NN ham.mem.m GNV.ONH mmm.am NNN.G¢ Hausa 6 m.ma veN.oam omN.OH moo.m NNm.v s mead «magnum Masha NH 8 m.oN eeN.on omN.OH moo.m NNN.¢ m mmmN came nmsnm NH 6 m.oH sz.oam ooN.OH moo.m NNN.¢ m mama «scam um>flm ON 8 m.mH vea.oam omN.ON moo.m NNN.¢ m Nema ummaz umsam m NH ma ooo.vmm mme.m GNN.G amm.m OH mmmN oaamm nausea. N N ma ooo.smm mme.m mmo.m maa.m ca mmmN mgqxnuatfiuamgz a N NH omo.Hsm «mo.HH msv.m 445.4 GN nmma Nuasmomzluumnumm G N NH www.mvm amo.oa omm.m N¢H.N 5N mmma .ueuqmm Hm” m . NH omv.aNm mNm.m mmm.m meo.m NH mmma mnmn_mqnm e . NH hoo.amm omo.ON oem.m mmm.N NH vmma 8:56:60 N . m.mN mN¢.Nmm mmo.ON Noo.m HNH.N ON mmmN cmsamgo N - m.mH mam.oam oom.m NNN.G Hmm.m NN omaa canon can. N ca m m N m m a N N H mMOHU ”.02 inmsssmv mummcmmmmm 38x 038 38m . no 8952 sun Beam oamm .3363 mg was .80» 9.2m m0 982 oz 88 863688 .NNNH .Namasao me» an gonzo mmnem mo mumasunuumauu.Ne mamag 189 Kingdom which was responsible for the parent company's general agency business in United Kingdom ports. It was expected to assume the main cargo brokerage services from January 1973.188 At the head office in Lagos, the company had expanded from the former eight to ten departments, in- cluding the newly created189 i. Nautical Department, charged with responsibility for marine administration of fleet, nautical, and victuallin matters. ii. Technical Department with responsibility for tech- nical matters, repairs of ships, and attending to new buildings as required. Beside maintaining the United Kingdom Offices, the shipping line has expanded its agency services in Nigeria to Port Harcourt, Warri, Burutu, and Calabar ports. Currently, the National Line undertakes some agency functions for a number 188Nigerian National Shipping Line, 1972 Report and .Accounts for 13th Annual General Meeting, 22nd March, 1973, p. 5. 189Possibly taking over some of the functions hitherto exercised by the Ocean Traffic Control Department. This will accord with the expansion of the line's func- tions and assumptions of new ones over time. 190 of foreign lines among which is the Japanese line--the 'K' line. Part of the progress is seen in the effectiveness of the Nigerline (U.K.) Limited as the parent company's main cargo brokers and general agents in the United Kingdom ports from 1973. Problems of Current Patterns within the National Line A number of pertinent areas of the Nigerian Na- tional Shipping Line's incorporation and operations need a few comments. The foremost of these is the legal rela- tionship between the line's management and the government (departments) ministries and the level of controls exer- cised by the latter on the former. Apart from the laws outlined in the articles of the line's incorporation, the relations between the line and the appropriate ministry responsible to the legislature and the Council of Ministers (now exercised by the Federal Military Executive Council) are spelred out in the official Sessional Paper, No. 7 of 191 1964.190 Under Section V, the relations between the state- owned companies191 and the government are explicitly stated. The Nigerian National Shipping Line--a state-owned company is officially defined as one in which the Government is the sole-shareholder or in which only a small proportion of the share capital is for special reasons left in private hands on such conditions that the State can, if necessary, have these shares also at its disposal.192 While this company is not necessarily a public corporation in the traditional sense, its position was recognized as making for "adequate protection of the eco- nomic and national interests without detriment to the com- mercial flexibility of the operations." The powers of the Minister and thus the government ministry involved the appointment and revocation of appointments of the Chairman and the Board of Directors of the national line, as well as giving directions of a general nature for the discharge 190Federal Republic of Nigeria, Statement of Policy py the Government of the Federal Republic of Nigeria on the Relations between the Federal Public Corporations and the Legislature, the Government and the Public, and between the State-owned Companies and the Government, Ministry of In- formation, Lagos, 1964. 191Includes the Nigeria Airways, the Nigerian Na- tional Press, and the Nigerian External Telecommunications. 192Ibid., p. 9, paragraph 18. 192 of its functions on matters which appear to the Minister to affect the public interests as needs arise. As touching the operational activities of the line, the appropriate minister was enpowered by law to undertake the following actions: (e) sanctioning in advance any extension of the ac- tivities of the company; (9) approving in advance the appointment of auditors: (h) approving in advance rates and scales of charges for services rendered to the public by the company; (i) approving in advance the investment by the company of its surplus funds; (j) approving in advance the borrowing of money or raising of capital by the company; and (k) approving in advance capital projects and financing arrangements for such projects by the company. To understand and appreciate the effects of any exercise of these ministerial powers on the national ship- ping line, the nature of shipping services and the market 193 should be known. For, where the Nigerian External Tele- communications, as an example, is a near monopolist on international telecommunications transmittal services for Nigeria, the National Shipping Line is in a most competi- tive market at the internal and international level. And, to worsen the situation, the company is a marginal firm in the oligopoly--the conference--which itself faces inter- conference rivalries as well as the competition from well entrenched tramps. Moreover, unlike the airlines where the market allows competition in the normal methods, loyalty and tying arrangements of consumers by established shipping lines make the job of securing adequate patronage and hence income more arduous for the Nigerian National Shipping Line. This means that the National Line has got to monitor its market and act swiftly to catch up opportunities by judi- cious extensions and curtailments of its services if it must survive in the economic sense. How then can the National Shipping Line perform these tasks, calling for prompt reflex decision making when it is supposed to work within the iron-clad controls of such ministerial directives? One direct effect is that since the appointment and revocation of appointment of chairmen and board members are 194 vested in the minister and the ministers, by our parlia- mentary system,may belong to the majority political party in power, actions in these areas cannot be divorced from partisan politics. It is not inconceivable that most of the chairmen and board member posts have become opportun- ities for rewards of political party agents and stalwarts. Except for just a few cases, most board chairmen have been anything else but practical businessmen, versed with ship- ping techniques. It is not also inconceivable that most board members have been civil servants who are proven ace administrators but not astute business directors. That political factors are allowed to influence board appoint- ments can never ensure neutral influences on the managerial and operational staff of the company. Thus apfibintments and rewards of such staff may not be by pure merit alone. The high rate of staff turnover in the company which the Federal Government has complaint about193 may not be di- vorced from political influences of appointments and re- wards for services which at any stage can only lead to exodus of efficient but frustrated staff. 193Nigerian Development Plan, 1970-74, p. 184. 195 That the minister (in this case, the appropriate Ministry) has to sanction, in advance, "extensions of the activities," "advance in rates and scales of charges for services rendered to the public," "investment of its sur- plus funds," "the borrowing of money or raising of capitaL" and "capital projects or financing arrangements for such projects by the company," would be tantamount to direct control of the managerial functions of the company's plan- ning and operations. Probably, the overriding desire of the government here is to safeguard the company from ruin by unscrupulous officials. The opposite effect is that, while security is being pursued, over-cautiousness had tended to slow down real progress capable of any able management personnel. This cautiousness over the years has tended toward conversatism which in a dynamic business like shipping is indefensible. One area in which this extra caution has demon- strated itself is in capital development. Shipping is a capital-intensive industry and capital-output and capital- 1abor ratios must be watched and suitable changes made if the company is to optimize its operations and earnings. The 1972 annual report of the National Line shows that 196 authorized and issued capital had stood sort of permanently at N4 million between 1960-61 and 1971-72.194 Capital re- serves went up after thirteen years to over N2 million by 1972 while other reserves were unstable up to 1965-66 where it assumed the value of over N50,000 and stagnated there to this date. This conservative policy for a company probably needing increased capitalization is the function of minis- terial control where red-tapism of public service has been allowed to influence this business venture decision making process. The built-in inflexibility in the decision pro- cess may be frustrating. It is very doubtful if the management of the Ni- gerian National Shipping Line enjoys the current state of affairs. The Annual Report noted that: The Federal Ministry of Transport, has come to understand the problems of the company and has played a leading role in carrying along all other essential Federal Ministries to get the support of the company from some of its sensi- tive financial problems.195 194Annual Report, 1972, p. 15. 195Ibid., p. 7. Evidently the use of the economics yardstick of profitability alone must have made approval by the Executive Council of further investment funds very difficultit 197 Apparently, the company must have tussled for a long time to get the essential approval for funds for its fleet ex- pansion and increased working capital. Indeed, the Federal Government had noted also that the shipping market is very unstable and it will have to be convinced of the soundness of the expansion proposal before risking further capital investments.196 There is, however, a minimum level of cap- ital outlay and operational capacity in international liner shipping which ensures reasonable net profit hr, at least, break-even incomes. Probably, while the National Line may understand this, the government ministries concerned may yet have had to grapple with such technical issues. Another area in which this ministerial control manifests itself is in the acquisition of tonnage. By 1971-72 operational period, the company owned only twelve vessels (Table 42) more than a half of which aged over six- teen years. Indeed, Dan Fodio, Oranyan, and Oduduwa had passed the twenty-year age position. Over 60 percent of the fleet were more than ten years old. A comparative study of the Palm Line or the Black Star Line of Ghana (members of the same conferences) shows that the National ‘ 196National Plan, 1970-74, p. 184. 198 Line had the higher mean age of vessels in the study period. Two problems show themselves in this case. The paucity of vessels in operation is likely to handicap the company in effective participation along the United Kingdom and Euro- pean routes where it is serving on two conferences. The other area is that the vessels' high average ages tend to have positive correspondence with high costs of maintenance and operations and tend to have negative correlation with high net earned revenues. Apparently, relative to other conference members, the National Line's vessels would, on -the average, be less reliable on the high seas since the probability of breakdowns with aged ships must be really high. It is also true, that the Nigerian National Ship- ping Line's vessels have on the average smaller gross registered weights and bale cubical capacities than those of their counterparts in the conferences. When allowances are made for the exigencies of the markets, scale economies should have dictated the use of larger vessels. The only mitigating factor for a choice of lighter weight vessels .must be the needs of shallow African creek waterways on uflxich the ports are built. The fact that other lines run ~ 199 those same creeks with heavier vessels does not make the decision of the National Line any more the wiser. The only consolation is the trend noticed in the acquisition of the River class vessels which not merely have heavier weights and larger bale capacities, but possess faster speeds. The National Line's vessels have a mean speed of 14.4 knots. Apparently this is slower than those of its conference partners when allowances are made for frequency or infrequency of port calls since slower speeds mean lost time and less revenue and turn rounds per year. Writing on the technological potentials for shipping, Professor Lawrence197 indicates the need for developing (1) still larger and safer ships to handle high volumes of both bulk and general cargoes . . . (2) increasingly speedy, efficient and low-cost package cargo services . . . to prevent diversion of high value cargoes to air carriers. As a matter of fact, based on the current rational- ization methods--scheduling of members' ships, and share of pool cargoes, the ownership of faster and larger vessels 197s. A. Lawrence, International Sea Transport: The Years Ahead, D. C. Heath and Co., Lexington, Massachu- setts, 1972, p. 154. See also, B. N. Metaxas, The Eco- nomics of Tramp Shippigg, op. cit., p. 147, and O.E.C.D. Maritime Transport, 1970, p. 88._ i1 () fin- '\ id '1 200 can mean more income since the carriage by individual line may be enhanced by "the lifing capacity, volume of cargo from conference member countries and the negotiating ability of conference members."198 In this matter, Professor Law- rence adds that successful operators (commercially) have sought to expand their share of the business by offer- ing even faster services and are now employing vessels with speeds of sixteen knots to up to twenty-six knots in order to gain a competitive margin.199 Thus when the yardsticks of age, speed, and tonnage and bale capacities are used to evaluate the vessels of the Nigerian National Shipping Line, most of that line's vessels are due for replacement. 'Apparently these aged and slower- moving vessels are making quadrennial surveys irksome and costly to the company for, not only is its fleet moderniza- tion necessary, expansion may be desired as soon as the full market and operational facts are diagnosed. This exercise can only be based on flexibility of decision- making if the rigid ministerial controls are reviewed such thatcertain decision making mechanisms are at the hands of 198Confirmed by A. J. E. Christopher, COWAC/UKWAL representative in Lagos, August 1973 (interview). 1998. A. Lawrence, op. cit., p. 276. 201 the company's management. Thus, left alone the company can react swiftly to the market in which it operates at times and under circumstances at its disposal. CHAPTER V EVALUATION OF THE NIGERIAN NATIONAL SHIPPING LINE'S PERFORMANCE: PRINCIPLES OF EFFECTIVE PARTICIPATION AND PROFITABILITY Among the expressed aims and reasons for setting up the National Shipping Line were to make "provision of effective instrument for the movement of the nation's increasing exports and imports."200 Two principles for the evaluation of the company's operational performance become relevant: the degree of effective participation and of profit making from the venture. In other words, the line's performance will be judged from the normal criteria of a company in the commercial sense. The principle of effective participation connotes market share and also re- lates to its effective power in the market. That of profit generation derives from its effective monetary returns on its outlay. In real economic terms, this should compare 200See the objectives, p. 7, and hypotheses, p. 14 of this study. Also footnote 15. 202 203 with opportunity costs of such capital or returns on sim- ilar capital investment in alternative applications. To have a proper grasp of what the Nigerian Na- tional Shipping Line faces in the shipping market, the operational effects of the conference system and the bind- ing agreements on member lines must be kept in prOper perspective. As already examined, the shipping market is more a collection of oligopolies--the conferences with some elements of competition among tramps and other conferences. Even though there has been no real universally acceptable quantitative standards for evaluating the conferences' con- centration and monopoly powers,201 such potential powers are restricted by market and extra-market forces.202 But the conference agreements among members tend to be rigid and the operational strength of each member is more a 201For literature review here, see Joe S. Bain, "Price and Promotion Policies" in Howard S. Ellis, ed., A Survey of Contempgrary Economics, The Blakiston Co., Philadelphia, 1948. 202These include (1) intra-conference competition, (2) actual or potential competition from other lines (in- cluding airlines for passengers) which may or may not in- tend to join the conference, (3) alternate sources of supply or markets, (4) actual or potential competition from tramps, (5) the bargaining strength of shippers, (6) government regulation or intervention--See Daniel Marx, Jr., International Shipping Cartels, Greenwood Press, New York, 1969, p. 240. 204 function of the provisions of such agreements. This situa- tion tends to render the supply of tonnage and expansion of services relatively inelastic to market price changes. Effective Participation The total potential volume of traffic on the Nigeria-European trade route is tied to the levels of total export-import trade for any one year. The number of total tonnage of vessels expected to operate on that route would be difficult to quantify since most lines including tramps operating on one route also operate on others and there is apparently no information on the shifting of tonnages among the different trade routes. If the total tonnages owned and chartered by the different conference lines were ar- rayed in order of magnitude, Nigerian National Shipping Line controlled only 3.1 percent in 1959 (Table 26) and 1.8 percent in 1962-63 (Table 27). When the West African Lines Conference was dissolved, and the United Kingdoerest African Lines Common Services (UKWAL) and Continent West .African Conference (COWAC) instated, the pr0portion of tonnages held by the Nigerian National Shipping Line. 205 respectively, stood at 6.3 and 4.5 percent by 1972 (Tables 28 and 29). Thus, when the shipping tonnage is the cri- terion for determining market share, the Nigerian National Shipping Line had only moved from a total of 20,000 tons in 1959 to 120,436 tons in 1972 or from 3.1 percent of WALCON to 4.5 percent of all the COWAC conference lines' aggregate tonnages. When the total of both conference and nonconference lines' activities are taken together, the medium available for measuring participation is the number of vessels of different nationalities entered at the Nigerian ports. A survey of such movements (Table 25) shows that entries of Nigerian-owned and controlled vessels' at the Nigerian ports as a fraction of all total entries ranged from 3.2 percent in 1960-61 through the peak of 8.6 percent in 1962-63 to 4.6 percent in 1969-70.203 In essence, appar- ently the Nigerian National Shipping Line was the dominant Nigerian line operating in 1969-70 because of the combined effects of the foreign exchange allocation and ship charter conditions imposed by the Federal Ministry of Finance204 203Nigerian Ports Authority: Annual Reports of Shipping Activities by Nationalities, 1959-60/1969-70. 204See‘Appendices IV and V. 206 during the civil war years. In effect, most Nigerian private lines which could not meet the conditions had to cease operations. The reported trips or entries into the Nigerian ports by Nigerian owned or controlled ships would be mostly those of the National Line. Such participation by the nationality criteria of entries (Table 25) was in any one year below 10 percent. Note should be taken of the declining but still dominant position of the British lines. Judged by the share of carriage of the export pro- duce controlled by the Nigerian Produce Marketing Company, Tables 43a and 43b tell the story. Based on estimates which disaggregated the conferences' allocations (which were not originally disaggregated for reasons peculiar to cartel methods) the Nigerian private lines initially made impres- sive efforts than the government owned National Line. It was not until the effects of the Ministry of Finance's memoranda205 that their proportions of carriage declined. The impressive showing by the National Line between 1968-69 and 1971-72 could reflect the effects of the civil war on foreign lines which then feared Nigerian ports or the zoslbid. 207 once uflamm 30c .zooqaz.>aumen0m .mmuoou mumuu uewcflucoo nunoz new .M.D1MHHmeflz modumnwmo mocwnwmcoo .memmeoo mcflumxumznmosooum cmanmeaz_ "mouoom .opoou_ucwcaucoo £ph021dfluomflz_co mcaummeoo no mopsou momma nguo co mgemnu new mmocwuomeoo Hmsuo mo.mnoeemzo .Ugamg 8......” omm.aav >mm.mmm mmo.m~H mmo.hma woe.Hm mvm.moa mmm.mhm ~b\HhmH «Hm.aom mem.mam mom.mma ema.ham oom.maa vmm.mo~ moo.mam H>\Ohma Hem.m~m www.mmm moa.mma hmm.me~ mmm.~m mmo.amH www.mmh on\mmma ~ma.mh¢ mmm.omm mm~.mma NmH.bhm vv~.mha mom.hma www.mmm mm\mmmH mmv.oah m~¢.mav mmm.mm~ Hmm.oha chm.ah Hmm.moa hem.hmm mm\NmmH Hwe.mmm vmm.~mm 5mm.mo~ mom.~m~ man.mva mmo.m¢H www.mmm hm\wmma mma.m~h wom.~vm hmm.oma Noa.aom mmo.HHm mHo.omH mo~.¢mm.a mm\wwma vmm.abv mmm.m~¢ mmm.mv Hmm.mam www.mwm mho.ama mH~.mmm mw\vwma m Amcoav Amcoav .mcoav_ Amcpav ofimcoav mamcoav “noose H309 cmwmnom cmwuwgz H509 savage :H . m . z. 2 882m fi H8999 ommcaq mocwummcoocoz nmmcfiq moowuomcoo . 8038 floaxm m . 888.8 afiumfimz 8808 53832 at no mafiflmo 88ml .82 Emma 208 .MNe manna_sonm uoNamspo m.mm N.NN N.NN N.NN N.Ne Ne\aamN m.es N.NN N.Nm N.¢N H.4m Na\cNmN N.Nv m.ea , m.mN N.¢N m.me oe\amma ¢.He N.NN . 6.Nm N.NN m.Nm mo\wemN ¢.m¢ m.mm N.Ne N.NN m.mm mw\somN m.o¢ N.NN «.mm m.mH m.om em\mmma N.om n.aa m.¢N m.mN N.Nm em\nmmN co.0N e.v N.a m.mN «.mN mo\¢mma mcoaumooada macaumooNNa. _ .. mcoqumooaam mcaaumooaae_ mcaaumooddm 3896 no 3885 no 3880982 mo 888 no 888.88 no 9888 E 886 .83 3 82m 2 8898 58832 N88. 883 5882 magnum go muflm m. 46.2.2 .mfioaxm .o.z.m.z mo mafiflwo was 5 coflmaaofiumm gaging was”. 209 conferences' strategy of allowing the National Line more effective carriage here, in excess of normal quota's to direct government's attention from their control of the nonmarketing company's cargoes206 or the allegations of directives from the Nigerian Government to the National Lines to intensify such carriage of the N.P.M.C. produce in View of rate disputes with the conference (see foot- note 213). On the whole, the National Line had improved its carriage share of the Conferences' allocations from 29 per- cent in 1964-65 to over 60 percent in 1971-72 while its effective carriage of N.P.M.C.‘s total export produce moved from a mere 15 percent to 24 percent between 1964-65 and 1970-71. Effectively, the improvement of such carriage of the total produce was a yearly increase of less than 2 per- cent. On the other hand, the nonpublic private lines (despite their dependence on charter vessels) increased their total carriage of N.P.M.C.‘s produce from 4 percent to 34 percent. They, thus, increased their effectiveness 206N.P.M.C. Memorandum to Ministry of Transport "Elder Dempster's and Palm Liners are also able to secure the majority of timber and crushed oil because of their age-long business establishments . . . crushed oil and timber are high freighted." 210 annually at the rate of nearly 7 percent by 1967-68 until the effects of the government's circulars on foreign ex- change reduced it to annual share of 20 percent by 1971-72. Indeed, the private Nigerian lines carried 19.5 percent of the annual total, while the National Line only conveyed 18.8 percent. The Conferences' agreements of 1959 and 1961 per- mitted the National Line, to operate 12 vessels in 1962 and 14 in 1963.207 By 1970, the new agreements with UKWAL and COWAC involved increases, not by vessels, but by cargo ton- nages carried. This set the quota at 18 percent of pool cargo in 1972 with increases to 23.5 percent for 1977 within UKWAL while the corresponding quotas within COWAC was 15.19 percent in 1972 to 20.19 percent in 1977.208 Provisions for lifting by the Nationhl Line209 in respect of Southbound shipments from the North European Continental ports to West Africa, were also made. An experimental rationalization scheme by COWAC members to ensure both the scheduling of vessels and allocation of cargoes was 207National Line, Annual Reports 1962, p. 4. 2081bid., p. 7. 2091bid., p. 7. 211 expected to help improve services and ensure better finan- cial results for members. In a comparative study of trips by the different lines engaged in West African trade it was found that the Nigerian National Shipping Line was responsible for 2.2 percent of such total trips in 1961 to a high of 3.8 per- cent in 1964210 (Table 44). Once more, it is significant to compare the dominant positions of the three British lines (from 23.1 percent in 1961 to 28.2 percent in 1964) with that of the Nigerian flag line. When the estimated dead weight capacities delivered by the lines in respect of west African trade are considered, Dag Tresselt211 showed the shares of the Nigerian National Shipping Line to be 3.6 percent in 1962 and 4.4 percent in 1964 (TabLe45). This cannot, of course, be fully indicative of the real share when Nigerian trade alone is examined since the Na- tional Line might not have engaged heavily in exports from other West African countries nor does it deliver any sig— nificant imports to those countries. Apparently, the ratio by 1964 would be around 7 to 8 percent. 210Dag Tresselt, "The west African Shipping Range," U.N. TD/B/C4/34, New York, 1967, p. 37. lelbido' p. 390 .NN .a .8932. 22a .pmflgmdmgfiaul: Adages 1N. .uauUnounong—Udiuo 3350893 .nwuflufiuaadfigwudflngflfluuo 558005 ~ .ggflgagggéyigggggggfifiggfl23363305a; ”g 212 0. 8a SN. N 0. 8H NNN. N o. 2: ONN N o. 2: SN. N 38. EN 3 TN 2 TN NN N.N N 884 .63 and are 3532 5.82.! an. . NN SN N.N N. «N NN NA NH «82 .93 ham fin:— wd N to m to m I ll 5N3": .6383: 8 2888a .fim I. l I- II I- la N5 1. 883 688262 8 1238 g 5 N 9N «N N; S NN N 883 .585 a 38.865 .038 an 1.80 848.88 0.. on N N. N.N 2. ON 4N 6868148083 . .BNthBC 888m 83¢ an! 835 EN 3 «N Na. N.N N. N.N 8 588.88 .853 388 33% 395.138 69 N; am N.N 8 N.N NN SN an 38 .854 :8} o; R N... on I. R N.N N «.5438 .83 g as: 582858 9n. .3 «N N5 N I. In I .I .4135 .23 8E2 on! 33.8 no N 3 NN NA NN TN N E5 :43 8:3 find .538 EN 3 TN no we 8 no 3 8855 .312 p.83 o3! manna: 3:898 N; 2 N4 NN NN SN ON 3 5988.. 338688: E9828 annum-8:38.82 .>.z : 8 I. 8 N.» m... N.N 8 Evans: ..>.z :34 5:82 pl: 953. NA 3 N4 NN NA NN NJ NN mail: .88.“;— lu mad 3 TN 2 SN 6N 9N N1. mania ..=.n.a.u 33952.5. gang N.NN ANS N.S «NH . TS 83 NN an g .354 5:58.. 3 NH HA 3 o; NN 3 NH .585. g a Ema: 8% ON NN o.N NN NN NN 1N R has .38 a can! .q 5 NS 8 NE E a.» S 3. NS «NHN $6337.88 3962 dam N6 8 me a N; Na 3 x: g .352 5.820 In and! a8 N.N 3 EN 3 em e 0.. an lung .5 3:8 5383 unnafiulohouoifiz 63558833 3 z o.N .N ON 3 .N .N Beau->3 :2. .83 36 358 em 2 o.» NN N6 me NS 3 888 .63 23 Sum n: e: 93 N3 m.2 NS 9: E 88.53 83 8.5 8348.8 HEM are 83 RE RE. 2888 No.62 .2888 8.62 E85 mo 62 gloat No.2 E88! 33 N 3 $2 :2 gggifiggguooflfiglng 213 .mEELElEdEm 535 an! £ng m8 “8&3 .%§§§3§§.§ Egouwgaégflgidgflfi .gmoflaim.§u§gnflfin§8§ ads 83: N63 312 NNN.N N38 . N3 N.N NNN NNN.N 63 and gum 3.93! 53.3.. . NmN . NNN . and an «In. N. NN NN n3. 3 8.3.3.6: 8 «533.3 dam g N. Na 9: Nfl o g QUE-8 8 3.8 $88 N. m3 3. 8.13 8N5 3 8.3.3 13.5 an»: ENS N. NNN NNN NNN. 85A Sud N. no. NNN a. 854 film N. N». NNN mm... 83 g «83 3.8m «E. N. NN In II 93. 33 835 an! 3.5.580 N.N N. . 3 N9. 8.5 £8» 533 N. 3N N.N NNN N85 in! Eng 038 «at! «3 v. 3 N.N :. 8N. i g 8:85 383. ii N. Na N.N NNN NNN. «54 BEN an! 38 m. 3 N.N 8 N3.N 33E 3.. «.53 N. NNN N.N 9.: Name 3% g N.N NNN N.N 8N NNN. 354 an... N. 8 N.N S NNN. and N Haul. Nd N... N.N NN EN. «8 N emu! N. 9N N.N 3N N8. gm «NBS-a N. NNN N.N .3 SN. flaw: «is: .Bm N.N NNN v.2 N84 N35 «an... g me SE «B N.NN 9a.... N.NN NNN.N NNN.3 8.: «N8 5958! a fig Edd 88.38 . 3338 53:96 .5990 id Novas 388 189 hug id i. 192. N6 i 38.5 yo and Mo minimal: calm-m. g g nun-.2. id 3 g anon-Nunn .32 nuwlggflllufiggabggbfiguflizfigufla‘éa C.) 7+] ’11 1 214 Taken on the basis of the export-import trade of Nigeria, the recent response to the study questionnaires212 of this researcher indicates that between 1968-69 and 1971-72, the Nigerian National Shipping Line had made very substantial increases in export-import deliveries. Cross trades increased from over 0.5 million tons to over 0.8 million tons at the comparable period. In fact, the com- panyexceeded 1 million total tons per year for the period (Table 46).213 This trend was also confirmed by the Annual Report of the company for 1972 which indicated that com- pleted voyages increased from 59 in 1971 to 81 in l972--a full 37 percent increase which resulted in a 7.4 increase in tonnages carried. Earnings increased by nearly N4.0 million.214 In an interview with the Nigerian National Shipping Line officials, the following statistics were presented for 212See footnote 93 and Appendix VII. 213This impressive level of participation is sig- nificant and seems to obliterate the picture of the pre- civil war years despite the maintenance of sixteen ships. A hint by the Nigerian Produce Marketing Board was that the performance related to directives from the government since conferences had dispute with the marketing company, and relaxed effective carriage of N.P.M.C. cargoes at going rates. 214Annual Report, 1972. 215 TABLE 46.-Nigerian.National Shipping Line-Shipping.Activities 1968-69/1971-72. Vmefl5:h1 (knss man: Sendsea :Dq::t D;:rt 'hfiflb Tbtilfibns 'Ibns 'Ibns Tons No. N.R.T. 1968-69 16 61,888 252,222 344,030 596,252 1,192,504 1969-70 16 61,888 268,208 482,480 750,688 1,501,376 1970-71 16 61,888 297,467 494,382 791,849 1,583,698 1971-72 16 61,888 334-342 469,890 803,232 1,607,464 Annugl 16 61,888 288,060 241,068 735,505 1,471,261 anmdvecmmeiamdiknr(flaruand. gkxmdaitnnfiuesttnfits. aunts: nfigenknaubtrmufl.Shuxfinglfine. 215 carriage of cargoes between January and December 1971. A total carriage of over 41 percent of the UKWAL Confer- ence's trade is significant (Table 47) and can either be ascribed to extra efficiency or to a confirmation of foot- note 213. If it were the latter case, some adverse effects ought to have been felt in the import carriage whereas at that time the National Line seemed to have broken all known 215 August 18, 1973 (Lagos). 216 progress records. Whatever the situation, the post-war performances seem to have been improved. Judged against the total trade of the country (Table 8) the Nigerian Na— tional Shipping Line carried 0.5 and 10.1 percent of all exports and imports for 1971-72, respectively. This was equivalent to 2.1 percent of total trade for the period. TAEEE 47.-Carriage of Nigeria's Trade (UKWAL) 1971. Bamxmt UKML N.N.S.L. . ‘angelfigs T r (kurnxiby ( ) ( ) N.N.S.L. NOrthbound 324,164 108,193 33.3 Southbound 133,914 81,308 60.7 Total 458,078 189,501 41.4 Smmxmn lmkfimflm1fiathauu.ShhxdngIfine. Thus whether the share of the market by the Ni- gerian National Shipping Line is related to the fleet strength or tonnage carried within the conference or as a fraction of the nation's total trade or the total trips into the Nigerian ports by all operating lines, the picture is one of marginal participation. In fleet strength among 217 the conferences it is shown that the Nigerian National Shipping Line maintained by 1971-72 6.3 percent of UKWAL216 and 4.5 percent of COWAC.217 In trips into the Nigerian ports, the company held 4.6 percent218 in 1969-70. When the carriage of cargoes within UKWAL is examined the Na- tional Line had 41.4 percent in 1971.219 The problem with this impressive showing within the UKWAL pales into insig- nificance when the periodic carriage of national export- import trade is analyzed (Tables 48a and 48b). Thus the company, for example, carried 11.7 percent of Nigeria's exports in 1968-69. This diminished to less than even one percentage point in the next three years. The underlying reason is the swelling of export tonnage by crude petroleum-~an area in which the Nigerian National Shipping Line has never operated. And, when it is realized that petroleum crude alone is 73 percent of the total ex- port value,220 the under one percent share record becomes 216Table 20. 217Table 21. 218Table 18. 219Table 46. 220Central Bank of Nigeria. Annual Report, 1971' p. 75. 218 .mmmma 6:3 Saddam Husoflmz £3332 "monsom .mucucomeoo mom ucm_ssmaonumm macho mchucoor o.~ ans :3; HA Zn 3.98 8m mum 83m aha.” o . H «2. HHh. 2. .v .0 3m mmo :2. N. .3 av Nam . v HRH m .H Hmh ovm. mm m .o va mow .mm .v .5 mam mmo. m 23 m . H mam Eb .Hm m . 0 «mm 3v . an N. .3 3m RN . m mme m.m mmv 38$ m.HH mvm mvH.~ m.m me mafim mmmH w . N. Nmm HR .5 m .v omN mg .m m . MH Non mmH .N hmmH m . m 0mm «mm .HN m .H ohm omo . «H o . m 3.0. NHm . m womH m . m wmm mmo . mH e .N «mm m2. . «H m .m gm mam . m momH 69.58 See 808 6638» See 808 8858 808 88c H8033 mmwflnuwo mmmgop HmSHumz owMHHHmo «monsoon Hdcoflmz 003.38 mama—sou How» m0 w m. :H.m.z.z HmcoHumz m0 m m..q.m.z.z Hmcofivmz m0 w m...H.m.Z.z HMSHUMZ wagon menu» 38. moms unomxm mama—sou £595” .ocwufl unomfixfluomoa 93332 no $03.33 $33 9.592.216? a 219 Keg—Mm mOHnNH. ammonium . woman—o ETHOuumxm .3anqu n . mow—.50 ~538qu mmBHBHm .03 Emma HchHumz gmHz u Hmzz . . . . . . can: a H mma mav me e NH mwv mom m a o mam avm mm Huzgqa o.H sow naaa.mn ~.oa onv -m.¢ m.o «mm ammo.~a ~p\ahma «.H Hm» novm.mm m.mH «as mmm.m m.o haw umon.~m Ha\cnma ¢.~ om» neao.am m.¢a «we >-.m a.o mmN ubv¢.m~ on\mom~ H.~H mom 4mm.v m.~H ewm map.~ n.aa mmw m¢H.~ mm\woma amzz “cool Aooov qmzz xooov Aooov qmzz Aooov “coco ucwogmm qmzz Haves ucmonmm qwzz Hmnos ugmonmm amzz Haves fiancee Haves Amcoav.pnoaen Amcopv_uuomxm .mnmnu HMGOHHMZ h«.0 mhmflm m. .Q..W.Z.ZII.QQV E 220 misleading. With imports, the company's annual average of 12.6 percent of national total is defensible. From all indications therefore, the Nigerian National Shipping Line by 1972 carried between 10 and 12 percent of Nigeria's total tonnage of trade under normal situations of partici- pation. Profitability When the yardstick of profitability is applied with reference to the Nigerian National Shipping Line's perform- ance, the paucity of data will hamper the depth of such analysis. In normal circumstances, the profit index of a shipping line, like any other commercial concern, should show the net differential between gross incomes or revenues and expenditures or costs. The major problem with research into shipping services is that cost structures and revenues are not accessible to external researchers.221 What data as are available consist of some generalized audited state- ments of accounts sufficiently aggregated as to hide the 221Daniel Marx Jr., International Shipping Cartels, Greenwood Press, New York, 1969, p. 241. 221 sources and uses of incomes. Indeed, Daniel Marx has asserted that since many steamship companies engage in a variety of nontransportation activities, the use of those published income statements are rendered unreliable.222 For example, at one time, Elder Dempster Line, Palm Line, and Guinea Gulf Line were involved in merchandise trade along with carriage services. Nonetheless, in the absence of any other reliable sources of financial data, the avail- able figures will be used cautiously for analysis in this study. From a theoretical economics standpoint, projects . . 223 . 224 and operational costs are fixed and variable. The former, given a certain operating production unit or trans- port unit, does not vary with output or amount of freight carried or services rendered whereas the latter varies with output or service levels rendered.225 Indeed given a long 222Ibid., p. 241. Also see Singh, Nagendra Achieve- ments of UNCTAD-I (1964) and UNCTAD-II (1968), S. Chand and Co., New Delhi, 1969, p. 47. 223Also called overheads. indirect, OHCOStSI or prime costs. 224Also called direct costs, or variable costs. 225See J. P. McKenna, Intermediate Economic Theory, Holt, Rinehart and Winston, Inc., 1958, pp. 14-18. 222 enough time, all costs tend to be variable.226 Cost clas- sifications thus vary with accounting systems as with dif- ferent accountants and conventions, and operational results of ships and shipping lines are handled in different ways. The major purpose is the assessment of the profitability or otherwise of the shipping venture by eventual comparative analysis of costs and revenues. Theoretically, the profitability of a ship stems from the ability of the ship to earn enough within a given period to cover her overhead and contribute to costs of management, interest on capital, and a fair profit. A fair profit here may be defined as one which satisfies investors to the extent of discouraging them from transferring their savings from shipping into comparable industries paying higher dividends. Professor O'Loughlin227 holds that shipping investors normally take long term investment views such that a bad year or a series of a few bad years would not necessarily force a revolt by such shipping investors. But a consistently bad series of years can force such mass 226J. M. Henderson and R. E. Quant, Micro Economic Theory, McGraw Hill, New York, 1958, pp. 58-61. 227Carleen O'Loughlin, The Economics of Sea Trans- port, Pergamon Press, Oxford, 1967, p. 97. 223 withdrawal from shipping investment. Market protection through restraints on unrestricted competition in shipping has been thus claimed for rate fixing, not by market me- chamism, but by market agreements, which is believed to stabilize earnings at levels fairly above direct costs. This is believed to be true for scheduled services which can encourage investments in shipping if net returns are reasonable. Profit is determined by the level of freight rates, volume of cargo, and number of passengers carried against the set of costs. A single voyage is considered profitable if the gross earnings exceed the voyage costs. In the liner operations, on the other hand, where voyages take place irrespective of the size of business handled, freight earnings which cover handling charges and contribute some- thing, no matter how small, to overheads are preferred. Incidentally, since freight rates are either fixed by the market mechanism or market agreement, the shipowner has to improve his returns by attention to costs and efficiency. While in practice it may not be necessary to cover all costs in the short run, these must be covered in the long 224 run since profit is a cost of attracting and retaining the 228 necessary capital and management in the industry. The former is broadly classified under Ai. ii. iii. A shipping firm's costs are fixed and variable. 229 General overheads 1. Management and directorship 2. Office and materials 3. Financial costs (interest and bank charges) 4. Planning and scheduling 5. Premises upkeep, insurance, rates, lights, etc. Selling overheads 1. Advertising 2. Agency fees--fixed components 3. Other selling overheads Marine overheads 1. Shore-based staff and marine supervisors 2. Marine stores and other overheads 2281bid., p. 229Ibid., pp. 93-95. This classification is adopted for simplicity of cost illustrations. 225 iv. Vessel overheads 1. Vessel maintenance and repairs Surveys--quadrennial, etc. Insurance--marine, indemnity, etc. Depreciation Staff and crew costs Radio fees, stores, etc. The variable set of costs are classified as below. B. Van e variable or Direct costs 1. 2. Fuel Port Charges--harbour dues, wharfage, light dues, pilotage, and towage Cargo costs--stevedores, freight commission, other shore and on board costs Passenger costs--stewards' and staff costs, baggage handling fees, passenger commissions, food, etc. Ship operating costs, repairs, supplies, etc. What emerges is that items in A and B (direct and indirect costs respectively) constitute the total costs of the shipping company's operations. For revenue, the come pany depends on freight charges, passenger fares, and other 226 commissions on its operations. The net revenue will con- stitute the differentials between the total revenue and the total costs. Admittedly all costs--direct and indirect--must be covered eventually if the concern is to be a profitable business. This necessity to cover all costs is illustrated in Figure 2. This assumes that freight rates are given and are outside the control of the single shipowner or shipping line. By measuring total earnings along vertical axis and cargo tons carriedalong the horizontal, the line OF indi- cates the total revenue at various points of fleet utiliza- tion up to full capacity at Point F. The line VP represents fixed costs (with contributions to the firm‘s overheads). The VT line shows total costs and PT indicates variable costs at full utilization. E is the break-even point. TF represents profits at full utilization of capacity and the difference between EF and ET at various points show profit levels. If freight rates equal the variable costs, TP will represent total earnings at full utilization and the lines joining various points on VP and VT total represent earnings at less than full utilization. VO represents a loss. As 227 mu. <1“. . \ \ —— ——————————— ”Ln DEERE 88$ 30. Vienna-lg 35.995 9 mg mom—4MB. sunbeam .363 08.3%. 0895135 moosoiom 0% was 5.93853. 228 long as earnings exceed variable costs, the loss will be reduced accordingly. Of course, the fixed rate OF is ig- nored here since it is assumed that such rates as are offered are accepted if they equal or exceed variable costs. If the fixed rate is accepted though the rate per ton is lower than originally, the revenue is OF' and the break-even point is E'. This point is the one near full capacity, and the profit is only TF'. Such profit level may be too low to attract more or hold existing capital in the investment. From a purely economic standpoint, costs are nor- mally related to units of output since higher outputs lower unit costs. This in essence means that the greater the number of output units the smaller the contribution of each to overheads and the average overhead costs would decline for each additional unit of output until the point of full capacity is reached. In average analysis, profit which equals the difference between average total revenues and average.total costs will be maximized at the point of full utilization of resources and this holds for all cases where unit variable costs are either constant or falling over the range of the service provided (Figure 3). 229 Utilizaticn of Capacity FIG. 3.—-Capacity Utilizatim and Profit 230 If in a situation of increased cargo offerings, additional overtime at the ports and hence rising marginal costs are involved, average total costs tend to be U-shaped functions. This is true if, for technical reasons, unit costs tend to be increasing between the optimum and full capacity. Assuming average revenue function over the range of services, the most profitable service level is one where the rising marginal costs function intersects from below the average revenue. At this point average and marginal revenues are identical by reasons of constant marginal and average increases. The Point T (on the Figure 3) is that of optimum. In actual fact, the marginal analysis is difficult to use in real life and the complexity of service‘ joint costs tends to enforce a resort to average or total costs and revenues for profit assessment purposes. Since rates are given, attention is directed more to quantum of services and cost saving methods and efficiency. Profits in practice are computed as the differen- tials between all costs (TC) and all revenues (TR) (Table 49a). Profits are at the maximum where that differential is the greatest (Figure 4). Total costs (TC) and total revenues (TR) are made up of important components. Total revenue (TR) may be classified as 231 Tc TV‘C \ TR 1 | I m 4X q4 q3 Total Profit ql - maxinum profit level q2 - maxinun revenue (inocme) q3 - I'm-optimal: equilibrium q4 - sales nmdmm (physical) FIG. 4 .-Capacity and Service Maxjitfization 232 .mamaa .q.m.z.z "mousom .mmomuu mmouu Sum mflBocH :0 33 mo xUMH Ou 9.6 30H: 98 mmsfimsmu um: Him 85:05.." H50» 58 "302 mao.mav.a man.mma.~a mma.amm.a ~vm.mng.v mmo.Hvo.H Hmm.mma.va mam.ma ooo.mm .m.: mam.ooH.vH maag mom.aqv.a Hm~.mem.ma moo.mvm.m ~mm.ama.v aao.aeo.a am~.vmm.qa -m.moa mmm.nm .m.: moo.oafl.m mmm.amm.m mama mmv.ema.a amm.¢~a.ma mva.~vm.a emm.avo.v oo~.¢ma.a mmm.mmm.oH vam.¢¢m mom.ov .m.: mam.mmm.q mmv.mam.aa Head mmo.mom moo.~mm.HH amv.hom.o anm.mom.m vec.mao.fl amo.oov.ma ~vo.vma mme.vm .m.: oam.HmH.~H onma mmm.moa u oom.mmm.m omm.noo.m vma.moo.m omw.mmm.a voo.mmw.m www.ma omv.am .m.a mma.mom.m ~5H.~Hm.m mead mog.oam n ~a~.o~m.n mmm.mam.m om~.>~a.~ amm.anm.a ong.om~.a vo~.va omm.ma .m.c Nam.~ew.m va.nom.m mead Nmm.mva u G¢H.oam.h ~mm.eva.v omn.mwm.~ voa.amo.a vam.ama.a omm.ma ~vm.mo~ .m.: Ngo.mmv.m obv.mmh.m head www.mmv n vm~.ogo.m www.mmq.v oom.mmm.~ mom.~mH.a mom.omm.a vvm.ma mam.m~ .m.: mom.mflw.m mmo.emm.m swag «HH.¢H~ u anv.mw~.m mma.mam.m omo.vmm.~ mma.mmm.a mmm.mm¢.m om¢.ma GaB.H~ .m.c mae.omm.v om~.moa.¢ meme moon—Om «dog 8.80 380 $68.85 €62.85 88:3 8938a mfioea 3008: 8:93 H38. 333, H33, ”.5633: 138. .882 28m 305 58m Sum uwz . iayrm .eonm Hum» Axe mumoo Ax. macm>mm .38» 3810.18»? 3592.688 m. .q.m.z.zl.c$ Sufi 233 TR = N (x + m, + r + c + a) where export cargoes carried x m = import cargoes carried cross trades cargoes carried H II c = charter deals with own vessels a = assets on which earnings are made, and TC = N (g + v + y + s + c') where g = overheads on general administration/management v = overheads on vessels y = direct costs on voyages direct costs on services to cargo and passenger handling 03 ll c'= charter deals on vessels from other shipping lines (foreign/local) Net profit (H) = TR - TC which sum to N (x + m + r + c + a) - N (g + v + y + s + c) = H Changes in the profit level for a period of a year (for ex- ample) is the sum.total of all net revenues per voyages and total operations for the period. n n n n n 2 (II) = 2 (TR- 'IC) = 2 (II) = )3 N(x+m+r+c+a) - 2 N(g+wy+s+c') i=1 i=1 i=1 i=1 i=1 234 variations in any or most of the above components can change the level of profit. Where data on the components are available it is possible to diagnose the factors af- fecting profit levels. The company's decisions to optimize the profit margins can be worked out by manipulating the different cost and revenue components. When the periodical cost-revenue relationships to profit determination are considered in respect of the Nigerian National Shipping Line, the published data in the company's annual reports do not seem to offer sufficient information for serious study of the company's opera- tions230 (Tables 49b and 49c). One major discrepancy is the difference between the written statements on the finan- cial results of operations and the tabulated financial data 231 in the "financial progress chart." Before using these 23OIt was felt that the principle of public ac- countability should have made the accounts and operational results in the company's reports a sufficient source of information for the average taxpayer, researcher, or other interested persons. Unlike public companies in some Wes- tern economies, the secrecy behind the data has been de- fended on reasons of protecting the company's interests. Reconciliations of the two principles must still be re- solved if the needs of public accountability and company's secrets must have their separate roles. 231Auditor's Notes on the Accounts--l972 Annual Report. ' 235 .g ...H.m.z.z ”mongom oo.ooa m.mm ~.om m.HH .ammz.qmasam oo.ooa m.mm m.~m ~.m mama oo.ooa m.HG m.om m.m mama oo.ooa m.mo m.o~ m.m Hmma oo.ooa «.mm o.mm G.m mama oo.ooa N.Nm m.Hm m.mH mmma 00.00H ~.mv 4.4m «.ma mama oo.ooa m.vm n.am ~.¢H mama oo.ooa ~.om m.m~ m.mH moms 00.00H H.om m.m~ G.¢H meme mumou mumogumzo mammnumso manoeumso Hum 138. 633.3, H885 0.58mi m .mojmm fiance—BO umoo H309 m...H.m.z.zI.amv a 236 0% hegemOZOZ "Q8 oo.ooa m.m m.ma a.mm m.mm m.m mama oo.ooa m.m a.aa a.mm m.ma a.m mama oo.ooa m.m a.mm a.mm m.ma a.m aama oo.ooa a.a o.aa m.am m.ma m.m oama oo.ooa m.a m.ma m.am m.ma m.m mwma oo.ooa m.m m.m m.mm a.aa a.aa mama oo.ooa a.m m.ma a.mm m.aa a.aa amma oo.ooa a.m a.ma a.mm a.aa m.m mama oo.ooa m.m a.am m.ma a.ma m.m mama annoy .omazn “mmwwmm wwwmmmmwawgmmwmw mmmnmeu uuom aosm mama .mmmficwoummllmuqmcomfiuo umoD oHnMHHm> m. .q.m.z.z..l.omv a 237 available data, it may be necessary to point out a few of the weaknesses in these financial reports. Apparently, the balance sheet did not include all that ought to have been included. Under "Notes on the Accounts," the auditors remarked that "no account has been taken of interest on government loans as the terms of the loans are yet to be determined."232 Again, under "long term liability" the auditors noted that "no provision has been made for the additional financial commitments amount- ing to EN 557,196"--equivalent to Nl,114,392.00 for changes in foreign exchange conversion rates for settlement of pay- ments on the River Class vessels.233 Unbelievably, the remarks showed that "no reserves and provisions against accruing repairs and maintenance costs of fleet" have been made in the accounts.234 Replaceable short and medium life items like the motor vehicles, furniture and fittings, hitherto treated as such, were in 1970-71 treated as fixed assets.235 232Annual Report 1971: P- 9, Note 1. 23311932” 1971. p. 9, Note 2. 234.9143” 1971. p. 9, Note 3. 235£2£Qyp 1971: p. 9, Note 4. 238 Apparently this was in a bid to reduce the level of operat- ing expenses and to inflate the capital value of the com- pany. Capital values actually entered for the company's fleet were inflated such that the market value was lower than the book value by N 6.32 million.236 This process was repeated in the 1971-72 report.237 The inflated book value of the fleet which was impressive at first sight then chal- lenges the depreciation rates and the reliability of the information they convey. The notes on the accounts for 1971-72 made it clear that examination of the creditors' balances re- vealed that reconciliation with creditors' statements had not been carried out and that it was accepted that there were many discrepancies [underlining by author].233 Even the debit balances consisting of (1) government serv- ices, BN103,319.4.5, (2) staff accounts, BN49,856.17.4 (all totaling BN1,442,561 or N2,885,122.00) were not made 239 available for audit purposes. The auditors had to make their usual reports after taking note of the reservations 236Ibid., 1971, p. 9, Note 5. 237Ibid., 1972, p. 13, Note 4. 233 ' Annual Report, 1972, p. 13. 2391bid., p. 13. 239 above on the accounts. It is, nonetheless, significant that the Board of Directors apparently passed these accounts in their published annual reports. Enough has been highlighted above to indicate the reliability problems of the published accounts and the bal- anced sheets. In the absence, however, of any other data, this study will use the available information, at least, cautiously in analyzing the company's profitability. Dur- ing the 13 years of the company's operations, profit before depreciations were positive throughout the (entire period.240 In other words, on short term basis, when asset recovery may not have been a prime target, variable costs were covered.241 But on a long term basis (covering the life span of the prime assets--vessels, etc.) nonrecovery of asset values would inevitably lead to a decline in capital and incomes. On the other hand, long term gains in capital and incomes can result from attention to maintenance and modernization of assets. 24°1bid.. p. 15. 241Provided interests on capital were recovered since these are costs that should be covered even in the short term. See Carleen O'Loughin, op. cit., p. 119. 240 When provisions are made for depreciations for capital assets, net profits by the accounts were realized in eight of the thirteen operating years. It is probably consoling that losses were the outcome in only five years. But by aggregation of net losses against net gains, it became evident that the picture is gloomy. By a cumulative treatment of the data, the company wound up after the thir- teen years of operations with a cumulative loss of No.6 million or what can work out as annual losses of N50,000.00. In other words, the company was run at a loss throughout its entire life (Table 49d). The incompleteness of the accounts contradicts the cumulative loss of No.6 million in 1971-72 calculated above with the admission in the company's annual reports that "the result shows a loss of 112,777,710242 bringing the accumulated loss to date to N4,707,276." By the 1971-72 operating period, the report shows that "after provision for depreciation" the company recorded heavy losses of N1,355,434 in 1969-70 and 8520,682 in 1970-71. It, however, noted a net profit of N46,812 in 1971-72 though admitting a cumulative loss of N5.7 million to that date. If this is 242Annual Report, 1971, p. 5. 241 .mfloamm agam ..a.m.z.z .888 m.moa.om .wm. m.mam.ama .mw. m.mam.aao .mm. Hflw Hflw. an.“ 3 mma.mmm am a mmm.amm.m a» m .mo.mom.m ax m annoy a G G mma.mmo . mam.m. + mam..mm.a mm..amm.a ma\aama moo.mmm u mmm.omm . mma.mmm.a mam.aoa aa\mama mmm.maa u m.m.amm.a I o...amm.a mam.mm oa\mmma m.m.mmo.a + mom.m.m + woa.omo.a oam..mm.a mm\mmma omm.mmm.a + oaa.mom . mmo.o.a mam.amm mm\amma omm.mmm.a + omm.mom u .mm.mma aoa.oa am\umma m.m.mmm.a + omm.mm u m.m.mma mom.omm mm\wmma omm.amm.a + m.m.mm + m.m.mao vma.maa mo\¢oma mam.amm.a + m.m.mam + «mo.amm mmm.mmme .o\moma mmm.aao.a + mao.om. + mmm.mmm .ao.mma mm\~mma oam.a.m.a + moa.m.m + pom.m.m «am.amm mm\amma mom.mmm + m.m.mmm + m.m.mmm .mm.aam am\mpma .mm.mom + .mm.mom + mmm.m.a oa¢.mm¢ oo\mmma a Ia mwmoa I 88 Aaav 33pm an 300 HMO 3.... 3...... 8...... up...” . msaumasaso . . cc fiasmmm maoaufiwao amaofiaam m. 9.3 8335 afloflmz Eaummazlémv mafia. 242 true, the company lost on the annual average of N438,462.00 as against the earlier estimate of N50,000 based on the ten-year financial progress chart data of the annual report. In the absence of reliable values of total assets, the total figures on the asset and debit sides of the bal- ance sheets will be treated as total asset values for this analysis. From the annual reports available, total capital values are shown against both profits before and after de- preciations (in Table 50) for 1959-60/71-72. The net profits before depreciation (accepting that financial charges and taxes were deducted) ranged from 15.4 percent in 1960-61 to the lowest level of 0.2 percent in 1969-70 of the respective total capital asset values. When esti- mates243 are made on the total asset values for 1963-64/ 1968-69, the net profits before depreciations and after such depreciations are outlined in Table 50. Net profits as percentages of total asset values showed no definite patterns except that profits before depreciations ranged between 0.2 and 15.4 percentage points of total asset values. The percentages for 1963-64 to 1968-69 are based 243Based on partially declared asset values in the ten year financial progress chart (under employment of capital). Annual Reports 1959-60/197l-72. 243 TABLE 50.--Profits as proportions of total assets. 'Ibtal Profit Profit Year Asaa: Befimx: Affla: Penxynage Penmanage Values Depreciation Depreciation. (2) of (1) (3) of (l) (1)a (2)a (3)a 1959-60 21 3.5 210.46 +21 .31 13.1 8.8 1960-61 21 5.7 210.88 +21 .59 15.4 10.3 1961-62 21 6.8 210.69 +21 .34 10.2 5.1 1962-63 21 9.5 210.80 +21 .43 8.4 4.5 1963-64 21 8.610 210.87 +21 .28 10.1 3.3 1964—65 21 8.319 210.71 +21 .36 8.6 4.3 1965-66 21 7.6b 210.65 -21 .89 8.5 -11.7 1966-67 21 7.019 210.70 -21 .67 10.0 - 9.6 1967-68 21 6.3b 210.33 -21 .41 5.3 - 6.3 1968-69 2117.81:) 211.32 +21 .24 7.4 1.3 1969-70 2120.0 210.39 -211.24 0.2 - 6.2 1970-71 2119.1 210.70 -21 .52 3.7 - 2.7. 1971-72 2119.3 211.28 +21 .46 6.7 0.2 am in 21 millions IEBthmnns Source: N.N.S.L. Annual Reports. on low estimates since actual asset values must have been higher. Indeed the ratios ought to have been smaller, on the whole. The net profits after depreciations indicated losses of nearly 12 percentage points to positive profits of nearly 10 percentage points for 1960-61. Even the profit claimed for 1971-72 was as low as less than a per- centage point of the total asset values. 244 The accepted book values of fleet in excess of the residual values have contributed to total asset valuation difficulty. And, since the actual asset values are uncer- tain on account of noninclusion of interest rates charge- able on the government funds loaned (or granted), deprecia- tions which were entered appear arbitrary. Such asset values are difficult to estimate because apparently the shares have never been traded on the capital market. At the rate of its profitability relative to other enterprises, it would have been possible to ascertain the real asset worth of the National Shipping Line had the shares been traded on the stock exchange. Even when the annual changes in the depreciation allowances are matched against changes in asset worth, no specific single pattern of movements is noticeable. If the depreciation data244 published in the annual reports are accepted, the annual changes in deductions and of assets before depreciations are outlined in Table 51. Such depreciations have ranged from 3.7 percent of total assets to as high as 10.5 percent between 1959-60 and 1971-72. 244Annual Reports: Ten Year Financial Progress Chart. 245 TABLE 51.-Depreciations and asset.values. .Asset.Values Percentage of Year Before. Depreciations Depreciations Deprec1ation (N.M1111on) to Gross uibfiJlion) Asset values 1959-60 3.65 0.15 4.1 1960-61 5.99 0.29 4.8 1961-62 7.15 0.35 4.9 1962-63 9.87 0.37 3.7 1963-64 9.18 0.58 6.3 1964:65 9.04 0.67 7 .4 1965-66 8.34 0.74 8.9 1966-67 7.74 0.74 9.6 1967-68 7.04 0.74 10.5 1968-69 18.88 1.08 5.7 1969-70 21.28 1.28 6.0 1970-18: 20.32 1.22 6.0 1971-72 20.53 1.23 6.0 Source: 1hun2fl.fiaport8. 246 What has emerged is that the depreciations have not by the records, assumed straight line deductions.245 Presumably the reducing balance method must have been used though stable percentages were not established. Since 6.0 percentpis apparently the modal value of the depreciation rates, which has shown itself more within the last three years, the accepted rate may be fixed there. Matched against fleet values246 the depreciations have ranged from the low of 6.1 percent to the high of 12.0 percent (Table 52). The modal values would be around 8.5 percent of the fleet's book worth. On a net deadweight tonnage basis, such depreciations worked out on the average of around 8 naira per ton and on the average of over 80,000 naira per ship for each of the years. Since the data on the profitability, depreciations and cost-revenue relations are either not available or not reliable, it becomes difficult to estimate the capital re- covery factors. In the first place, capital values arexmot 245Adopted in Britain, the full cost of dry cargo ships can be written off in 12 years and of a tanker in 10 years. See Sturmey, op. cit., p. 176. 246Book values exceed residual values of fleet. See Annual Reports, 1971, p. 9, and 1972, p. 13. 247 TABLE 52.--Depreciations and the fleet values. Depreciations as antfim' Deadr' Fleet Year 3:32:23 Wigggt» values Per Ship Per Dead- Percentage (#) (000) N Million N waight Ton of Fleet , N value 1959-60 5 48.9 2.6 29,778 3.0 5.8 1960-61 5- 48.9 4.0 57,690 5.9 6.6 1961-62 5 48.9 4.0 69,702 7.12 8.7 1962-63 6 58.6 5.9 61,432‘ 6.28 6.2 1963-64 8 79.3‘ 8.3 ' 75,204 7.62 8.2 1964—65 9 88.8 8.3 75,204 7.62 8.2 1965-66 9: 88.8 7.6 82,206 8.34 9.7 1966-67 9~ 88.8 6.9 82,222 8.34 10.7 1967-68 9 88.8 6.2 82,228 8.34 12.0 1968-69 13 129.8 17.7 83,136 8.32 6.1 1969-70 12 120.4 16.3 106,786 10.64 7.9 1970-71 12 120.4 15.2 101,850 10.14 8.1 1971-72 12 120.4 13.9 102,884 10.16 8.9 Source: Annual Reports. 248 aggregated in any of the published reports. In the second, no stable rates of depreciation deductions are established in the analysis nor are asset values less such deprecia- tions established on a year-to-year basis. But sufficient evidence is presented that the Operations of the Nigerian National Shipping Line had not been in the long haul pro- fitable. Where recovery of capital assets were not major considerations, the operations were marginally successful (if published data must be accepted). But as percentages of both total assets and fleet values, the operational re- sults were not encouraging. When the civil war effects are discounted, the post-war profitability was not much dif- ferent. Indeed, on a cumulative basis, the company had been losing annually throughout its life period. Without costs and revenue breakdown data, the un- derlying causes of the poor operational results can only be speculative. More evidence of the poor operational re- sults can be seen in the increasing pumping of external finances along with the declining net working capital of the shipping line (Table 53). Between 1962-63 and 1971-72, the cumulative annual averages of such external finances stood at over N2.5 million. At the same period, the net 249 TABLE 53.-—External finance and net.working capital movements. Exunmalfinmre EtitmkbeGqfital Yen: Anmmfl. Cunflatiwa Ammxfl. Cunflathm: values A::::::s values 33:22:23 "' 00°) (21 000) (N 000’ (21 000) 1962-63 2,775 2,775 834 834 1963-64 2,688 2,732 129 482 1964-65 2,055 2,506 - 272 230 1965-66 1,422 2,235 - 339 88 1966-67 949 1,978 - 814 - 92 1967-68 156 1,674 -1296 -293 1968-69 12,309 3,193 - 414 -310 1969-70 12,216 4,321 -1266 -430 1970-71 14,301 5,430 560 -320 1971-72 15,157 6,403 1568 -131 anmoe: Anmxfl.nqxuts. working capital of the line showed an annual deficit of over N131,000 by 1971-72. The overall net losses which moved from N2.7 million in 1969-70 to N5.2 million in 1970-71 later reached N5.6 million in 1971-72. The cumu— lative losses reached an all time record of N5.7 in 1971-72 250 from N4.7 million a year earlier. Federal government had to advance N3.l million in 1970-71 and N1.9 million247 in 1971-72 to meet installment payments on the vessels. The picture here is one of a firm with probably little or no equity capital of its own for either further investment expansion or own funds to meet current operational expenses without subventions from outside sources, loans, and credits. While searching for the reasons behind the shipping lines' operational and functional results, the annual re- port248 ascribed it all to "our past misfortune" which have come about through "port delays and port additional on N.P.M.C. caro" on which revenue losses were N402,500.00 and N2161052-00, in 1970-71 and 1971-72 respectively.249 Terminal costs,250 port delays and handling costs of exports of the Nigerian Produce Marketing Company have been 247Annual Reports 1971 and 1972. 248N.N.S.L., Annual Report 1972, p. 8. 2491516. 250 For classifications into line haul, terminal, pick up and delivery, billing and collecting costs of dis- tribution services, see D. J. Bowersox, E. W. Smykay, and B. J. Lalonde, Physical Distribution Management, MacMillan, London, 1970, p. 165. 251 responsible for over 60 percent of all costs.251 The charter of four vessels on permanent or long term basis for service with the shipping line has involved losses of up to N440,234.00 in 1971-72 period. While these factors may contribute to the losses, apparently the built-in inefficiency lies deep in the system. Except for such incidental factors like the devaluation or revaluation effects of some foreign currencies252 with which install- ments on the vessels are paid, and which lie outside the powers of the management, the other reasons are endogenous to the system. Since the National Shipping Line operates within the conferences in which rigid agreements and operational formula, rates, incomes, etc. are not subject to sudden changes in response to the market, any efforts to pursue profitability can only come from greater attention to opera- tion cost reductions and greater efficiencies. What can the National Line do here? The vessels are older (with 25:I'Interview with the Management (N.N.S.L.) August, 1973 confirmed that view. Also see R. O. Goss, Studies in Maritime Economics, Cambridge, 1968, p. 154. 252Including differences in exchange rates due to changes in parity values of foreign currencies, e.g. Deutsche Marks, etc. 252 mean age of 12.5 years), speeds ranging between 12 and 16.5 knots and increasing costs of repairs and maintenance, little, if any, reductions in operational costs are imme- diately visible. With fixed quotas in cargo allocations from the pool it is difficult for the National Line to either reduce rates to attract cargo or increase its opera- tions beyond the stipulated quota. Either its rates must fall simultaneously to increase the cargo to be carried (subject to elasticities of cargo supply) or both must in; crease autonomously, otherwise the chances of immediate changes in the financial picture are slim. Allowing for increases in fleet above the quota permitted by the confer— ences, greater resort to tramping may likely be the way out when cross trades are taken into account. The national cargo has got to be increased substan- tially to enable the National Line to expand its operations into new conferences. The other temptation (which the 53 government of Ghana took some time)2 is to give a quota of the national trade which this National Shipping Line 253Dag Tresselt, West African Shipping Range, p. 49. It is even held that the Ghana State Shipping Corporation joins the conferences only on the southbound leg of West European-West Africa route. Operational results are not available for testing the success of this experiment. 253 must carry annually. The country should, in this case, be prepared for reprisals from foreign shippers, foreign lines and even foreign governments. Obviously, a review of the conference agreements should be undertaken within two to three year intervals instead of once in five years, to make for responsiveness to actual market demands. It is curious that while the British shipping lines (members of the same conferences) are making profits or rendering reasonable returns on their outlays, the Nigerian National Shipping Line appears to be doing financially so badly. According to Fairplay Magazine, the returns of these British shipping lines were around 5 percent between 1965 and 1969.254 The recorded ratio of net equity earn- ings to assets in British shipping companies was 3.9 per- cent (compared with average of 9.3 percent for a sample of 549 companies in a cross section of industries).255 Not that the National Shipping Line made low returns but it was involved in net losses. Apparently, the Board of Directors of the Nigerian National Shipping Line met in 1972 and authorized the "resturcturing of the capital base" of the 254FairplayMagazine, 1970. 255Fairplay Magazine, 1966. 254 company.256 There are insufficient facts available to help an assessment of the capital restructuring activity. The Federal government had pumped in more funds to help this capitalization exercise. It is not really clear what factors underlie the poor profitability picture without adequate facts on costs and earnings. Nonetheless, even when rates fixed by the confer- ences are sufficiently high to accommodate inefficient firms while not necessarily being too high to attract com- petitors, it baffles a great deal why the National Line cannot make reasonable returns within the system. In the absence of hard facts, a sample test run based on part estimates and part actual variables on the company's Oper- ations will be used to ascertain the determinants of the company's profitability and sound operational results. Determinants of the Company's Level of Profitability Earlier in this chapter, some considerations were given to the factors which contribute to costs and revenues 256After reviews, the government paid in new ad- vances totaling N5.7 in 1971-71 for fleet and capital ex- pansion. 255 257 In this section, from the management's point of view. some of the determinants which appear to be of policy na- ture and often beyond the company's control will be con- sidered. These variables will be applied in a quantitative analysis to determine their strengths or weaknesses in the determination of the company's level of profitability. Unlike single explanatory variables, the model employed here permits the inclusion of multiple variables. These six variables have been selected from a vast population of others to test certain hypotheses regarding their contri- butions to profit level determination. These variables are: l. the company's total assets (X1) 2. the average values of freight rate to total cargo valueS'(X2) 3. operating ratio--operating costs to operating revenues (x3) 4. vessels' capacities used (X4) 5. percentage of pool cargoes allocated by the con- ferences to the company (x5) 6. average age of the company's fleet (X5) 7. the dependent variable-ethe profit before deprecia- tion (Yp). ‘ 257See pp. 224-225 and 233... 256 The Model The analysis based on a multiple regression is developed on the ordinary linear model under Y b X p o 1 + lel + b2X2 + b3X3 + b4X4 + bSX5 + b6x6 + E i.e., H = f(Xl, X2, X3, X4, X5, X6). The Hypotheses It is hypothesized that the company's profit level is a function of several factors which exert positive and negative effects. (A) The company's total assets which include all movable and immovable property (dependent on investment pattern) covers buildings, road transport, stores, vessels, and other assets which either increase income or deplete the income. If most of the investments are tied in vessels and other direct operational tools and equipments, subject to costs, the greater the investment ceteris paribus the greater are the levels of profits. The obverse is equally true. 257 (B) The average values of freight rates to total cargo values are directly linked to profit margins. This means at higher freight rates, more incomes are possible subject to elasticities and the effectiveness with which tramp competitions can be controlled. If the supply of services and the demand for services are inelastic, such rate increases can only increase incomes and profits directly. (C) Operating ratio--the ratio of total operating costs to revenues is significant in that the smaller the fraction the greater the chances of improved profit margins. As these fractions tend to unity or structurally improper, the worse the profits since costs would tend to approximate or exceed revenues. 6H 6X3 < 0 258 (D) Vessels' capacities in use are directly related to profit levels since at higher used capacities, total carriage will be increased. Subject to total costs of the increments, the chances are that towards fuller capacity utilization, profits would tend to a maximum. 6H 6X4 > 0 (E) The percentage of pool cargoes allocated to the National Shipping Line by the conferences would mean in- creased revenues and hence enhanced profit margins possibly. At lower percentage of allocations relative to their vessel capacities, the National Line would be running at less than optimum carriage. On the other hand the company would be running toward maximum profit margins if such percentages are greatly increased. 6H __.>0 6x5 (F) The greater the average age of the company's fleet the more the chances of reductions in its net revenue position. This is due to the fact that at older ages, vessels tend to incur more repair and maintenance expenses 259 which normally are debit items. If increases in these items are greater than the increases in revenues,profit margins are threatened. Thus the greater the average age of the fleet the greater the chances of diminishing profits. In summary, 0) :1 O) x I-‘ AV 0) :1 0» >4 N o» :1 0, >4 U 0) :1 o. X 0) :1 o: N O) :21 o; x O) :1 o: x therefore the hypotheses are: total assets are either positively or negatively related to profit levels, depending on asset composition. freight rates are positively related to :profits subject to elasticities. operating ratios are negatively related to profit margins. vessel capacity used is positively re- lated to profit margins. percentage of pool cargo allocated is positively related to profit margins. average age of fleet is negatively re- lated to profit margins. 260 Discussion of the Results In this aspect, the reader is reminded to interpret some of these results with caution. This is because some of the independent variables were mostly estimates espe- cially such numerical data as involved vessel capacities used, operation ratios and average proportion of total cargo values taken up by freight rates. The results are, however, presented in Table 54. Figures in parentheses are standard errors of each estimate. The Company's Total Asset Values (XI) The coefficient of the company's asset values has, as been postulated, been mixed and had never been signifi- cant at the 5 percent level in all the equations. This is due to the fact that no indication was given of the pattern of investment in assets. Where the assets would have been more in vessels which have direct relationship with opera- tions, the coefficients would probably have been positive anh could have accorded with other studies.258 258A. D. Couper, op. cit., and ECAFE, Shipping and Ocean Freight Rates, New York, 1968, pp. 19-40. ' 261 ME 54.--Estimates of the Coefficients of the Detenm‘nant of Profit level (N.N.S.L.) EC 1. Y = 1.0022 - 0.0084X1 + 0.0205X - 1.3216X3** + 0.0042X 2 4 (1.5809) (0.0251) (0.0391) (0.4479) (0.0193) + 0.0602XS - 0.0106x3 R2 = 0.4511 (0 . 0851) (0 . 0565) ED 2. Y = 1.3403 + 0.0029X1 + 0.0371X2** - 1.3442143" - 0.0011)!4 (1.3246) (0.0169) (0.0287) (0.0147) (0.0147) R2 = 0.5672 ED 3. Y = 1.2943 + 0.0188X2 - 1.3123X3** + 0.0370215 (0.2676) (0.0297) (0.2978) (0.0466) R2 = 0.6257 ED 4. Y = 1.3965 - 1.2301X3.** + 0.0671X5** - 0.0093X6 (0.3549) (0.2822) (0.0201) ' (0.0475) R? = 0.6197 MSignificantly different fran zero at the 5 percent level. 262 Average Values of Freight Rate to Cargoes (X2) The resulting signs of the coefficient of average values of freight rates to total cargo values have been, as postulated positive in all the equations. The coefficients were significant in Equation 2 but not significant in the others. This must be due to the fact that the variable has positive correlation with profits under normal competitive conditions. In the case of the National Shipping Line which operates on quotas and controlled conference rates, such movements in rates are not easy and their effects on profits may be hampered by oligopolistic control factors of the conferences. Operating Ratio (X3) This has appeared as the strongest independent variable in all the equations. It has appeared quite in consonance with the original postulate and had remained significant in all the equations. As Operating ratio denotes the index of the company's efficiency, attention, for policy purposes, must be paid to this variable if 263 profit margins of the National Line are to be improved. This variable has behaved in this study in agreement with findings from theories and other studies.259 Used Capacity of Vessels Here again, the vessel capacity in use variable has had mixed signs contrary to the postulates. It has been at the same time insignificant at the 5 percent level in all the equations where it appears. The irregular observation on this variable is due to the fact that vessels will tend to be part of the total assets under variable X1. Since controls over the use of vessel capacities are outside the control of the company and freight earnings may be more a function of cargo values than mere volumes, this variable is partly positive and at other times negative in sign terms. But capacity utilization is important at least, to cover variable costs of operations. 259Carleen O'Loughlin, op. cit. 264 Percentage of Pool Cargo Allocated to the National Line by the Conferences (X5) The cargo allocation coefficient in all the equa- tions were positive in accord with the original postulates. The variable was significant in Equation 4. This is impor- tant since the laws and operations of the conference system stipulates carriage by quotas. For policy purposes, any attempt to improve the profit level of the Nigerian Na- tional Line must take such recourse to hard negotiations within the conferences which allows the National Line to increase her quotas from the pools. Average Age of the Company's Fleet (X5) In consonance with the original postulate the average age of fleet variable was negative in all the equations. This is because the older the vessels the greater the costs of repairs and maintenance with negative effects on profits. In particular, this variable was sig- nificant in Equation 1 though not significant in Equation 4. The mixed signs can be the effect of the constraints in vessel use due to the pooling and rationalization of 265 shipping services which negates the competitive conditions underlying the original postulates. But, whatever the signs, age of fleet is negatively correlated with profit margins. and X x2' X3' 4 In general, while variables X1, together account for only 56 percent of all the variables affecting the Nigerian National Shipping Line's profit margins, it is significant that X2, x3, and X5 should ac- count for 63 percent. So strong apparently are variables X3 and X5 that with additions of X2 and X6 in different equations (Equations 3 and 4) respectively, the account has never gone below 60 percent. This indicates that for the future of the company and profit, greater attention should be directed to operating ratios and the percentage of pool cargoes the company handles. Opportunity Costs of Investments in N.N.S.L. One other way of assessing the economic justifica- tion of investments in the Nigerian National Shipping Line is by the estimation of the opportunity costs. In theory, 266 opportunity costs relate to values foregone in the alter- native or next best use of the resources employed in the investment. What is next best is philosophical and means differnt things to different pe0p1e dependent on prior- ities. Nonetheless, returns on investments of similar magnitudes in other economic sectors can approximate such opportunity cost estimates. Hypothetically, if the asset values held by the Nigerian National Shipping Line were merely turned into cash and deposited in a commercial bank at 3.5 percent interest per annum for the period of the National Line's life to date, interest earnings compared with profits earned on the investments would appear as in Table 55. Over the period, the conversion of the investments to cash deposits on commercial bank account at simple interest rates would have yielded an annual net average income of N380,000 as against an average annual net loss of N50,000 from investments in shipping. If the profit before de- preciations were considered, the Nigerian public treasury would have earned N750,000 on the average as net income per year. It is also doubtful if the asset values would have maintained their prime values if no depreciations for 267 TABLE 55.-Oarparison of interest and profit earnings on N.N.S.L. '3 total asset values (N Millions) Asset Net Interest Year Values Profits Earnings Differerzxies (1) (2) (3) 1959-60 3.5 0.31 0.12 . -0.19 1960-61 5.7 0.59 0.20 -0.39 1961-62 6.8 0.34 0.24 -0.10 1962-63 9.5 0.43 0.33 -0.10 1963-64 8.6 0.28 0.30 +0.02 1964-65 8.3 0.36 0.29 —0.07 1965-66 7.6 -0.89 0.27 +1.14 1966-67 7.0 -0.67 0.25 +0.92 1967-68 6.3 -0.41 0.22 +0.63 1968-69 17.8 0.24 0.62 +0.38 1969-70 20.0 -1.24 0.70 +1.94 1970-71 19.1 -0.52 0.67 +1.19 1971-72 19.3 0.46 0.68 +0.22 Aggzzl 10.3 -0.06 0.38 -—- Source: N.N.S.L. Ammal Reports. 268 replacements of deteriorations were not taken account of. With deposit account too, the money values would have been affected by inflation and other value determinants. None- theless, there would have been some updating of values if the calculations of earnings were on compound interest rates. Comparison of returns on similar investments within the Nigerian economy indicates that net returns before de- preciation of the Nigerian National Shipping Line was the lowest within the survey period (Table 56). This averaged 10.6 percent during the 1960-1966 period for the National Line against 19.2 percent for the Nigerian Tobacco Company; 20.1 percent for Nigerian Cement Company, and 36.7 percent for the Nigerian Breweries.26o If these figures were stretched to 1972, when the National Line was steeped in losses while other companies (private) made fantastic profits, the comparison would have revealed a most deplor- able situation for the National Line. Incidentally, the NTC, NBL, and NCC have had their stocks traded on the stock exchange while the NNSL depends on government investments 26oPeter Kilby claims the average rate of return of 38 percent on capital investment between 1960 and 1965, op. cit., p. 98. 269 TABLE 56.--Rates of returns on investments-selected industries (asmnriaxn. Rfles<fifReUumsOamumy M3}—NkfimL31Cenxm:OImany NBDnmfigenEKLBnaEmies NNSL—mugerfluxNatuxud.ShhmfingIfine unfanadbpnxuatnxn Smmce: Pena:Kiuwu:nfiMsudaLhnmnmiinaniggaiEaxrgy: Nygxia 1945-1966, Part 2 alone. The incentive to improve performance which stock trading of capital shares of companies may have had on NTC, NCC, and NBL can never touch NNSL which is cushioned from 270 the competitive capital allocative principles. As long as tax money can be siphoned in painlessly, NNSL will operate, how be it, no matter how unprofitably. A significant observation is the magnitude of cap- ital invested in these four companies under comparison. By 1966, for example, the issued and reserve capital of Nigerian Tobacco Company was N15.6 million, that of Star Brewery was nearly H8.0 million, and N12.8 million for the Nigerian Cement Company. On the other hand, the average capital investment of the Nigerian National Shipping Line has been around N15.0 million.261 The capital investment differentials are relatively not too wide though returns on the operations of the Nigerian Shipping Line had been comparatively poor. In actual fact, the cost to Nigeria in economic terms of the investment in the Nigerian National Shipping Line is the loss of one or two viable industries (companies) capable of returns to public treasury of in- comes between 20 to 25 percent of total assets so invested. The losses constitute extra liabilities to the taxpayer. 261Estimates. 271 Conclusion The incorporation of the Nigerian National Shipping Line was the child of sentiments expressing the wishes of a colonial people fed up with political and economic depen- dence and who wished to set in motion the machinery for their economic modernization and participation in interna- tional carriage of their export-import trade. The people's wishes were translated into action by their parliament and government. But when the actual participation of the Ni- gerian National Shipping Line in the carriage of Nigeria's foreign trade was examined, the company maintained some 5 percent of the fleet strength of the conferences which operate on the Nigeria-U.K. and European trade routes but actually carried an average of 10 percent of the country's total external trade. Is the company a paying concern in the economic sense? This is doubtful since the net profit levels have been negative on the average during the 13 years of its operation. When its earnings are compared with other companies (mostly private) the National Line has been a losing proposition. The opportunity cost of the public investments in that company is the foregone alternative investments possible in other sectors of the economy where 272 profits would have been made. The current operating losses of the National Shipping Line, therefore, constitute extra burdens on the taxpayer of Nigeria on which the painless and fruitless pumpfpriming of scarce resources into that company depends. It is only by paying special attention to the important determinants of profitability indicated by the multiple regression analysis results--operating ratios, capacity utilization of vessels, percentage of pool cargo allocated to the company, etc., that the management of the 'National Line improve the net revenue position. CHAPTER VI EVALUATION OF THE NIGERIAN NATIONAL SHIPPING LINE'S PERFORMANCE: PRINCIPLES OF IMPORT SUBSTITUTION/EXPORT PROMOTION AND NET BALANCE OF PAYMENTS CONTRIBUTIONS Principles of Import Substitution AnOther major reason behind the incorporation and operation of-the Nigerian National Shipping Line was the "earning and conserving of much needed foreign exchange through increased participation in the movement of the na- tional exports and imports."262 Within this context, the operations of the Nigerian National Shipping Line is to be examined from the criteria of import substitution as well as export promotion and positive contributions of foreign exchange earnings to the nation's balance of payments assets . 262Nigerian National Shipping Line, Information Pamphlet, Lagos, pp. 2-3. 273 274 The principles of import substitution263 is derived from the notion of producing locally such items of industrial products hitherto imported and on this score cut off or reduce the level of foreign exchanges usually spent in such purchase from foreign markets. Applied to shipping, this means less reliance on ship- ping services offered by foreign shipping lines. It involves the incorporation of indigenous shipping lines, the acquisition of shipping tonnages by purchase or charter and the control of their operations such that foreign exchange hitherto spent on foreign lines services are reduced while such incomes are rather earned by the indigenous lines. Nations with more or less chronic shortages of foreign exchange consider merchant shipping as one way of improving the earning and conservation of foreign 263A. Maizels, Industrial Growth and World Trade: 1899-1959, Cambridge University Press, 1963. Also H. B. Chenery, "Patterns in Industrial Growth," American Eco- nomic Review, September 1960, pp. 639-641. 275 currencies.264 Professor Goss265 has indicated that such belief is predicated on the following hypotheses: i. That investment in shipping will improve the balance of payments. ii. That shipping possesses some character- istic which makes this effect particu- larly large, even when the return on capital is smaller than obtainable else- where. iii. That the benefit to the balance of pay- ments is greater when the ships operate in cross trades (i.e., on voyages which do not involve calls in the ships' home country).2 The question here is not necessarily how much foreign ex- change will the indigenous fleet earn nor what the net excess of foreign exchange earnings over foreign exchange expenses will be? The crucial question is: What is the net extent to which the balance of payments differ from what it would have been if the investment in the Nigerian National Shipping Line (for example) had not taken place? 264India is typical in this belief. See Nagendra Singh, Achievements of UNCTAD-I and UNCTAD-II in the Field of Shipping and Invisibles, S. Chand and Co., New Delhi, 1969. 265R. O. Goss, Investment in Shipping and the Balance of Payments in Studies in Maritime Economics, Cambridge University, 1968, p. 46. 266The hypotheses are extreme views which Professor 6038 has refuted. See R. O. Goss, ibid., p. 54. 276 This net difference is the resultant total effect of a number of separate effects of freight earned, passenger revenue earned, spending on shipping matters abroad and at home and the capital costs of ships (taking foreign and domestic currency).267 The real contribution of the nation's shipping to its balance of payments is derived from the national trans- portation accounts (see Table 57) and is the net difference between credits and debits, subject to certain statistical adjustments. Net gain to balance of payments equals Nx - Hy = N2 Theoretically, had the investment in the national fleet not taken place, the nation would have lost earnings from freight (exports), cross trades, and foreign passenger re- ceipts to foreign lines. At the same time, the country would have avoided overseas disbursements incurred on pur- chase of the vessels and their overseas operations but would have gained added expenditures by more foreign ships 267Carleen O'Loughlin, op. cit., pp. 35-40. 277 TABLE 57.-National Shipping Contribution to Balance of Paynents. l. Cnifits a. Freight earnings by Nigerian flag268 (exports) b. Remfiptsitcmikmenyipamxxgens c. bhmineimeumume:fixmlfanflgnmsmupes d. Ships stores,:minor repairs, bunkers services for foreign ships e. Port.dues, fees, port handling expenses paid by foreign ships f. Foreign crew expenses in Nigeria 9; (flarua:fea3by1nme:flupammms h. Drydock receipts in.Nigeria i. Frerfiuzoncnxes Danes Toafl.cnafits fix 2. Ix&fits a. Freight.payments to foreign flagszsg (imports) b. NimuflangnssamerlxnmenU3to2fimmdgniflags c. lkuine:nummanmapeidaflnrad d. Eflfipsamxmes,zepahxn bmflmmspnddiflroai e. Portikes,Ches,efin.,§nidaflxoad f. Crew (Nigerian) expenses abroad 9. Charumrfeesgmddaflnxed h. Dmfikcklxwmauslxfldaflxoai Tbflfl.ddflxs Hy in the nation's ports. As such, all imports and exports would have been carried by foreign flag vessels. And, given the quantum of Nigeria's trade, currently valued at nearly N2,500 million annually, the country would have been 2688. G. Sturmey, British Shipping and WOrld Compe- tition, op. cit., p. 416. 269Assuming the importer pays the freight and no effects of elasticities and shiftability of freight pay- ments. 278 losing (allowing a 10 percent freight rate _a_dvalorem)270 a total of N250 million every year. The real gain in net terms would, however, depend on the relative ratios of the different components which sum to the debits and credits in the national transportation accounts. Nigeria's balance of payments on transportation accounts is designed on the methodology of the Interna- tional Monetary Fund's Balance of Payments Manual271 where transactions of the shipping sector are grouped under: 1) freight on international shipments, 2) other transpor- tation, 3) investment income, and 4) other services. A careful examination shows that between 1967 and 1971, for example, Nigeria had been losing on transportation accounts (Table 58) and the deficits had been expanding in magnitude if accounts on both the oil and non-oil sectors are aggre- gated. But, taking the non-oil sector alone, the same trend is observed except for 1971. When transport accounts for the oil sector is evaluated, the deficit was the worst 27oUNCTAD, Level and Structure of Freight Rates, Conference Practices and Adequacy of Shipping Services, TD/B/C.4/38/Rev. 1, New York, 1969, pp. 19-22. 271International Monetary Fund, Balance of Payments Manual, washington, D.C., Third Edition, 1961, pp. 1-18. .uuommm depend .maummflz mo xcmm Hmuunmu "mousom .mmauwawnnwa CM Tumouooo Ho mummmm CH monouocalluwnma "muoz v.mam1 N.Hm I N.wm 1 «.mm 1 m.moal Apmzv mocmamm N.VHH II o.nm 1) v.mm 11 o.m¢ II a.mm I) mmoa>uwm Macao .m . I) I) . II MEOQCH v NHN w mm unmaumm>nH .m 1| 1| o.oa I) m.m I) v.0H I) o.v 1| Hm>mua .m . . In I) II II coaumu II m m 11 m ma 1) 1) luommcmuu m; .v muememanm o.H 11 11 1| 1| 1| 11 I) II II monmusmca 8.... £38.. . m 279 6831.: z C808 29 coflfiuommfiyelaéfié£ EH a 8383 £882 mooafiwmlfimm was. mean a.mhan N.Nman m.mvHI m.mnn Aumzv Cantata v.5m m.oa o.oo v.5 o.vv v.ma o.ov m.mH a.mm N.NH mooa>uom umcuo .m 0 O I O l O O O O 0 98a 4 mad 0 m m mHH 0 HA 0 oaa o o o mad m m e mv N n unmeummanH .m o.om v.m m.mm m.q o.em o.~ a.mm o.m a.aa m.m Hm>mns .m m.mm m.mm v.ma ~.o~ v.mm a.aa m.ma o.oH o.wa o.oH ocean» Iuoamcmuu mango .v magmas... v.a , m.ma m.o v.m o.H v.va m.o a.aa v.o o.m mocmusmca 8... £30.... . m ”.38 £608 ”.38 ”588 038 989.6 038 0880 0.38 ”.890 EH Hbma onma mama mead hood . 3:033: z Auouoom 1.01:9: ggybulaifi€8 93H ¢ 8.3009 ucsoooc mmoa>ummlfimm g 280 in 1971. If freight and insurance on international ship- ping are taken together, the picture will not be different since transportation accounts had all along been a debit item on the overall balance of payment schedules. Above trend was confirmed by an independent sample study by the Central Bank of Nigeria in 1969 for a business period covering 1964-1968.272 This study covered vessel ownership of 13.4 and 14.1 percent indigenous owned or in- digenously chartered as against 86.6 and 85.9 percent foreign owned or foreign chartered in 1967 and 1968, re- spectively. Since the information was based on responding companies only and at a time private ship charter was at its highest point among Nigerian shipping firms, the pic- ture contains elements of bias. The data are not reflect- ing total transactions due to poor response273 from ship- ping companies. The conclusion was that the impact of the operations of foreign shipping companies had been a per- sistent deficit arising from transfers on freight earnings. 272Central Bank of Nigeria Research Department, "International Shipping and its Effects on Nigeria's Bal- ance of Payments: 1964-1968." Lagos, 1969 (unpublished). 273Ibid., p. 4, no response index was indicated. however. 281 In the case of the indigenous companies, the study con- cluded that there "have been deficits in the transportation account." The overall deficits were attributed to the "agency status of foreign companies in Nigeria and the charter of foreign ships by indigenous companies." This evidently must have been partly confirming the reasons for the memoranda of the Ministry of Finance274 which sought to minimize the loss of foreign exchange through ships' charters and which succeeded in driving most of the Ni- gerian private shipping lines out of business. Taken from a national accounting system, the net difference or balance between receipts and payments may not totally matter insofar as that difference between re- ceipts and payments in foreign currencies is positive. The shipping endeavors would thus have been justified. Taken at the micro level, the data on the Nigerian National Shipping Line would be able to show justification if the foreign exchange content of incomes and expenses indicate balances in favor of the National Line. Where the net con- tribution in foreign exchange is positive, the import 2“Ministry of Finance, Memoranda to All Insurance and Shipping Companies Operating in Nigeria, Lagos, 3 Sep- tember 1968 and 18 November, 1968 (Appendix IV and Appendix V). 282 substitution objective is fulfilled. The overall receipts and payments in respect of the Nigerian National Line would be broken down as in Table 59. TABLE 59.-Hypothetical Balance Sheet on Shipping. Papmxns «xm¢s) Rxmdpfl3(1mxne) 1. Firms Overheads . 1. Incone frau Carriage of . . . Enxmts a. Sexual @dmnustnnnve) b. Selthg'cmmmmtnfing,enn.) cu Immune 2. Vessel Overheads 2. Inccne from Carriage of an Mahfienmxanqxfirs E ts IL Insunnne c. Ebpnafiatflxx d. £fiafifcnsfl3 3. Vwa s uhmctcxmts 3. InxmezfimmICnxusTnxks a. Fuel b. Port charges, etc. c. (Xhercfluuges,efin. 4. Variable/DirectOosts 4. Incane from Charter of Own a. (kayo S E b. Pamuxger 5. Chnfiercxets 5. Inxme2fimn20flmurAm¥ns 6. Pammnn31mf\nseaLCbsUBand Inuuests Tbfifl.=!b{ 'Rfial==NU 283 If the difference between Nx and My is Nz, it does not matter much for the nation, at least, even if the Hz is negative. If the foreign exchange contents of Nx, Ny, and Hz is such that fix (foreign exchange) less than Ny (foreign exchange) i.e., Nz (foreign exchange) is positive, the criteria of import substitution is justified. Indeed, the net addition of foreign exchange earned to balance of payments must be positive. Unfortunately, the total costs and incomes of the Nigerian National Shipping Line are not made available. But from the scanty data available, some construction of foreign exchange situation may be attempted. In the first place, the ships used (whether new or second hand) were built in foreign yards. These constitute costs in foreign exchange. When the ships are bought from short-term or long-term loans, payments of the principals and interests are substantial indeed. The charter of foreign vessels to enable the National Line to expand its operations also constitute drains on fOreign exchange. The salaries and wages of expatriate staff (whether totally or partially paid in foreign currency) also place lien on foreign ex- change budgets. Expenses by crew and staff in foreign 284 ports as well as repairs, port charges, fuel and bunkers and insurances paid for in foreign lands constitute costs in hard foreign currencies. On the receipt side, earnings from the carriage of export (provided its freight is paid for by the overseas buyer and cannot transfer it back to the seller) will con- stitute foreign exchange earnings. The carriage of imports in which the seller pays for the freight constitute foreign exchange earning if carried by the Nigerian National Line. Incomes from cross trades constitute foreign currency incomes. The National Shipping Line is a charterer of foreign vessels and thus has zero income from foreign charter parties. In the case of incomes from other assets, it is doubtful if the company's foreign offices are owned and sublet and if the agencies overseas do earn incomes from services for foreign customers. An examination of the balance sheets and profit and loss accounts (from the company's annual reports) indicate the strategic areas of losses. While the overall losses of the National Line have been very significant, the analysis of the sources of such losses have shown ships' charters to have involved the company in a total deficit of 285 N440,230 in 1971-72. At the same time, finance charges, presumably sizeable, which would relate to some overseas loans, and interests on long term loans on River class vessels have amounted to N1,051,486.00. Difference in exchange rates at the period accounted for N314,754. When the federal government was forced into making a 81,900,000 advance in 1972 to pay installments on the River class vessels, which brought the total advance for the same pur- pose to N5,037,222 by the same accounting period, the pic- ture is clear that the company's contribution in foreign exchange to balance of payments was negative. The balance of operations show deficits in the following areas in 1971-72: Charters N440,230 Interests on Capital Loans Nl,051,486 Repayment of Capital on Vessels Nl,900,000 In real foreign exchange terms, these few items indicated losses of over N3.4 million for that period. The cumula- tive losses after finance charges and interests stood in 1971-72 at 85.7 million and government advnaces for repay- ment of capital charges on vessels amounted to N5.0 million. 286 The company evidently did not make a positive balance in foreign exchange. This is more so when it is known that finance charges and interest may be mostly on foreign cap- ital charges on vessels bought and the charter fees are for foreign vessels. The picture is one of net foreign exchange losses. That the government had to come to the line's rescue by making payments of installment charges on the vessels indicates that the firm was in complete deficit, at least, in foreign exchange balances. The criteria of import substitution is that foreign exchange be saved by providing goods and services which hitherto were provided by foreign producers and paid for in foreign currencies. This has not shown itself to be true here and equally applies to the private Nigerian lines.275 Where shipping services were offered in replace- ment of such services by foreign lines (even where the services were significant) they were at the expense of foreign exchange losses. The displacement of foreign lines at the Nigerian ports in this context meant a loss of those expenditures at the Nigerian ports by those lines. Where 275This trend was noticed by this researcher in a private study conducted in 1969 on foreign exchange costs of selected Nigerian private lines' shipping 287 shipping services were offered in replacement of such services by foreign lines (even where the services were significant) they were at the expense of foreign exchange losses. The displacement of foreign lines at the Nigerian operatidns in the 1967-68 export season. The results are tabulated under here: TABLE 60.-Private Nigerian Line's Operations (1967-1968). J Enxmt Appnnmd {Rxmaga Freflflm: lanefiyi Shuxunglfines (MENBM: Todd 00 Exdmuge Penxnuzof (1) Gargo by NPM: Transfers (4) to (3) Carried (3) (21) (2) (4) Eagle Line 92,333 1,023,348 1,494,1229 146 Anansa Line 37,713 377,268 214,906 57 meafianinuer- national Line 27,578 256,346 340,680“ 133 AfrflxHIShhxflng Agency 7,411 80,242 54,202 68 Equitorial Line 23,384 -. 518,208 294,000 57 NnmmLmIInunr oceanic Line 1,345 112,416 107,876 96 Maritime Assoc. 8,200 82,014 23,112 28 Ibru Sea Foods 7,638 76,948 202,994b 264 Nfixuimafihtnxed ' Shipping Line 250,450 n.a. 534,678 n.a. Oanpanies with (a) had foreign exchange request carryovers while the case of (b) are those with aura needs than ordinary shipping since theifirmxksdt.hzfflshhxgacthdxiesauso. Fteflfifl:pafi1heneéfid notindflxnsztoefl.eanfimgs:fin:thermmflxh 288 ports in this context meant a loss of those expenditures at the Nigerian ports by those lines. Where the differen- tials between their earnings and expenditures in Nigeria offer positive balances in favor of Nigeria, the foreign exchange contributions to balance of payments would be more preferred. .The situation as here outlined shows that the Ni- gerian National Shipping Line had made net negative foreign exchanges to the balance of payments. This is due to the fact that all the vessels were purchased abroad since there are no shipyards in Nigeria. As such, foreign exchange is involved in payment for them. Moreover, nearly a good pro- portion of the fleet are second-hand where on the quadren- nial surveys-for the fifth, ninth, thirteenth, seventeenth, and twenty-first years of the ships' life falling due would involve with great severity higher foreign exchange payments for repairs.276 Briefly summarized, the situation is a function of greater spending overseas as a component of total spending which far outweighs the company's total earn— ings of foreign exchange as a proportion of all incomes. 276There are no local yards for major drydock re- pairs in Nigeria. For details of such surveys see R. O. Goss, op. cit. 289 It would, however, be one-sided to view the earning and conservation of foreign exchange by the Nigerian Na- tional Shipping Line only in the short run. The important point is not just the imbalance in foreign exchange in the transportation account generally or in the shipping activ- ities, in particular, which so much matters. Since ship- ping, like all other transportation activities, is not de- manded for its sake but is a derived demand on the basis of what it enables the economy to accomplish, the imbalance in shipping services account can be more or less meaningful in the long run. Again, it is meaningful when related to the level of economic activities which it enables the nation to achieve. In this case, the emphasis on positive balances on foreign exchange of the past years of tight balance of payments situations may be relaxed at periods of improving and improved foreign exchange positions on international accounts. A careful analysis of balance of payments between 1960 and 1972 will reveal interesting information. The first trade surplus of 855.4 million since 1954 was recorded 77 in 19662 (see Table 9). Between 1955 and 1965, the 277Federal Office of Statistics, Review of External Trade, Nigeria, 1966, p. l. 290 country had been running on trade deficits. This is under- standable when the foreign exchange reserves were appar- ently being steadily eroded to offset the imbalance in payments. The emphasis then was on plugging all avenues of foreign exchange losses. Reference to Table 9 shows that trade balances which were in favor of Nigeria in 1954 became ever after unfavorable between 1955 and 1965. It was not until 1966, twelve years after the last positive balance, that exports of Nigeria ever exceeded imports again. The major assisting factors were the contribution of the oil sector and controls on imports. The favorable trade balances and hence favorable balance of payments led to some relaxation of tensions over deficits caused by transport accounts. In particular this was encouraged by the realization of the positive contributions of certain economic activities to payments balances even when trans- port accounts pertaining to them ended in deficits (see Table 58a). The contribution of the oil sector to the balance of payments were significant in helping the favor- able balances of payments even when transport accounts in the oil sector showed deficits (compare Tables 58a and 61% 291 TABLE 61.-Trade Balances and FOreign Exchange Reserves. Year Trade Contribution Fbreign Exchange Balance of Oil Sector Reserves 1965 - 14.0 n.a. 168.8 1966 + 55.4 n.a. 145.2 1967 + 36.4 97.4 77.8 1968 + 37.0 57.6 8.38 1969 + 138.8 106.6 99.0 1970 + 129.0 263.8 157.6 1971 + 214.2 585.6 277.0 Source: Central Office of Statistics and.Central Bank of Nigeria. Export Promotions Principles When the question of export promotion is analyzed in connection with the Nigerian National Shipping Line, no definitive statement can be made. There are no real indi- cations that the National Line as at present constituted does or does not promote Nigeria's exports. In the par- lance of shipping theory, export promotion is possible more with the type of freight rates which are sufficiently low enough to enable the local export goods to compete in foreign markets. Low freight rates on local export com- modities, sometimes below the going levels, are possible 292 with subsidies from the government. Even with government subsidies, where the national flag ships operate within conferences with fixed rates and centrally controlled schedules, the National Lines have little opportunities to operate on separate rates. Apparently the Nigerian Na- tional Shipping Line is in this position since it maintains the conferences' fixed rates and operates within the cen— trally controlled pooling system. As was discovered earlier, the Nigerian National Shipping Line holds some 10 percent of the export-import trade market of Nigeria. This market share of services is so insignificant that the National Line cannot afford sep- arate rates which may be interpreted by other conference members as price war. The National Line cannot afford a price war since it will come off the worse and the national trade may be jeopardized. Indeed the Nigerian National Line is unable, at least, not at this time, to give promo- tional services to Nigeria's exports. The joint services organization in which the company serves has no space for special rates for specific members unless such rates are agreed to by all and apply to all members of the conference. 293 The Freight Investigation Bureau of India, set up at the instance of that country's export promotion drive in 1959, hoped to secure a "machinery for fixing freight rates by mutual consultation between those who provide sea trans- port and those who use it."278 One of the achievements has been freight reduction and adjustments particularly in the case of nontraditional items of India's exports, which suffer from discriminatory or anomalous freight rates. This achievement merely puts the export commodities affected at par with their counterparts in other countries. The one area where the Bureau calls for more action is in the area of "promotional freight rates." 'Such "low rates" which can encourage the flow of goods of nontraditional character, especially from developing countries, will involve some sac- rifice on the part of the shipping lines. In the long run, the compensating variation of increased volume will offset possible losses that would have accrued from high levels of rates. Of course, indirect government assistance through reduced port costs to liners carrying such exports, for ex- ample, will aid the export promotion exercise. 278Indian Institute of Foreign Trade, Ocean Freights and India's Exports, New Delhi, 1967, pp. 105-106. 294 What the Indian National Lines are doing for export promotions of India's nontraditional products should serve as an example for Nigeria's National Line. On the current form, Nigeria's industrial products are still to saturate the local demands. Except for quite a few items, no real scope exists for nontraditional export promotion activities abroad for the Nigerian National Shipping Line currently. It is hoped that the National Line should be able to per- form this service to Nigeria's export trade in due course. Such a promotional exercise is only possible when the National Line has acquired sufficient market power to either maintain a promotional set of freight rates or is able to carry the other conference members along in such an adventure. In the first instance, the National Line will need increased governmental subsidy cushioning to carry such export commodities at less than the effective operating freight rates. Alternatively, direct export promotion subsidies may be paid to the shippers to enable them to enter foreign markets. Whatever is the situation, government backing is needed to ensure that the carriers cooperate to promote such export drive. On current form, the National Line does not involve itself with export 295 promotion. It is engaged in some form of import substitu- tion in the shipping area. Conclusions The National Shipping Line's operations involve some elements of import substitution. Even at this, the level is really marginal since the bulk of the service to Nigeria's trade is still handled by foreign shipping lines. There is no service to export promotion since there is currently no export promotion drive on hand. The indus- trial sector is at present struggling to satisfy the in- ternal demands for its products. Maybe, in the near future, export promotion through shipping and some enhanced freight rates may become important. When the earning and conserva- tion of foreign exchange are considered, the Nigerian Na- tional Line is a net loser of foreign exchange. Since the service helps the exports of Nigeria's products, the serv- ices may be worthwhile. But whether it would have been better to depend on foreign carriers instead of investing so mmch in an indigenous shipping line which is a net loser 296 of foreign exchange, the question involves more than purely economic reasons which are the subjects for discussion in Chapter VIII. CHAPTER VII EVALUATION OF NIGERIAN NATIONAL SHIPPING LINE'S PERFORMANCE Principles of Freight Rates Stabilization, Yardstick for Measuring Freight Rate Heights and Movements and of Employment Generation The next line for evaluating the aims of the incor- poration and operational results of the Nigerian National Shipping Line is with respect to three other principles. The evaluation here will cover the freight "rate stabilizer" basis, the yardstick for comparative measuring of the move- ment and heights of the freight rates in the home market relative to other routes,and the basis of employment gener- ation. Each of these will be treated separately hereunder. Freight Rate "Stabilizer" Principle In the context of the principles of rate stabilizer, it was recognized that 297 298 an economy which is entirely dependent on foreign shipping services can be exploited and held to ransom . . . indigenous shipping acts as a catalyst by influencing freight rates charged by foreign shipping lines.2'79 S assumes the eventual attainment of commercial indepen- :e by the country because the National Shipping Line Ld be able to take up larger and larger shares of ship- ; services in Nigeria. The possibility of this happen- is predicated upon the operation of the company judged 21y as an economic proposition or with the use of extra- 2omic powers of government to ensure that the company ls a substantial share of the market. Both methods will examined later on. Already it was noted that by 1971-72 the Nigerian .onal Shipping Line handled 10 percent of the carriage Tigeria's total external trade and had a fleet strength .valent to 6.3 percent of UKWAL'S and 3.4 percent of .C's totals.280 Both by fleet strength and by effective iage of trade, the National Line is a marginal company. rown its degree of ”nonindependence,” the company Li 279Nigerian Produce Marketing Company, Memorandum he Ministry of Transport on Transportation of Cargoes ndigenous Shipping Companies. 280Page 216 supra. (If 299 lintains cargo pool arrangements within the conferences it : serving and by the system of rationalization of trans- rt operations, the National Line has almost little powers very independent decisions on what to carry and what tes to charge. A company in that position normally has independent pricing policy of its own for services ren- 'ed. But the Nigerian National Shipping Line within the ferences has some element of powers. The patronage :h the conferences enjoy from the Nigerian Produce Mar- ing Company is partly a function of the latter's pa- 2age of the Nigerian Shipping Line. Speaking of this ronage, the General Manager of the National Line noted True enough, WALCON's joint traffic arrangement demands that member lines should put all cargoes they are able to secure into the common pool. All such cargoes are subsequently reallocated to respective members according to the agreed percentage shares. ant further, re need not advance any further argument to Iustify N.N.S.L.'s stand and hope that you ill also agree with the principle that the 'uantum of cargo any conference member can ring into the pool, amonst other things, 281N .N.S.L. Memo to Ministry 01‘- Transport, Lagos. - crea 50W 300 determine its extent of influence and bargain- ing power within the conference fold.282 the memorandum, the General Manager pleaded for in- :ased N.P.M.C.‘s patronage from 50 percent allocation to e 60 percent. Even the Federal Nigerian Government rec- ized and apparently agreed with the principles when it noted that: The bargaining strength of any member of a conference depends not only on the volume of cargo it can carry and on the number of ships it has but also on the quantum of cargo it can bring to the conference pool.283 strong bargaining powers of members as a function of t such members can bring to the common pool was con- ned by the conferences' representative in Lagos.284 Since government has not directly intervened to :ngthen the powers of the National Line both within the ’erences and in the market in general, it may be held . the patronage the National Line and consequently the erences receive should ensure that bargaining strength. strength may be of some significance in the fixing of If 283National Economic Council, Paper on Shipping. 284Interview with A. J. E. Christopher in Lagos, st 1973. ‘.-‘“ I'nc.L‘.-‘ ' . 301 eight rates. Presumably the National Shipping Line can d often does influence the rates fixed for Nigeria's port-import commodities. But a major problem is the parent conflict between national interests and the in- :est of the company in its effort to cover its costs and prove its net revenue position. It was earlier noted at this type of conflict faced the United Africa Company 1 John Holt, initially merchants depending on the West rican Lines Conference for shipping services, who later lyed ambivalent roles in the Merchants' Freight Associa- )n while still common carriers through the Palm Line and .nea Gulf Line's operations. The major question is: L the National Line help stabilize freight rates for pping services affecting Nigeria's external trade? initive statements on this are difficult but presumptions possible. A rate stabilizer principle as defined by the abil- of the National Line to influence and prevent undue and frequent gyrations of rates cannot be determined. The or issue is whether the rates as at present prevailing ld have been any different had the incorporation and the ration of the National Line not taken place? Here again ith None Wit te‘ 'c / 302 nout actual data, the question becomes hypothetical. atheless, since the National Line is a marginal firm min the conferences, it is serving, and since its in- ast is in making its operations more Of a business in economic sense via the profit margins and share of market, it may be taken that any observed stabilization not due to the actions of the National Line directly. A major feature of the market among the conference .ers in West African shipping trade is that since syste- c preferential treatment has been accorded by the mar- ng boards to the national lines in the allocation of ght from their home ports, and, since the conferences several of the member lines have taken active parts in blishing the national lines, both by financial support by day-to-day management of the vessels, the attitude he conferences have been one of good will. In Dag 285 words, the principle had been, "if you cannot selt's them, join them" which has fostered a "spirit of tol- t and enthusiastic cooperation." It is, nonetheless, icult to assess the effect of that paternalistic I1 285West African Shipping Range, Op. cit., p. 46. 303 tude on the part of the conference on the actual muscles he Nigerian National Shipping Line. It must be admitted there must have been disagreements during quota and 3 negotiations. But whether the Nigerian National Ship- Line can step out of the ring to take a strong posture ates by itself in defiance of the conferences, in the of its marginal existence, is a different story. A careful check on the movements Of freight rates Lting in Nigeria's market should first indicate whether 2 is any stabilization at all. The case of the Niger- 'roduce Marketing Company's agreed rates on selected 't commodities with the major European-west Africa con- .ces are shown in Tables 62 and 63. Evidence shows the increases were somehow slow and not very frequent. xample, between 1966-67 and 1972-73, rates on cocoa e United Kingdom or to the North Continent of Europe up 21.7 percentage points and 19.1 percentage points, ctively. These averaged about 3.1 percentage points lly. On the whole, only the rates on Oil seeds which up an annual average of 5.8 percentage points on the 1 Kingdom route was considered the highest among these ted export products analyzed. 304 $350 92.33.32 condone 3.332 50.58 .239 fl .8: came mo c8 83 Home ‘ .I eo~.e eo~.e eoo.~ Heo.m H.~.H Hem.e Ham.e eo..e me\~aae Hom.e eo~.H Hoo.~ evo.~ Hem.e Hem.e Hem.e Hov.e ~e\eeme HON.H Hom.e mom.e mom.e ~me.H ~me.e mom.H mem.e He\eeme «Ne.e NNH.H Hom.e Hom.e emo.e Hmo.e Hom.a Ho~.H oe\mcme NNH.H NNH.H Hoe.e Hoe.e meo.e eme.e Hme.e eo~.e mo\oome oee.a oea.m Hewqe. Hom.e oeu.m Hmo.e Hme.e eo~.e eo\eome oea.a oeu.m Hem.e Hoe.e eee.a oeu.m Hme.e eme.e eoxeome ocmceucoo _eoomcex ococeucoo.. stooges nanosecoo eooacax ucoceucoo eoomcas oouoz cooec2_ ooeoz emcee: ooooz oooeco ouuoz among: some do 58 nod SS8 868 :0 808 305 .moumu unmflonm Hmouom you wanna so venom .mnomsoo mCHquu z mo:ooum.cmanomwz "mouoom a.mma a.mNH a.aaa m.maa m.h~H m.cva a.mHH n.ama mb\N>mH a.mma a.mma a.aaa m.maa m.mma m.ovH a.maa n.ama Nh\HNmH a.mma a.mma m.moa m.moa m.o~H m.oma m.mHH m.mHH Hp\¢hma m.maa m.mHH o.ooa o.ooH n.5oa >.noa m.voa n.aoa on\mwma m.maa m.mHH o.ooa o.ooH >.>oa n.5oa o.OOH m.voa mo\woma o.ooa o.ooa o.ooa o.ooa o.ooa p.noa o.ooa m.voa mm\wmma o.ooa o.ooa o.ooa o.ooa o.ooa o.ooa o.OOH . o.ooa hm\mmma ococflcoo Sooofis ococflcoo Bog ocwcflcoo 585x ocooflcoo Sconces nuuoz wouflsb opnoz nouflno nuuoz doses: nuuoz coves: snow HHO.EHmm pean souuou moomm HHO moooo .mauomaz eons moomnmu puomxo «.022.m.ze oouooaom so mooaocH mumm OCmHOHmII.mm mummy 306 In another study conducted by the UNCTAD Secre- iat286 the freight rates were noted to have moved up y Slowly and to be declining in most cases on the aria-European route. This study confirms the idea of eat stability in freight rates for some of Nigeria's r agricultural export produce" (Table 64) . The drop ed, some 17 to 23 percent according to commoditysbe- n 1964 and 1965, led to sharp increases thereafter only tabilize between 1966 and 1967. When expressed as per- 2ges of freight (f.o.b.) values, they remained rela- .y stable. In fact, when cocoa prices fell at the be- ng of 1964-65 season, this was apparently compensated y the fall in rates on cocoa. During the period, the ntage of freight component of f.o.b. values ranged an 3 and 12 percent. When these rate movement indices are compared with :s of world average prices of Nigeria's major export ities, a proper perspective would have been created. ample, the indices of world prices on cocoa, ground- palm kernels, cotton lint, and palm oil (Table 65) Ii 286UNCTAD, "Level and Structure of Freight Rates, ence Practices and Adequacy of Shipping Services," .k' 1969’ pp. 46-470 rt. 1. v 5.3.33 gonzo mo 35 3 330mm.“ 093350 .33 ”Eng .06 go new 33.. .352: .25 "330m .30..” 038 o3 a $3 .0 Age 33> .n.o.u 3d 33> .n .33 3.3” one 33 #533 .n "302 3 mm 3 mm m mg a mm a me n ma. n 2. $3 7 m mm a mm m mg m mm a mm m 2. m R 33 w a me e B e 8a a 8 a 8 c 2. 83 «A o3 NH 8H 3.: .s 3 8H a 2: o OOH v 2: «can 33> yo 33> «0 33> mo 33> mo 33> .«0 33> no 33> «0 033 £883 £803 ~33 33 ”.3 pg on. 33 no 3mm 3 3g no 39m no 3am 3 3mm 3 3mm ”.83 ”.533 963 ”.63 983% £63 083 983 9&3»... 983 983 “.53 ufimoflum 2363 3353 8.. £5 8. 8g 8. EH33 8. £5 09. fig” on. £5 8.. mag 3m 352 @555 moooo .30» .3 3a 3838. 38s 33. 83532 05 8 .3333 33 9831.3 3 308 . 389mm 38$ .3832 no x55 Hmfifio 688m a.mmm v4.3” m.mmm m.mm a.mfln m.mmH ~63 m.mm oéoa a.mm 95 mod “won—.5 m.mm m.moa m.mm .12. eds. 0.5m 0:3 m.mm m.mm mod @0038me m.mm mém méma méma a.mva Emma m.m..H m.moa a.mm: a.mm." m.mdn mm...” 80mg Tmma m.mma a.mm m.om a.mm m.m: m.mma e.g..“ mfim m.mm mé: mod .30 gem meH a.mm.“ m6: Th: m.mma ~43” m.mma wdaa 5mm." e.g." ~63 moé gem adv wém m.$ m.om a.mm N.Nw N.N.m 1% m.m.m m.mh m.m“. 3.3 “838.8 m.om m.moa m.mm 0.3..“ «.mm a.mm m.moa oém m.mm m.mh 5.2. .36 duh“Sou “new m.2: a.mm Tm: m.mm m.mm m.moH mtg 5mm m.mm 0.8 8.3” mg 5mm méfi m.m: m.2. m.2. a.mm a.moa m.m: v.8.“ m.mm mtg m.mm 2.2” do Edam m.mma 93H m.moa m.m: «.moa m.moa Tmoa m.moa m.moa e.g.n a.moa omé NEE :Buoo v42” v.53” m.moa m.mm ~13 «.vm m.moa N43 m.mm m.m.m “Ham mmé 3.0 #5305 m.mma 93..“ Héoa a.mm m.mm 0.3 a.moa «.3 a.mm o.mm a.mm mmém 33950.5 m.mm a.aa m.mma m.m.fl m.mm «.3 95m m.om a.mm m.2. m.mh 2.6m moooo a.mm 5&3 a.moa Hém mtg m.mm m.mm m.mm v.5 a.am mfim g mummoummd :3 ohm.” mama $3 $3 mmma $3 33 mmm." mmma Hem.” #5303 3.39550 . 83.. u omma mmMHmBN "mmmmv mmUHvQEUO Hmflfiasoflhmm “ohms mo mmofinm mmmum>¢ 6.303 mo gidw 3mg 309 indicate a mixed picture. Between 1960 and 1971, almost all prices increased initially and later on declined, only to move upwards again. Relative to this uncertain trend in commodity prices, the freight rates also rose between 1960 and 1963-64, only to decline and later to move slowly up to where they tend now to stabilize during the 1972-73 season. In effect, the conferences seem to have allowed their rates to be relatively stable when matched against prices of com- modities for which their services are required. From the available evidence, freight rates are relatively stable. The major factors affecting this ap- parent stability are the strong position and negotiating powers of the Nigerian Produce Marketing Company,287 the 288 potential threats from the major tramp operators, the desire to maintain the spirit of cooperation among the 287In control of over 33 percent of total national export volume, the company can, through freight allocation system, favor tramps which may offer shipping space at rates below the liner rates. The public tender system led to problems with the West African Lines Conference in 1964-65 when the latter increased their rates by 10 per- cent. For full story, see UN (ECA) Report of a Preliminary Survey of Factors Contributing to Level of Freight Rates in the Seaborne Trade of Africa (E/CN/l4 Trans/27) of 9th July 1965. 288See Daniel Marx, Jr., op. cit. 310 conference lines in order to avoid undue opportunities of windfall business to the competitors289 and the fear of 290 Potential as most what the Nigerian government can do. of these factors have been, they have, nonetheless, proved effective in keeping rates stable. But, government alone or tramp competition alone could not have been so effective if the Nigerian National Shipping Line, the last resort in the event of problems within the market, had not been avail- able. For, no matter how powerful a government could have been, without own line as a last line of defence in the. situation of threatened sabotage by entrenched conferences, it would only "bark but cannot bite." Even when not very effective in the share of the market or in the tonnage of vessels held, the National Ship- ping Line, endowed with the freight by the Nigerian Produce Marketing Company, is able to muster Strength for negotia- tions within the conferences. Evidently, the apparent 289Ibid. 290Especially if the government treats any disagree- ment on rates as a regional problem affecting other west African nations' export trade, the overall inter-governmental cooperation can weaken the conference if national lines are forced to carry their nation's exports at rates below the conferences' since most national lines are government en- terprises. See Daniel Marx Jr., op. cit., pp. 38-40. 311 stable rates prevailing must partly be a function of behind- the-scene activities of the indigenous member of the foreign-based conferences. This is more so when comparison is made between the 1960-70 decade and the 1950-60 decade when freight rate movements differed significantly. The absence of the National Shipping Line in the 1949-50/1959-60 period might have contributed, among other things, to the upward movement of rates at faster paces than is witnessed in the 1960-70 decade. The National Line with the govern- ment agencies' supports had helped in this stabilization exercises, how be it, even surrepticiously. Yardstick Principles The yardstick principles connotes the use of the freight rates maintained by the Nigerian National Shipping Line as a measuring rod of what happens in the freight markets elsewhere, thereby assessing the degree to which the home market is better off or worse off in terms of freight rates or trade carriage costs by having a local shipping line in operation. The principle here presumes an independent set of freight rates in use by the indigenous 312 shipping line or directly a set of tariff rates maintained locally through the instrumentality of the indigenous ship- ping line. The freight rates at the home market become comparable with the rates operating in foreign markets if, given the types of commodities, market conditions, and general economic circumstances, the impacts of the freight rates on trade are relatively equal. Where the local rates are so excessive that exports from the local economy are priced out of the foreign markets relative to the exports of competitors, the prevailing local rates are economically oppressive. In theory, freight rates are fixed on three major principles--"cost of service," "value of service," and "what the traffic will bear." Under the cost of service 'principle, all costs--overheads and variable costs--have to be covered in the long run from freight rates imposed on trade commodities. This is a supply-oriented price fixing. The value of service connotes the value added by the service to the total value of the commodities being exported by the shipper to enable the commodities to reach the market at prices capable of making reasonable profits. These are demand oriented pricing techniques. Each of these prin- ciples would not by itself constitute a sound business 313 pricing technique since, taken alone, each can adversely affect the service supplier or the consumer. Both of them fix the upper and the lower limits within which the appro- priate freight rate has ultimately to lie. While freight rates arising from tramp operations are more closely determined by the economic forces of supply and demand working on the international scale,291 liner freight rates are fixed by deliberate arrangements in which supply and demands are not the only determinants. Specific, however, to the liner operators with fixed routes, and heavy sunk cost in equipments and investments, "what the traffic will bear" becomes the policy for freight rate administration.292 This principle assumes that a commodity should be subjected to a freight rate on the basis of its ability to bear the incidence of the charge made by the operators. The ability of a commodity to bear the costs is dependent on the elasticity of demand and supply for the commodity, the availability and entry possibilities of 291Carleen O'Loughlin, op. cit., p. 129. 292Other additional sides include the dual rate systems, penalty charges, surcharges, and other variations aimed at maximizing total revenues of the liner conferences. 314 substitutes into the market at cheaper or dearer rates and the cost-revenue relationship of the commodity. The liner operator apportions rates to commodities such that low class commodities bring in only out-of-pocket expenses (direct costs), how be it, in the short run. The medium and upper-class commodities, not only cover direct costs but contribute extras for overheads. This system makes for the cross subsidization of commodities. The categorization of commodities enables rates to be separ- ately fixed within the ceiling of value of service and the 293 At the same time, commodity floor of costs of service. attributes--the character and volume of cargo, bulk in relation to weight, packaging and such other factors as port facilities, regulations and location, availability of return cargoes, susceptibility of cargo to damage and pilferage--all play significant parts in the freight deci- 294 295 sions. Indeed, Carleen O'Loughlin holds that liner 293UNCTAD, Level and Structure of Freight Rates, Conference practices and Adequacy of Shipping Services, op. cit. 294C. F. H. Cufley, Ocean Freights and Chartering, Staples Press, London, 1962, pp. 408-417. 295The Economics of Sea Transport, op. cit., p. 129. 315 operators lay down rates between ports and groups of ports as well as in respect of commodities and groups of commod- ities. In actual practice, conference freight rates con- tain a mixture of all types of adjustments in the interest of the trade. Apart from the class rates and the commodity rates, differentials and "favors" are built into the system to the advantage of the liners. The dual rates, the open rates, and the general cargo rates in addition to tying arrangements maximize the liners' incomes. The rate market is consequently so manipulated that what emerges is a structure of discriminatory pricing tariff.296 The complex rate structure is intended to ensure profit maximization through separate rates determined by elasticity of demand for the service through the goods and the maximization of the sales (freight revenue) of the conference.297 Since conferences the world over operate on almost the same principles, any application of the yardstick principles 296 . . . . . . This is a pricing policy of charging prices based on differences in demand factors not related to costs. 297For sales maximization hypothesis, see W. J. Baumol, Economic Theory and Operations Analysis, Engle- wood, New Jersey, 1961, pp. 198-199. 316 must take account of the conference practices on the com- parable routes. At the same time, the major factors af- fecting traffic and tariff rates must be assessed. Applied to the West African (Nigerian)-United Kingdom and North Continent routes, the comparison with other routes must consider the nautical distances, the availability of cargo on both legs of the trade route, the volume of trade, the number of ports of call and the extent of conference and nonconference competition298 in validat- ing such comparison. If distance is relatively a minor 299 the comparison would factor in freight determination, be somehow relevant if the routes and exporting countries compared handle mostly traditional raw material exports and less of manufactured goods. Three principal methods are possible for this type of comparison.300 298Indian Institute of Foreign Trade, Ocean Freight Rates and India's Exports, New Delhi, November 1967, p. 87. 299Ibid., p. 88. Also see UN, Liner Shipping in India's Overseas Trade, p. 22. 300For details of methods of freight comparisons on a trade route, see T. K. Saragan, Liner Shipping in India's Overseas Trade, New York, 1967, pp. 22-25.‘ 317 1. Comparison of general cargo rates on various routes ex-Nigeria. This shows whether rates on the Nigerian-U.K.-Continent routes compare in rate movements with other routes which serve Nigeria. 2. Comparison of outbound and inbound rates on a few important selected common commodities in the Nigeria-U.K.-Continent trade. 3. Comparison of rates on a few important commodities with rates from competing countries to the same destinations. The weakness in (1) above is that the general cargo rates on the U.K.-Continent routes are paper rates since trades on some routes are covered by bilateral trade ar- rangements with rates fixed by the need for reasonable re- turns to shipping lines serving the trade and the countries concerned. In the case of method (2) considerations should be given to round voyage adjustments since the conference arrangements cover both north and south bound traffic. In method (3) above, information would be most incomplete for specific conclusions to be drawn, but note must be taken of 318 political and other extra-market reasons for certain preferential rates. For the purpose of this study, methods (1) and (3) will be adopted and as far as data are available, the comparisons will be done. A comparison of selected com- modity rates from Nigeria to different destinations should illustrate the movement of rates on these routes. Taking cocoa and oilseeds as commodity examples, the rates move- ments have tended to remain fairly stable on all routes between 1966-67 and 1968-69. Some significant changes were noticed between 1969-70 and 1971-72 where the greatest in- creases were recorded for Nigeria-Baltic and Scandinavian ports and U.S.A. and Canadian ports. On the United Kingdom and North Continent routes, where the Nigerian National Line runs in conferences, the rates seemed to have moved in a more or less uniform.manner. But relative to routes where the National Line does not operate in conferences, the movement of rates were almost nonexistent (Australia and New Zealand) compared with the U.K.-North Continent where indices reached 136-138 percent between 1966-67 and 1971-72 (Tables 66a and 66b). 319 (#8950 g «9605 53.332 «838 .guggggfigmuegggasflbflngggfi o.oss odss Toms isms «.Rs udms I. ul ul odes odes flushes odes odes m.mns «.st odss odss li ul ..l mdss mdss sonoeos odes o. eos o .mss «.st o. oos odes ul ul al s. .Ss e .eos 2.33 903 o.oos m.mss ~.s~s odes o.oos I: II In odes odes menses odes odes odes o.oss odes edos I- In In odes odes eoneoes odes odes odes odes odes odos nl ul ..| odes odes Slooos «atom «atom mtg mmfiom 6382 58m $833 533853 manna «mung «when 8&3 388 €980 $580 62 magmas osusmm use 03mg 5853 umwuo 2m: >18 5.82 ad has loos u Sosuooos .80» 33: .mflmm 08m sso go flosoSIfioo Sass. odss Yoms odes m.mos odes o.m~s Roms «dos odes odes odes «ensues odes edss skews s.mss sdos «dos odss odes m.mms odds odss speeds odes odes o. ass odes odes odos o. ees odes o .mss n dos m .ees oonooos o. oos odes o. oos odss o . oos odes o. oos odes o . oos o .oos m .oos modems odes odes odes o.ess odes odes o.8s odes odes odes odes modems o.oos odes edos odes odes odes odos odes odes odes odes Suooos MEMO“ “$98 33m «38¢ 538: 538m flan—”MON 5% $3 0388 NE mg g 89.30 nag—BO 6: $3.534 9.3st an» aims“? g2 page \am: 2w: 5.8: £5 83» 30H u humalmomd some 0800 8 g H0 80? gmglé 9958 ”5.33; O» ”and 3.8038 BDUQHOmIIémm a 320 When rates for selected commodities handled by nonconference lines are examined (Table 67) the movements had always tended to be gentle and non-too-regular. Since these are not composite rates, it is difficult to gener- alize on this comparative study. As the general composite rate movement between 1960 and 1972 tends to involve some 15 percent annual increases,301 particularly created by the UKWAL-COWAC (WALCON) conferences some evidence seems to be gathered that relative to those routes on which serv- ice appears to be more competitive and less of a cenference monopoly, rate movements tend to have been less frequent and none too gyrating. While data is incomplete and gener- alized conclusions difficult to arrive at, the problem posed here is whether the inauguration and operations of the National Line have forced rates on the routes it is operating to be more erratic than on the routes on which it is not operating. Such a conclusion ought to examine factors like the volume and value of traffic on both legs of the routes as well as other factors needed in the pro- cess of the evaluation. 30:I'Based on evidences from the major shippers during the field interviews. 321 .§ 5993! 8.695 ominous: "mos—5m odes odes e.8s odss «.st .1st ll mdms odss odss odss odes odes odo ooéos odes odes odes odss odd odes In odes odss odss odss odes odes odss sousoos e.8s odes odes odss odes odes In mdo odss odes m.mss odes «do sumo sonooos odes odes odes odss odes odes II ~do odss odes odss odes Ndo sumo oodoos odes odes odes odes odes odes In odes odos odos odes odes odes odes ownmoos mooumsso ~88 8838 880 8838 808 8838 088 8838 880 8838 308 8338 808 snows. 5.5m ossfiom mung \ustmeo 598 spasms. B: 31594 has Ha g Essa: €855 osumflsl 58» Sea u aomdnwwma Humor 035 Ag Nine—ME 83 assuming Baum?“ HO g ufig MO «BEIKw WEE. 322 Information on inbound and outbound freight for Nigeria to different markets is not readily available. This comparative measurement cannot be now used. But the measurement of comparative rates on a few important com- modities from competing countries to the same destinations-- this time, United Kingdom and Continent of EurOpe--is pos- sible. This method helps the detection of rate discrimi- nation.302 In Table 68, relevant, freight rates on diverse raw materials moving from selected developing countries to Western Europe are indexed. From the available data no real trend is established. But when freight rates Operat- ing in the Nigerian export markets are compared with those of Turkey, India, Brazil, Australia and Mauritius, Nigerian exports do not seem to be worse off. For, during the survey period, while indices of rates on Nigeria's exports were declining, those of Turkey and Australia were increas- ing absolutely while wide fluctuations were noticed for Mauritius, Brazil, and India. When even the rates of 302This exists when a rate on a commodity is higher than the rate on the same or on a similar commodity moving from other countries to the same destination, other condi- tions governing rate being more or less the same, or when a rate on a commodity in outward tariff is higher than the rate on the same or similar commodity in an inward tariff. See T. K. Sarangan, op. cit., p. 86. 323 .2 .oo .2 do .ooos snow 32 .fiommm “3388 965 figmmsam mo 5360.2 9am mooflomuns «Bonanza 63mm “Egon—m mo musfiosdbm 98 33‘s.. 5" 3.3 EM 3398 h.HOH ¢.Hm o.HNH m.vw N.NOH O.EOH a.mm mwmd m.mm m.mh o.mHH m.mh M.Om o.mOH o.mm head a.mm a.aa o.HHH m.mn H.Nm o.m0H a.mm wwmd ¢.00H v.HOH o.hOH m.mb m.mHH o.NOH a.mm mmmH m.mw N.Nm 0.00H o.NOH ¢.mOH o.HOH o.OOH vme o.ooa o.ooa c.00H 0.00H c.00H o.OOH c.00H mwaH Comma 3M3 390 GOHC 3003 3803 $9an HHOV Amuoom ._....sOV summon .33 mosusssmz susnmum gonna 3.332 ans Essa. 3903.2 “mow . gmcoflgmgqmomoflfigmng . mmsfiqao osmosmemo oouomsmm mo Bugs co moosofi Bum smug magi. me a 324 changes are assessed, the Nigerian markets were enjoying better rate reductions than most of the other competing markets. Above conclusions must be taken with a lot of cau- tion. Since the data are not aggregated with appropriate weights for money and trade values, with the quantum of trade commodities, nothing is really explained. And, the fact that the commodities are different from each other with respect to various factors,303 the absolute or rela- tive advantages of any route over others cannot be speci- fically determined. A proper comparison should be related to equality or near equality of the different factors affecting rate making and rate revisions over time. What- ever can be said, the rates operating in Nigerian markets are apparently competitive at international levels. 303 (1) Character of cargo, (2) volume of cargo, (3) availability of cargo, (4) susceptibility of cargo to damage, (5) susceptibility of cargo to pilferage, (6) value of goods, (7) packing, (8) storage, (9) relationship of weight to measurements, (10) heavy lifts, (11) extra lengths, (12) competition with goods from other sources, (13) cargo via competitive gateways, (14) competition from other carriers, (15) direct cost of operating, (16) dis- tance, (17) cost of handling, (18) lighterage, (19) special deliveries, (20) fixed charges, (21) insurance, (22) port facilities, (23) port regulations, (24) port charges and dues, (25) canal tools, (26) port location, (27) possibil- ity of securing return cargoes. The list was prepared for 325 Even when the nautical distances are taken as the major factor, the following table demonstrates the compar- ative position of Nigeria. Coffee exports to London works out (Table 69) at freight rates from competing sources of supply at 0.52d, 0.48d,0.65d, and 0.44d per nautical mile from India, East Africa, Nigeria, and Malaysia, respec- tively. A significant thing here is that there is no re- lationship between freight costs and the nautical distances covered. Nigeria seems to pay higher than all the other exporting countries even when by distance it is the nearest to London. On a comparative basis, it was discovered from the foregoing analyses that the freight rates enjoyed by the Nigerian markets tend to be more stable than those on com- peting routes elsewhere. Moreover, rates on routes where the Nigerian National Line Operate tend to increase more rapidly and at higher percentages than those routes on which the National Line has not even had a token service. Even though all things considered, rates on the Nigeria- United Kingdom and European routes are fairly stable, it Inter-American Maritime Conference of 1940 and later enu- merated in T. K. Sarangan, op. cit., p. 85. 326 .mhn d imam .cmmqmumm .M .B “condom mafia {cam 83‘ {an .33.. gem H35 {3m 9. 2: one» 53 am: mmmfi I\om~ mg”; I\ mmm ommé o\mm~ mvmtm mth m2 coca Aggy .M.D 8ng 3mm 8538 3mm gang mama 8533 moms unusual 3.332 8E 68 £5 3mm. coflmaflmmn Egg .33 m>fl§umommoo 338 now mound ”Egon—muldw a 327 is difficult to ascribe the phenomenon to the presence or absence of the National Line. Probably, the National Line must have had influence, directly or indirectly, on the rate stability. The fact that the presence of the National Line in the relevant conferences had enabled the Nigerian inquirers to know something of the prevailing rates,304 makes it possible to use that knowledge to judge the extent to which the foreign lines are charging too much or too little on the export-import trade of Nigeria. Thus on the principle of yardstick for measuring service gains and benefits both from the freight rate con- tent of cargo values as well aseon the relative basis with other trade routes, the presence of the Nigerian National Shipping Line seems to be an asset, the degree of which cannot be easily determined. Principle of Employment Generation Creation of employment opportunities for Nigerians was one of the major goals of the incorporation and 304Previously it was almost impossible for even small shippers to have full operating tariffs books and changes made never required advance information. At least, 328 operation of the Nigerian National Shipping Line. It was found to be part of the long felt need that a line of this nature should provide employment opportunities for Niger- ians who would have the opportunity to acquire valuable technical knowledge and skills. So important was this aspect of the purpose behind the inauguration of the line that the First Annual Report of the company in 1962 com- mented: Particular attention is being given to the question of Nigerianisation in the company's expansion programme so as to reflect the company's national character while maintain- ing, at the same time, the international nature of our trade. The training of manage- ment personnel as well as marine engineers is being vigorously pursued and there is no doubt that this will yield ample dividends in time to come. Again, the Second Annual Report published in 1963 noted inter alia: "During the year, emphasis was placed on training of management and other personnel which is the main subject of this report."306 The up-to-date figures advance information to shippers is possible under today's arrangements. 305Chairman's prefacial statement in the Annual Report, 1962, p. 2- 306Annual Report, 1963, p. 14. 329 of trainees then were 12 deck cadets, 7 engineer cadets, 5 radio officers and trainees, l4 pursers and writers and 8 chief stewards and trainees.307 Even though the company owned only seven vessels then, six of them were manned by Nigerian chief stewards and six Nigerians were in charge in the purser's department. Indeed, the annual report noted that: This aspect of our policy is being pursued with the utmost vigour. It is our hope that with the training being given to trainee managers and other personnel it will not be too long before our key posts in our company are Nigerianised. The information bulletin of the company also commented on career opportunities thus: The staff of the company consists of the shore and marine establishments. In both esLablishments the process of Nigerianisav tion is progressing as more and more indi- genous officers acquire the highly technical skills involved in ship operation and manage- ment.309 It went further to explain the nature and methods of train- ing opportunities open to new trainees in the company's employment. 307 Annual Report, op. cit., 1963, p. 14. 308 Ibid., p. 14. 309Nigerian National Shipping Line, Information Pamphlet, Lagos, 1967, p. 8- 330 The National Line, operating with a fleet of nine- owned ships between 1965 and 1968 had about 409 marine jobs by 1968 period. Of that number 327 were already Nigerian- ized (including jobs held by other West Africans). Accord- ing to the study by the Expert under the Technical Cooper- ation Programme of the Inter-governmental Maritime Consul- 310 only 32 jobs were still held by tative Organisation foreign employees (see Table 70). It is significant that while some of these posts were held by foreigners because there were no qualified or experienced Nigerians, the Ghana government's Black Star Line had the equivalent qualified Nigerians in their employment.311 As at that date, the Black Star Line had the following Nigerians employed: 4 Chief Officers, 6 Second Officers, 2 Third Officers, 1 Radio Officer, 2 First Engineers and 15 Ratings. According to E. Kemperer, it had been the company's policy ”to give priority to qualified west Africans whenever jobs cannot be filled with qualified Ghanaians." 310E. Kemperer, Final Report on the Feasibility and Practicability of Establishing a Nautical Training School in Nigeria, unpublished document, Ministry of Transport, Lagos, 1968. Bllxbidel p. 3. 331 ME 70.-N.N.S.L.'s Marine Jobs-1968. . Hehiby Beniby Posuriggngpmelkunne Tbtal Nimafians lkmehymms Museums 9 nil 9 Deck Officers 27 15 12 ChhfifEnghxwms 9 nil 9 Engineers/Electricians 52 13 39 Catering Officers 27 27 nil Ixcklknfings 121 121 rfil EnfiUEHRxmlEMfint 78 78 nil Cauafingiknfings 77 77 nil Radio Officers 9 nil 9 Tbtal 409 331 78 Smnne: Kemxuer,gx 2. Matched against the vacancies for qualified Ni- gerians then, the four qualified Chief Officers of Nigerian origin serving, probably on contracts with the Black Star Line ought, with the'policy of Nigerianization, to have re- placed four of the expatriate masters in the service of the Nigerian National Line. The Nigerian Radio Officer would have replaced one foreign Radio Officer in the National Line's service. These did not happen because at this time the real decision on the future of the Nigerian trainees, when they qualified and their suitability for service de- pended on their training schools in the United Kingdom 332 alone.312 Since most of the expatriate employees to be replaced were British, it became difficult to separate the real desire to have effective replacement at the shortest time from the academic questions of suitability and compe- tence of such Nigerians.313 Another major development in the company was the high frequency of resignations and dismissals of senior staff and management personnel between 1960 and 1970. The greatest test of this truth is seen in the Annual Reports where heads of departments and chairmen and board of di- rectors' membership seem to be changing annually. So strange and debilitating had this phenomenon in the annals of industrial relations reached in this company that, gov- ernment was forced to include it as a major problem within the company.314 It is difficult to ascribe the situation 312During interviews there were allegations that the training institutions in the United Kingdom frustrated these trainees by disqualifications in the final training years. Indeed, some of these officers later serving with Black Star were alledged to have completed training else- where only to be found competent to serve in the Ghanaian National fleet. 313No study has been done to show if the Nigerian officers serving in Ghana did so purely from a sense of choice and dissatisfaction with the Nigerian National Line's job opportunities. 314National Development Plan, 1970-74, p. 184. 333 to social and political factors or to the purely economic reasons of dissatisfaction with job performance and future expectations. Despite all these problems, the policy of Nigerianization was being pursued. When the 13th Annual General Meeting convened on the 22nd of March, 1973, the Board of Directors' Annual Report noted inter alia on the subject of "Staff Training and Development": Significant advance has been made in regard to training and manpower development for staff , both ashore and afloat, excepting the post of General Manager . . . all other posts in the Head Office are ably filled by Nigerians . . . The Nigerianisation policy is still being dili- gently executed but you can be assured that this will not be at the expense of efficiency, or detrimental to smooth operational activities.315 The report went on to indicate that the company was by 1973 having 30 engineering cadets and 45 deck cadets trained in various institutions in the United Kingdom. Such training was expected to provide a substantial level of manpower needs. To review the inventory, the report noted that the company had 16 captains of which 10 were Nigerians.316 3151972 Annual Report, p. 6. 316Additional three captains and six chief engi- neers--all Nigerians--were expected to qualify during the plan period to help to increase the overall number. 334 That number of Nigerian captains was to expand to 13 during 1973. Indeed, the staff record when judged by the impres- sive figures can lead one to realize the importance at— tached to the employment opportunities for Nigerians as a policy in the operation of the National Line. TABLE 71.-Offioer Class Position in 1972-73. fifial Officer Class N I Nigerians l. captains 16 10 2 . Chief Officers 12 ll 3. (Rfieflfindmaus 20 8 Source: 1972.Annual Report, pp. 6-7. When the technical partners were being invited to share in the setting up of the National Shipping Line, one of the crucial conditions was that such technical partners should, among other things, be able "to provide the tech- nical knowledge and management of Nigerian vessels."317 When the joint proposal by Messrs Elder Dempster and Palm Lines met the provisions set down by the Federal Ministry of Transport, the two companies, later to be known as 317N.N.s.L. Annual Report, 1962. 335 technical partners, assumed responsibility for the training of Nigerians as cadets for the new shipping line. By the end of the 1962-63 operational period, the training pro- gramme involved the following categories of staff:318 Deck Cadets 12 Engineer Cadets 7 Radio Officers and Trainees 5 Pursers and Writers 14 Chief Stewards and Trainees 8 At the same time, shore staff-managers, senior clerks, and other traffic officers were also undergoing training in the United Kingdom. The overall training programs for cadets were de- signed for "young Nigerians of good secondary education be- tween the ages of 17 and 21"319 who intend to become Navi- gation Officers, Pursers, Engineer Officers, Radio Officers and Chief Stewards. The total training period differs with types of cadetship, being about three years for Radio and Catering courses and up to about eight years for Navigation 3181bid., 1963, p. 14. 319For details of training scheme see ”The Message is Clear: A Career at Sea with N.N.S.L." A publicity material published by the National Shipping Line. and witt Enu ofi otl 336 and Engineering courses. The 1971-72 Annual Report noted with some satisfaction that: A Nigerian is also at the head of affairs in the Liverpool based Nigerline (U.K.) Limited . . . with regard to training and development of afloat staff--30 engineering cadets and 45 deck cadets are being trained in various in- stitutions in the United Kingdom.320 Enumerating some of the cadres of staff in training--radio officers, electricians, pursers and chief stewards, among others, the report noted that the training schemes will "secure and maintain an excellent work force compoed of men of high intelligence, sustained competence, creative drive, and a great sense of loyalty." With only twelve owned vessels and a training pro- grame dating back to the 1960-61 era, it should have been possible for the National Shipping Line by 1971-72 to run the company with nearly all Nigerian shore and sea staff.321 Of course it must be noted that the company sees the idea of Nigerianization as an employment tool for Nigerians but 32°Ibid., p. 6. 321Staff turnover has been too high in this company and changes in management personnel had been too frequent. Apparently political factors must have the blame since appointments and rewards have been based on anything but efficiency. . 337 not at the expense of efficiency or the smooth operational activities of the line.322 Despite this caution which acts as a break to reckless "indigenization" of the company's services, the federal government has added "defective orga- nizational and management situation in terms of quality" which will be examined later in this study. The staff position at 1972-73 operational period was 772. Between 1970-71 and 1972-73, an increase of 43 posts was filled, all of which were in respect of marine and shore staff (Table 72). Presumably, this was in re- sponse to the needs of the newly created Nigerline (U.K.) Limited. While detailed breakdowns into the traditional segments--(l) Engineering department, (2) Stewards depart- ment, (3) Deck department, (4) Management and shore staff, and (5) Radio department, etc.--are not available, some hint of the current position of Nigerians in certain areas are indicated in the annual reports.324 There were by 1971-72, twenty captains, a half of which were Nigerians. 322Annual Report 1972, p. 6. 323Second National Development Plan: 1970‘74r p. 184. 324Annual Report, op. cit., p. 6. 338 TABLE 72.-National Shipping Line's Labor Force. Staff Catemries 1970-71 1971-72 1972-73 On land Nigerian 84 84 93 Senior Foreign l 1 1 Total 85 85 94 Nigerian 387 387 387 Junior Foreign -- -— -- Total 387 387 387 A Float Nigerian 270 270 304 Senior Foreign 42 42 42 Total 312 312 346 Nigerian 375 375 375 Junior Foreign -- -- -- Total 375 375 375 Total Nigerian 354 354 397 Senior Foreign 43 43 43 Total 397 397 440 Nigerian 375 375 375 Junior Foreign -- -- -— Total 375 375 375 Grard Elbtal 772 772 815 Source: Nigerian National Shipping Line . 339 This increasing trend would be noticed in respect of quite a number of job groupings and departments. An important aspect of this study with respect to employment generation is whether increases in investments have been matched by increases in employment levels. For example, the total asset values held by the company be- tween 1970-71 and 1972-73 ranged between N20.32 million325 through N20.53 million to N20.25 million. Total employment levels moved concurrently from 772 to 815 in 1972-73. This situation works out on a percapita asset values as are enumerated below (Table 73). It thus took asset values of over N26,000 to employ one person--senior or junior. When asset values fell by normal depreciations between 1972 and 1973 inspite of increased employment, the per capita asset value fell by 5.5 percent. Nonetheless, when the growth of the company is taken as a whole, increased in- vestments appear to have been matched by increased employ- ments. If the employment was related to the gross regis- tered tonnage of vessels in service during the 1970-71 to 1972-73 period, the per capita gross weight of vessels in 325Estimated for 1972-73. 340 TABLE 73.-Nationa1 Line's Per capita (Staff) Asset‘values of Interest. Asaazvahme Year Staff Nuuber Asset; Vii‘lues Per Capita (Nhulluxm) (N) 1970-71 772 20.32 26,321 1971-72 772 20.53 26,593 1972-73 815 20.25 24,847 Based on data fran N.N.S.L. Annual Reports. service would appear as in Table 74 where it differed be- tween total labor and marine labor forces. This comparison becomes meaningful when related to what the ratios are in respect of some other maritime national data. What emerges from the comparative study of British and Nigerian per capita (staff) gross registered tonnage of vessels in operation is that unlike Nigeria, the British tend to have one unit of labor take care of a greater gross tonnage of vessels. For example, when the British gross registered tons increased by 13.4 percent between 1965 and 1966, marine labor‘ fell by 7.3 percent giving an increase in labor per capita gross registered tonnage of operating vessels of 22.5 percent (Table 75). Over the years, 341 TABLE 74.--National Line's Per Capita (Staff) GRI' of Vessels in Service. GRI‘ . Gross GRT Total Marine . Per Year Staff Staff Regibsnste‘ed 89;]? Marim Staff 1970-71 772 687 81, 939 106. 13 119 . 27 1971-72 772' 687 81, 939 106 .14 119 . 27 1972-73 815 721 81.939 100.54 113.65 Based on N.N.S.L. Annual Reports dam. TABLE 75.—United Kingdom Per Capita (RT of Vessels in Operation. G.R.T. (Millions) (Staff) Vessels' Year mine GRT Per Dry Oil Personnel Capita Carg.) Tankers ‘Ibtal 1965 13 .6 7 .9 21. 5 103,330 208 . 07 1966 16.4 8.0 24.4 95,725 254.89 1967 13.8 7.8 21.6 91,818 235.25 1968 13.5 8.4 21.9 86,750 252.45 1969 13.6 10.2 23.8 83,611 284.65 1970 13 . 7 12. 0 25 . 7 85, 200 301. 64 1971 n.a. n.a. n.a. 81,114 n.a. 1972 14.9 13.7 28.6 74,114 385.89 Source: O.E.C.D. writime Transport. 342 indeed, increasing gross tons have been associated with each unit of marine labor.326 On the other hand, the Nigerian marine labor tends to have handled less gross registered tonnages of vessels in operation. This means that the National Line pursues a policy of increasing labor intensity of operations and, no doubt that the oper- ating ratios have tended to be larger recently. Employment opportunity policy of the National Line can be viewed from two perspectives. In the one case, it can mean replacing expatriate personnel with Nigerians. If this is the connotation of the policy, it had been ful- filled and the increasing training scheme had justified this. On the other hand, if the employment policy means job creation, then relative to the capital invested and job opportunities by other technologies, shipping has been a poor tool. While the latest trends among maritime nations show very convincingly that shipping is a capital intensive industry, reliance on this by Nigerians for job creation must be predicated on absence of concern for the level of 326This is due to increasing capital intensity of operations, more modernization of fleet, multi-functional specialization of the marine labor and general efforts at maximizing shipping returns. See O.E.C.D., Maritime Transport, 1972. 343 net revenue of the firm. Either the National Line must be run as a public service or it must be run as an economic pr0position with emphasis on net returns to operations. A comparative investment-employment ratio327 in a number of industries will show the weakness or otherwise of reliance on the shipping industry as an employment generat- ing tool. Compared on the basis of investment and employ- ment generation potentials of the Nigerian Tobacco Company, Nigerian Cement Company, and the Nigerian Breweries, the National Shipping Line is not a proper employment generator per se (Table 76). That the company has up to 1972 spent a total of over N200,000 for staff training alone empha- sizes the level of attachment to Nigerianization and em- ployment within the shipping line. What has emerged is that the shipping industry is important not for its employment creation ability (where it is viewed as a commercial venture) but for other reasons. Even when the employment potentials of the National Line are compared with the Nigerian Ports Authority, the Nigerian Railway Corporation, and the Nigerian Airways 327Account must, of course, be taken of the differ- ences in technology-~production functions and factor pro- portions as well as the skill mix required in each case. 344 CHELE'NL-aammannfixeIDuEBUmanEqfloymrn:Reuniomflfip. Finn cagflzd.ax1Re&ames Emgknmentlxwel Nigerian Breweries N10 million 1, 700 Nigerian Tobacco Conpany 1115.6 million 2,200 Nigerian Carent Ocmpany N12.6 million 1,800a bfigerflnlNathal . . a a S] . ing I' 1114.0 million 700 aEmfimauxL Source: Peter Kilby, op. cit. (data for 1966). Corporation, increasing levels of employments are noticed in respect of the Railways and the Ports Authority (due regard being given to respective capital levels invested). By 1966, the Railway Corporation had a labor force of 328 It would 30,267 while the Coal Corporation had 3,306. therefore appear that the National Line had fulfilled the aims of employment of Nigerians through replacement of expatriate labour as well as the acquisition of certain skills which other employment opportunity would never have given. Whether these skills are so vital that the country 328Federal Office of Statistics, Annual Abstract of Statistics, 1971, pp. 19-20. 345 would not have depended on the international markets for their services is another question altogether. Incomes data earned by these employed labour are not available. But in theory, crew costs are made up of (l) wages, (2) social security or insurance contributions, (3) victualling, and (4) repatriation costs. Professor Sturmey has given estimates of cost components of crew 329 (see Table 77). Evi- incomes on a comparative basis dently wages are the highest components and since the Nigerian crews are part of the National and International seamen's unions33o their cost structure would not be far different from others. Evidently, over 60 percent of crew costs would be wages. As it turns out that part of the wages and allowances in respect of the Nigerian crew and nearly all of the foreign crew are met in foreign exchange, the real costs to the company must be high. When the training costs totaling to date over N200,000 are added, the cost must be significant. 3298. G. Sturmey, British Shipping and WOrld Com- petition, The Athlone Press, London, 1962. 330Nigerian Shipping Federation. 346 ms 77.—-Crew Cost Cbuponents on a Representative Ship. Oost Oon'ponent U.K. Norway Netherlands France U.S .A. Baxent wages 75.0 71.0 69.5 68.0 88.0 Social Security 2.5 4.5 14.5 20.0 4.5 Victualling 22.5 20.5 16.0 12.0 7.5 Rxntnkflion -- 4.0. -- -—- -- Tbtal cost 100.0 100.0 100.0 100.0 100.0 Sauce: S.! so 8388 88888 no 888 3838838 38888 8» so .n e: .885 no 8.88 08888 338838 88 888888 88083388...” 0.32 888m mo 8898.88 088.88 82.38%. .8 mg 383 institutions which face competitions internally within the Nigerian economy cannot pass the economic performance test, there is no reason to expect more from the Nigerian Na- tional Shipping Line which faces both internal and external competitions. Most of the variables affecting the per- formance of the National Line fall within the wide spectrum of the controllable and the uncontrollable variables facing the company. This is apparently the reason behind the use of "national policies" by foreign governments when they adopt extra-market measures to keep their national marines going. And when the Nigerian government planned to "study the economic soundness of additional investment in ships with the greatest care" because of "The notorious insta- bility of rates and profits in shipping on the high seas,"367 it must have involved a policy of eventual closure of the National Shipping Line since opportunities of high profits in ocean shipping by the National Line are slim in the short run. Of course, it was most mitigating to note the government's observations that: It is not helpful to condemn the performance ' of these bodies (public corporations and 367Statement of Policy on Transport: Federal Government Printer, Lagos, 1965, p. 2. 384 companies) in general terms without first setting out performance targets and achieve- ment yardsticks. It is necessary to answer the question whether or not most of these corporations can in fact, or should be ex— pected to, make profit. It is also, of vital importance that a proper balance be established between commercialism and state control.368 At this point in the analysis, the vital issue is what the options are for the National Line in terms of survival opportunities, taking into account its internal and external constraints and enabling variables. What happens in spite of government support and what would happen with its removal? Theoretically, with the current internal and external constraints and enabling factors along with government support, the options are either very viable and rewarding existence or a most moribund survival opportunity. Without any government's continued support despite the current operating and external constraints, either a moribund existence or a sure collapse is the inevitable end. Since it would appear that the desire of the Ni- gerian government is for the National Line to become a 368Second National Development Plan, 1970-74: p. 185. 385 paying concern369 simultaneous with the minimization of public support and subventions, a detailed analysis of those variables affecting the National Line's operations should be undertaken. The National Line influences and is in turn influenced by the government agencies in Ni- geria, the international shipping lines (both conference and nonconference members), foreign governments and their economies (see Figure 4). Each of these institutions has a series of variables which influence them. Some of the variables are internal and others external to them. Among these are those which each of these institutions can rela- tively control and manipulate for policy purposes while others are beyond their control. Interactions among these institutions are dependent on their ability to manipulate what proportion of these variables and the combined weights of these variables. With respect to the Nigerian National Shipping Line, the variables which exert their influences either posi- tively or negatively on their operations and their opera- tional results are enumerated in the following chart and Table 82. Internationally, the influences of the foreign 3691bid. 387 m 82.—Variables Influmcing Institutional Interactions (11 Ocean Shipping. Institution Variable Oontrollablea muollablea Imels 1. Credit Level lbquired l. Flexibility of Decisim bohemian b 2. Service Level Efficiency 2. Vessel Capacity Used Internal 3. Type of Vessel 3. Service Macy/responsiveness Iii ian 4. Staff oality 4. Desired Camp Volune Natiaal 5. Noncmferenoe calpetition 9‘1““ g l. GmferaneoargoQioi-a l. FactorOosts 2. Shipper Patronage 2. Freight Rates b 3. Trade Rants Traffic 3. Capital Sugaly Dctenal Ratinalizatim 4. Port Efficiency 5. Garter Market 6. Trams in Natiaal Trade 7. level of names 1. manage/Support for Naticlal 1. Factor Costs (Int-enal) Line 2. Freight Rates b 2. Intenal Capital Surply Internal 3. Internal Port Efficiaicy/ Nigerian Facilities vaernnent 4. Ompetitive Practices of Lines and 5. Naticral Shipping Policies Agencies 1. Trade Agreements and hunting 1. Dcterral Factor (bets 2. Conference Practices 2. Foreign Naticral Shipping Policies 1b 3. CnrgOQntastomxas 3. mmfiflcmmmfl 4. Foreign rarket Brigancies 5. Ship Building/Ship Garter Markets 1. Conference Shipper Patrmage 1. Factor Costs 2. Trade/Traffic Ratiaalizatiaa 2. Vessel Capacities Used b (Omference) 3. Desired (hrgo Volune Internal 3. Service levels/Waiveness 4. Freight Rates and Cargo Qntas Fureim 5. Gnice of emfermoe wasp flaming 6. (bufereae Practices Lina (Grim) 1. Trade mites an! Ports Gaice l. Nonomferenm Ccnpetiticn 2. Supply of Services 2. Factor Costs 3. Capital Supply 3 I 1b 4. Port Efficiencies 5. Ship aiilding/Garter Markets 6. Natiaal Shipping Policies 7. Market Beigencies 8. mm of Vbrld Trade 1. Quip milding nadustry 1. Factor Cost Inl 1b 2. Garter Darkets 2. Freight Rates B I 3. Capital Supply . G ts 4. National Shipping Policies gains 1. Omference/mnonference l. Intenaticnal Shipping Policies Practices 2. Interrational Trade Trends ‘Abiaormubmmmnignateromacrmgebyuemmum. 'Fradehgrealmtsandmutes (argomotastounes bibuogamsoradogsrmstotiaixatimtim. amply of 'lbnrages and Services Internatioral Energetics/Market Beigencies g 388 national lines (conference and nonconference members), policies of foreign governments and their agencies as well as the actions of the Nigerian government and its agencies-- all bear directly, negatively or positively, on the opera- tional efficiency of the Nigerian National Line. The two- way types of influences are shown in the diagram (Figure 5). The ship building industry and the ship charter markets become central in the whole setting of interacting forces since supply of tonnage is an important influence of demand satisfaction and eventual capital and service costs. To make the analysis more specific and slightly detailed, the major variables influencing international institutions and hence ocean shipping are outlined in Table 82. The variables are either internal or external to each institution and may be either controllable or un- controllable within that system. This control notion indi- cates the relative ability of each institution to influence shipping supply, demand, costs, and incomes by direct or even indirect manipulation of the various variables. The list is not, however, exhaustive, but is tendencious. The ability to manipulate a majority of the respective vari- ables (subject to their respective weights) in an effort 389 to influence total costs and revenues would to an extent determine the ability of each shipping line or nation to optimize its services. Relevant to a national shipping line, the preponderance of more internal and external con- trollable variables would indicate its ability to improve its performances. On the other hand, where the uncontrol- lable variables are dominant and exert greater weights, the chances of economic viability for such a national shipping line are slim. For the Nigerian National Shipping Line, manipula- tion of service level and efficiency by judicious choice of suitable vessel types370 and improvement of staff qual- ity371 while engaging aggressively in cross trades against nonconference competition should be a most short-term ob- jective toward improvement in operational results. Even though the quotas of cargo from the pools, shipper patron- age, and traffic rationalization are endogenous to the Nigerian National Line, powerful negotiations, increased acquisition of tonnage and aggressive selling policy by suitable advertisements should make these variables 37OIbid. 371Ibid. 390 controllable. Some of the areas which under current ar- rangements are uncontrollable touch on those internal variables which are rendered rigid by conference and government control mechanisms.372 The firm's decision mechanism comes under this area. Those variables which are given by the market and on which the National Line has no powers are listed under external uncontrollables. Can the Nigerian government help the National Line to achieve economic viability? This depends on those controllable external and internal variables at its dis- posal. Patronage and support are currently being exploited. When the national shipping policies, the noncompetitive practices of conferences and efficiency of port Operations and stevedores are acted upon, the National Line would have been assisted to earn its keep. Since factor costs and 'freight rates are decided by the market or agreement of conference membership, and port efficiency and costs as well as charter markets are controlled externally of the Nigerian economy, the best option is to help the National Line improve its efficiency by minimising its total costs and maximizing its total revenues. The use of bilateral 3721bid. 391 and multi-lateral trade agreements as well as appropriate subsidies and preferences (as are used by other foreign governments) should help to improve the position of the National Line. This means that the Nigerian Government is indispensable to the well being of the National Line since its relationship with foreign governments is through appro- priate actions.373 To the question of what options for survival are open to the Nigerian National Shipping Line, the answer is either (1) steady movement to sure and eventual death, (2) weak or moribund but indefinite existence, or (3) strong and viable growth-induced existence. Under the conditions of eventual sure death, the most obvious method to ensure that is the withdrawal of government patronage and support and the pursuit of a laissez faire transportation or ship- ping policy. Definitely, this will lead to the immediate close-down of the National Line. When that happens, it would have been clear from the transportation accounts in 373For a new approach to the organization of inter- national shipping service, see Samuel A. Lawrence, Inter- national Sea Transport: The Years Ahead. He acknowledges the factors of national defense and security and inequality among different economies though recommending competitions and regional organizations of shipping. He advocates na- tional flag lines for developing nations which should work within cooperation and understanding with developed nations. See Chapter 15. 392 the balance of payments sheet whether Nigeria. gained any- thing or nothing from the existence of the Nigerian Na- tional Shipping Line. Under situations of moribund existence, the most effective conditions to ensure that state of affairs for the National Line is to refuse to directly influence the conference practices and their grip on the National Line. In this context, except the continued financial support and cargo patronage as at the moment, there should be noth- ing done about positive shipping policy. The cargo quotas should be negotiated with the conferences once in five or seven years and no government pressure would be needed to influence the allocation of cargo from the pools. Govern- mental control .even to the point of directly influencing appointment, training and rewarding of the shipping line's personnel should continue to be strongly applied. With steady cargo patronage and some financial support but with nothing done to offset the administrative grips of the government or the operational grips of the powerful con- ference ring, the National Line will not fold up but will be unlikely to become a truly paying concern. 393 The third alternative is one which is probably de- sired by all Nigerians. To see the National Shipping Line a viable, vibrant, powerful, and growing shipping line, able to contest in the market with other indigenous and foreign lines, quite very many variables--external and internal must be influenced. The National Line should attend to efficiency of operations through reduction of total operating costs or improvement of operating ratios by improvement of staff quality,”4 investment pattern”5 and applications of working capital by time and sector. A fairly reduced ministerial control of the National Line and a more progressive effort at reducing the grips of the conferences will make decision making flexible and respon- sive to the commercial needs of the company. For its part, the government should, like other national governments, inculcate the ideas of transportation requirements in whatever trade agreements are entered with foreign nations. Increased carriage of Nigeria's export 374Which the Federal Government has acknowledged that "the level and quality of personnel are sometimes mediocre and reflect the worst traditions and rigidities of the civil service." Second Development Plan, op. cit. 375Ibid. 394 products should be pursued not by discrimination but by aggressive flexible use of vessels as are done by India, France, Brazil, Japan, and the United States.376 Once the manipulable variables are influenced by the National Line and the Nigerian Government simultaneously, the chances for its viable growth are high. The major question is: which option should Nigeria choose? Other relevant questions center on the role of the conferences on the ability of the National Line to operate effectively and whether the National Line can afford to operate outside the conferences successfully. To the first question, the choice would have to do with the balancing of actual costs and incomes as well as social costs and in- comes which satisfy the national interests.”7 This will depend on national priorities. Since national well-being in the world of socio-political realities is predicated upon its security and strength, evidences show that a viable national marine is desirable. This means that the 376See O.E.C.D., Maritime Transport, Paris re 1966. Also Sturmey, op. cit. 377"The criterion of benefit-cost surplus must be brought . . . in assessing their success or performance." Second National Plan, op. cit., p. 76. 395 third option is preferred. As to the question of the in- fluence of the conferences on the viability of the National Line, opinions are mixed.378 But with particular reference to the National Line the absence of flexibility in the de- cision mechanism of the company is in part a function of its conference membership. The rationalization of services may secure optimal use of total conferences' capacities but will not make for lack of individual lines power of decision in accordance with the demands of the market. Can the National Line operate successfully outside the conference membership? It is possible but fraught with dangers of the conferences' retaliations on the interna- tional ports and markets. The case of Okafor Line which was blacklisted all over European ports and refused port services in foreign ports was attributed to the concerted 379 True indeed, foreign efforts of conference activities. dock labor, foreign ports authorities, foreign shippers, and foreign conferences have been known to exert concerted . 378For advantages and disadvantages of conferences see Charlotte Leubuscher, op. cit., Chapter VI and for favorable View of Conference see Sir Osboune Mance, Inter- national Sea Transport, Oxford University Press, 1945, p. 96. 379Memorandum from Okafor Line, Lagos. 396 efforts to ruin a nonconference competitor. This can be disastrous for the National Line and may be injurious for the Nigerian trade, if in taking a policy decision, the National Line was suddenly made to carry all of Nigeria's exports. The Nigerian government had recognized the dangers of such extreme measures.380 What had become the practice in most developing nations is to allow their na- tional lines to operate within conferences while strong bargaining powers are used to increase the share of the national trade carried by such national lines.381 “ Their successes should prove to be examples for Nigeria. Thus, it is proved that the ownership of the Nigerian Na- tional Line is a national necessity and the operation of the firm within shipping conferences a sound policy. What is needed to make its operations more effective and re- warding calls for a program of actions which involve both the shipping line and the national government. 380National Economic Council's Memorandum, 1955- 3811ndia, Brazil, Ivory Coast: Pakistan, and Ceylon. 397 Programs and Strategies for the Future To sustain a healthy shipping market in Nigeria and enhance the productivity and returns of the Nigerian Na- tional Shipping Line, a series of actions are needed both at the shipping company level and at the Federal Nigeria Government level. Both types of actions must be complemen- tary to ensure desired objectives. Government Programs and Strategies Government strategies and shipping programs382 are needed to (l) facilitate the conduct of our international trade, (2) provide a favorable climate for exporters and im- porters, (3) protect shipping services on which trade depends, 382This summary of regulatory measures objectives was made by Harry x. Kelly, Chairman of the Executive Com- mittee, Mississippi Shipping Company. See Merchant Marine Policy, Cornell Maritime Press, Inc., Maryland, 1963, p. 186. 398 (4) protect national welfare and maintain national defense, and (5) enhance the effectiveness of the Nigerian National Shipping Line. Such programs are divided into those directly touching (a) the Nigerian National Shipping Line, (b) the Nigerian Shipping Market, (c) other Nigerian private lines, (d) for- eign governments and foreign markets, and (e) miscellaneous matters. National Shipping Policy Objectives Objective Functions Government assistance to Nigerian shipping lines (apart from any ownership) is mostly motivated by (l) amelioration of the inherent problems of the Nigerian indigenous shipping lines in interna- tional markets over which they have little or no effective controls. 399 (2) the desire to offset the peculiar conditions of the national economy which are outside of the shipping sector383 (3) unfair "shipping nationalism" policies of foreign governments and international shipping cartels which make it difficult, if not impossible, for Nigerian shipping lines to operate on competitive bases with foreign national merchant marines. Constraints The major constraints to effective governmental activities in the area of rendering assistances to the indi: genous shipping lines are (1) technical and technological384 (2) financial, particularly in foreign exchange terms 383O.E.C.D., Maritime Transport, op. cit. 384Technical skills are currently acquired outside of Nigeria and the costs include foreign exchange, time, and attitudes. 400 (3) SOCiO-POlitical (internal and external)385 (4) market factors386 Shipping policies involve externalities--social costs and benefits which often defy calculation or quan- tification. This is an aspect which most planners overlook in assessing the needs and costs as well as the returns of shipping. Moreover, the time function of costs and returns are made more difficult of quantification since the time lag between acquisition of shipping assets--vessels, trained manpower, etc. and when positive returns are realized on the investments make the work of economic planners difficult. Again, the question of risks and un- certainties in shipping programs and budgeting reduces the chances of accurate estimation of costs and benefits.387 These must be kept in proper perspectives when assessing the programs set hereunder. 385The reactions of foreign governments to actions taken in Nigeria to influence the shipping market for the benefit of Nigerian indigenous shipping firms. 386Most costs are endogenously determined and there is little the government can do. 387For case studies of the program budgeting and benefit cost analysis, see Hanley H. Hinrichs, and Graeme M. Taylor, Cases, Text and Readings, Goodyear Publishing Com- pany, California, 1969. 401 National Policy Programs The current forms indicate that the Nigerian Na- tional Shipping Line's share of the market is minimal: (1) about 5-7 percent of the conferences' gross regis- (2) (3) (4) (5) tered tons. under 2 percent of all total number of ships enter- ing the Nigerian ports annually. under 12 percent of dead weight tonnage of the two conferences--UKWAL and COWAC. about 7-9 percent of total dead weight tonnage of the Nigerian market. negative post-depreciation net revenues and returns on investments (cumulative and otherwise). National Shipping Targets Estimated export-import trade of Nigeria by 1990 is 9.74 million long tons388 of cargo (excluding mineral oil). 388NEDECO, Op. cit. 402 2. Estimated crude petroleum production of 100,000,000 barrels per month or 1,200 million barrels per annum by 1985-1990 (assuming increased drilling at current rates389 and the exploitation of new fields). 3. Shipping tonnage required to ensure (a) 45-50 percent control of carriage of Nigeria's external general cargo trade by 1990. (b) 100 percent of inland waterways and coastal shipping by 1985.390 (c) 40-45 percent of West African coastal trade by 1990. (d) 25 percent carriage of petroleum crudes and refined products by 1985. Must be at least 2.5 million gross registered tons of vessels by 1996 (assuming a twenty-year plan between 1976 and 1996). 389Central Bank of Nigeria Monthly Reports. 390This involves cabotage principles. See Central Bank of Nigeria, Notes on the Application of Cabotage Principles, 1969. 403 4. Manpower training and skill acquisition should in- volve the establishment of a West African Maritime School.391 5. Development of repair facilities and maritime services institution which may be able to give shipping the required forward and backward linkages. Specific Programs of the Government on the Nigerian National Shipping Line 1. Provision of flexibility in the company's decision and commercial mechanism (a) Permission of sale of a majority of the govern- ment's shares to the private sector (particu- larly Nigerian investors). This will ensure more emphasis on the commercial than the "civil service" functions. 391From unpublished paper presenting Nigeria's shipping development plans up to 1980 by Federal Ministry of Transport. 404 (b) Reduction of some Ministerial Controls392 in administrative matters by removal of more government appointed directors and replacing them with actual privately appointed directors based on private investors' holdings in the company. (c) Increasing liability of the company's manage- ment for Operational results by more effective roles in decision making touching investments, directions of operations, staff apppointment, promotions, and rewards.393 2. Provision of aids for capital investment and opera- tional strength (a) Provision of financial and fiscal aid394 to the Nigerian National Shipping Line 392Second Development Plan, op. cit. 3931bid. 394 See O.E.C.D., Maritime Transport, Financial Aid and Fiscal Relief to Shipping in OECD countries (1966). (i) (ii) (iii) (iV) (V) (vi) (vii) (viii) 405 grants, loans, subsidies and allowances for acquisition of vessels (mostly new vessels). guaranteed credits, mortgages of other vessels, etc. as collaterals for new loans to acquire new vessels. guaranteed loans from internal and interna- tional institutions for acquisition of vessels and provision of working capitals. deferred tax programs to enable the company to amass tax-free reserves. grants and allowances for manpower planning and skill development grant of special depreciation allowances to help build up of sound equities interest subsidies to help the company meet liabilities on loans and credits investment allowances to stimulate expan- sion of investments 406 3. Other Enabling Actions (a) Increasing cargo patronage and support for the National Line (b) Government weight behind the line to increase the frequency and powers of negotiations for increased allocations of cargo quotas from the conferences‘ p0013395 and freight rates. On the Nigerian Shipping Market Some regulatory measures are needed to check what 396 Harry X. Kelly calls "anti-competitive practices" of the shipping lines. Such regulatory measures397 should include: (1) prohibition of such restrictive practices398 as (a) deferred rebate system 395T. K. Sarangan, op. cit., for the Indian exper- ience. 396Ibid. 397 WOuld be most meaningful and effective if taken as intergovernmental actions of governments of the west Africa trading region. 398Apparently only the U.S.A. and South Africa have taken firm actions on the deferred rebate menace. See Leubuscher, op. cit. (2) (3) 407 (b) exclusive patronage contracts (c) port discriminations (d) retaliations against shippers who refuse to use a particular line399 (e) conferences' use of fighting ships (f) rate and/or space discriminations against shippers. filing of all freight tariffs with the Ministry of Transport or some other Federal Agency?00 This will remove the veil of secrecy which has fostered the distrust of the lines by shippers. Enforcement of open conference membership so as to ”keep the trade open" to newcomers.401 399Harry x. Kelley, op. cit. 400These can be published where appropriate. 401O.E.C.D., op. cit. 408 (4) Strengthening of shippers' negotiating powers by encouraging and supporting the establishment of National Shippers' Council.402 On Other Private Nigerian Lines403 Capital Investments and Operations (1) Provision of interest free or low interest loans directly or guarantees on such loans from finan- cial institutions. (2) Grants, subsidies and allowances to deserving 404 private lines for purchase of vessels. (3) Grants, allowances, subsidies, loans, credit guarantees, etc. for operational or expansion purposes; organization and management as well as sound economic performance. 402UNCTAD, Consultation in Shipping, op. cit. 403This should include lines wholly or partially Nigerian owned and operating from Nigeria. 404These lines should have sufficient capital in- vestment, technical knowhow, efficient organization and management and sound economic performance. See criteria set out by Shipping Committee of the Ministry of Trans- port and the Nigerian Produce Marketing Company. (4) (5) (6) (7) (8) 409 Direct cargo patronage by the Nigerian Produce Marketing Company and other agencies. Encouragement of indigenouSzlines fi?anced by private investments through the money market. This should replace the current family enterprises in the sector. Family enterprises generally col- lapse after the original director must have either died or become incapacitated. Amalgamation of existing mushroom shipping lines should be encour- aged. Private Nigerian shipping lines should be encour- aged to undertake inland water and coastal ship- ping primarily before venturing eventually into ocean shipping. Most small scale private Nigerian shipping lines should be encouraged to become customs agencies, forwarding and clearing agencies. Government should help the private lines to join the shipping conferences operating between Nigeria and other countries on the nation's major trade 410 routes.405 The hardened close-shop methods of the shipping cartels hardly can allow private national shipping lines to gain entry into their caucuses except with the strong support of the governments. This was India's experience, it was Ghana's and Nigeria's public line, it must be the same for the Nigerian private lines. 405T. K. Sarangan, op. cit., noted that it had been, the policy of the government of India to enCOurage Indian shipping lines to negotiate admission to shipping confer- ences and, where necessary, to lend support at the govern- ment level. The issue of membership of conferences by private national lines is aptly put by Leubushcer, op. cit” p. 92. The fact that the West African government con— trolled 1ines are members of the conference will make it easier for other members to put pressure on these lines (and on the West Af- rican governments) to discourage private ven- tures by West Africans into ocean shipping . . . the lines put an official seal on the conference by becoming members and thus sub- scribing to its policies. Earlier she had noted that: these lines may be forced to take up an un- friendly attitude towards an outsider whom the conference decides to fight, even if the challenge is of African origin. Compare these statements with the opinions on private indigenous lines expressed by the N.N.S.L. to the govern- ment (correspondence) the present private indigenous shipping com! panies which by imponderable hazards may not 411 On Foreign Governments and Markets (1) The Nigerian government should maintain some trade agreements with foreign governments which may in- corporate provisions for flag preferences or cargo quota allocations on the basis of encouraging foreign exchange earnings. (2) Government's direct negotiations or support for such negotiations should help the availability of foreign exchange for acquisition of vessels or equipments or training for the Nigerian nationals. (3) International trade channels can be adopted to ensure favorable terms for the Nigerian acquisition of tonnages from the charter or construction markets. (4) Diplomatic channels can be used to reduce the de- bilitating effects of narrow national shipping policies abroad. make good in the shipping liner business . . . it is hardly rewarding for the government to encourage a proliferation of weak and ineffec- tive indigenous shipping companies. What a service to the conference! 412 On Miscellaneous Issues (1) Actions should be taken to improve port services and the efficiency of the stevedores.406 The increase in the port service efficiency will be reflected in improved turn-round of ships.407 The development of ports in point of time, has to pre- cede and not follow or even be simultaneous with trade which ports are called upon to handle.408 (2) Facilitation of clearing formalities and procedures has got to help entry and departure of ships. Re- duction of formalities to a minimmm to help com- merce is definitely essential. Joint agreements between national shippers' councils, liner confer- ences and national or regional (west African) custom's councils can smooth out procedures. Such 406The recommendations made by A. A. Ayida, pp, cit., are relevant. 407The NEDECO Report (subject to certain reserva- tions) set out development plans for effective port service. See also, Economist Intelligence Unit, Financing and Invi- sibles (U.N.), p. 259. 408Liner Shipping in India's Overseas Trade, p. 11. 413 coordination of activities and procedures on in- formation and vessels' movements can reduce delays to ships and personnel in the ports.409 (3) Improvements to inland transportation is one way of increasing the productivity of shipping. Studies410 have shown that greater costs of exports or imports are due to internal transportation prob- lems. The coordination of traffic to and from the ports by the Nigerian Ports Authority, Railway Cor- poration and Road Hauliers as well as shippers and marketing Boards will improve shipping productivity through reducing costs. (4) Adequate storage facilities and warehousing for both export and import cargoes must be a prime con- cern of the Nigerian Ports Authority. From an analysis in Tables 44 and 45, it was discovered that over 70 percent of imports, about 56 percent 409For Convention on Facilities of International Maritime Traffic, 1965, see Ireland's Revenue Commissionerks Notice No. 1097 of March 1969 (and E645/3907/68). 410Couper on inland and ocean shipping in the Fiji Achipelago, Indonesia, Malaysia, and the Philippines, op. cit. 414 of exports or about 60 percent of total trade re- quired storages and warehouses. In the absence of large scale containerization of cargoes, more storages at port areas are needed and would still be needed if the port area congestions by trucks and lorries are to be eliminated, or at least, re- duced. (5) Any scheme for expansion in shipping would be in- complete and unable to yield its full benefits in foreign exchange unless a steady flow of qualified personnel to man the vessels is ensured. Training institutions must be set up to coordinate and direct the manpower development. Such training would include navigation engineering, deck and engine room ratings and other skills. In this area, the recommendations of Kemperer411 for a Nautical Training School for West Africa is com- mended. Such a school would be comprehensive and run at full capacity to Optimize use of all 411E. Kemperer, Expert Under the Technical Coopera- tion Programme of the IMCO: The Feasibility and Practica- bility of Establishing a Nautical School in Nigeria, Min- istry of Transport, Lagos, 1968. (6) 415 equipments and staff. Jointly owned and run by west African countries, enrolments are expected to be high to meet the needs of inland, coastal, and ocean shipping for West African nations. Establishment of dock service and ship repair facilities at appropriate points. National Shipping Line's Programs and Strategies The internally planned and executed plans of the Nigerian National Shipping Line are intended to: (1) (2) (3) facilitate increasing investments with a view to expanding the share of the market and probably improving the earnings picture, increasing effectiveness in matters of freight rates operating in the market, improving the net foreign exchange acquisitions from the trade, 416 (4).securing better market possibilities overseas for Nigerian export products. Such programs would include: (1) vessel acquisition (2) staff training and skill improvement (3) expansion of services to more routes and membership of new conferences. Specific Programs vessels--Investments In Of the estimated 2.5 million gross registered vessels needed by 1996, the Nigerian National Shipping Line should have some 1.0 to 1.5 million tons (gross regis- tered). This should be broken 1nto:‘12 (1) dry cargo vessels--break bulk conventionals 412Enumerated by Captain H. A. Agate, Government Inspector of Shipping, "Nigeria's Shipping Development Plans to 1980." Unpublished document, Lagos, 1968. 417 (2) CBC type vessels for oil, bulk ore-~capable of oil or dry bulk, (3) the lash type of vessels for lighterated container- ization processes, (4) the hinged deck vessels for general cargo, bulk cargo, motor vehicles, etc.--the hinging depending on decks, (5) the tankers, (6) container ships, The distribution of number and tonnage among the different types of vessels should be subject to further detailed study of the market and its requirements. But on the basis of the calculations of the Government Inspector of Ship- 13 the National Shipping Line for its share of the pins4 1.5 million gross registered tons would invest a total of over N80 million in twenty years' time, broken into: 413Estimates were above N140 million nationally for vessel needs. 418 (1) Dry cargo vessels N25 million (2) Oil tankers N40 million (3) Containerised vessels N15 million . Total N80 million Financing will be based on the Berne Conventional 20 per- cent deposit and ten-year amortizations for new ships. The emphasis here would be on the purchase of new ships414 or where there are financial problems, the five-year-old or under five-year-old second-hand vessels. The plan for fleet expansion should follow a definite course which ac- cords with (a) annual targets of share of trade expected to be carried, and (b) categories of vessels needed for the different sectors of the national trade within the target plan. 414Computerized economic life of a new vessel is 17 years trouble free. See Agate, op. cit. 419 Staff Recruitment, Training and Rewards The National Shipping Line should be able to give adequate training to its future staff on the basis of the Nautical School developed out if the IMCO expert's report. Recruitment, training, and rewards should be based on the needs of the services. The size of such staff will be determined by the company's management personnel. Specific National Investment Targets Supervised or Aided by the Government Vessels415 Based on the needs of the national trade and determined by the market trends and conditions, the esti- mates are: 2.5 million gross registered tons of varied vessel types--N200 million. 415Estimates revised and different from Agate's calculations. 420 Port Developments Based on the recommendations of NEDECO416 (with specific amendments) a total investment may be around NZSO-million. Establishment of the Nautical School417 Based on the recommendations of the IMCO expert, the West African Nautical School (bi-lingual) to be estab- lished in Nigeria would involve costs of nearly N30 million with annual recurrent costs of N5 million. Ship Repair Yard and Dry Docking Services This can be the enlargement of Wilmot Point WOrk- shOp for the graving dock facilities or some new site apprOpriately selected by the government: funding and 416NEDECO recommendations included in land trans- portation--rai1, road, water, etc. : 417WOu1d be borne in specified proportions by all participating West African countries. 421 capital could be initially joint government and private Nigerian interests which should eventually be private. Estimated costs of development would be around N20 million at full capacity. Total estimates of all the investments within the twenty years should be N500 million between 1976 and 1996. The breakdown of the program is as per Tables 83 and 84. Notes on the 1976-1985 Comprehensive Development Investments This set of projects covering fleet expansion, staff developments, port development, railroad extension, provision of new inalnd roads or expansion of old ones, as well as the preliminary work on the International Nau- tical School are phased into two five-year periods. Between 1976 and 1985, a total investment of N310 million on the projects are envisaged. The idea is to assist shipping by (a) Relieving congestions likely to occur due to over concentration of activity in Lagos and Port Harcourt, 422 m 83.—mulled Malysisof W him an! bland latter's, 1976-80 and 1901-65. Perl I “in lutiaal Private Nigxisn man Puts Nigu'ian min-y numerical Ministries of Ms aim Lina lhimim Audra-ity Carpet-stirs: W1 Banal ani Rampart 1976-80 Float mien Fleet mansion Port halts-N: am an! initial 1. Window Nu inlaid roads Phase I - ( ) (U4uillicnm (l/B-illimau") 1. I mmflarail “Ex”:- I] In Mel- Buff W Staff W 2. Calabar rand sit-aim m“ a" amt: std drill mai- std drill sani- 3. mm: 1. W tical Whom“, surveys siticn (ms tition. 4. mi 2. Imam-aux for . Na: 1.: Nav' c aids I I“ II . actual. . igatioral try the): at! ur- c. MUN] york mu 2' mun Pl“ pair ty. am Mails of i. Nigu' River school constnzr ii. Buns River tion, earns-nit. iii. Cross Riva staff. sec. an iv. Delta Creeks bsundu'tahsn. a. “It'd-143905 .b- Narri-PJI. 0‘ N30 sillicn N10 million W million N15 sillicn was sillion N35 sillicn N10 1981-85 Further fleet Fur-rm fleet Port analog-13t— Won work possible W No: inlur! roads (Phase I!) mien (1/4 mics: (U4 various dry cbck a: tion, m arr! Provision of mvj tions 9a 1 million as) sillicn can who... L m 1 1, mm at: 0‘ 9" aids, M11190! annals MW Staffdwalomt a.mm I IN “Wmfml' and skill aoqui- am man acqui- 3. up: wraul- ‘ idea on the major inland sition (overseas aition (mseas in; of existing “t8 uansport Mm- iratimtions). institutions). old rail cysts 0‘ N35 sillim 5 N15 ‘llion N10 million I I “ N3 sillion N20 million N30 sillicn I: mm W . costs $5 sillim NSO sinks: I85 sillicn N65 sillion N25 sillicn N20 million N65li11im NSOlillim 85 lim linion N25ni11im NZOmillicn mm m 0 O N O m "- 6.5 I I ml Average Gross mary N16.5 sillicn N 6.0 million N143 million 1114.5 nillim N 1.1 sillion N 1.3 million Irma First Othsr mots N 6.1 Ilium N 0.3 lillim N 3.0 sillicn N 5.0 million N 0.9 sillion N 0.9 million ””1 1 N 5.0 llillim N 1.6 million N 2.9 million N 2.8 million N 1.9 million N 2.0 million I N 6.5 li11ion N 2.2 nillim N 4.3 nillim N 2.9 million N 4.4 million N 3.9 million Actual ml , . M km N 4.6 nillim N 1.3 Iillim N 4.7 11111111 N 3.1 million N 0.2 million N 0.3 million unfit-(hot litics: a. by individual l25‘ 1 \ MI I 119‘ 133‘ 122! 104‘ 06 b. w mm imestnents (122“ 423 .«RH 68E 38365 mi Eon .muofimz now 888 98959? do moans? .UumfiQB .o «330 8a E8953 use . 3808083? 3a§§+§mfioogo .mofimfiflflmtfimgfiflofioflfifloufiafihuufio .Hnmmuwmugoauuwmmauomfi com Hg mooflfimn gag newshound Humour 893% 53% 5g 8338855 m3 ~.v o.~ m.m mend cma omm gum—chow n. cw WEN—cg 98.3w (Home 05.35.33 n can 3.835 5 3g 1:23: a 18:12 a .839 a .5 5 an. . Ag: 5 . . 3on5 g B 350.38 3.55 gm A335. 3555 NEH—509m 3on5 083nm Omani moans...” sumo nauseous u." . 3H3 Hos—Ea g can 3 Bag #80: Locum H930 uofio uoz 3% H82. use 3.89 E g .oofluonfl 385% «5 no new»?! swoon—3.3 59s 424 (b) Cutting down the overall costs of imports and exports by provision of better inland evacuation facilities, (c) Connecting all possible production centres and communities by the most available cheaper means to the ports and hence reducing costs of exports and imports handling and cost of transportation to the producers and consumers. Cost-Benefit Analysis 1976-80.--Not much may be realized here due to lumpiness of capital investment and the problems of gesta- tion. It is advisable to carry the project forward to 1980-85. l980-85.--At the end of the second five-year period it should be possible to trace significant benefits accru- ing_tO the economy. (a) More effective carriage of national trady by indi- genous ships culminating in increased transport and freight earnings. 425 (b) Increased acquisition of marine skills through improved quality of Nigerian seamen's performance. (c) Expansion of the economy with reduction of traffic bottlenecks which currently plague both internal and external transportation and trade. (d) Improvements in incomes and government revenues from direct and indirect sources should be demon- strated. Assessment of Investment by 1985 At the end of 1985, a formal comprehensive invest- ment appraisal should be undertaken for the investments to justify the national economic and strategic considerations. The quantified net benefits should be positive, i.e., total costs (monetary and social) should fall below the total incomes (including quantified values of social benefits). Only on such a situation would it be justified to continue the second ten-year investment plans under the overall 1976-1996 program. ,‘.1 426 A cost-benefit analysis on the formula of Table 84 indicates that the benefit ratio would be most approxi- mately 122 percent of the costs. Even if the ratios are below this estimate but are above 100 percent, the next ten year investment projects should be continued. This is partly the effects of gestations in lumpy investment and' time lag between investments and effective returns. Benefit-Cost Estimates of the Investment: 1976-1996 The benefits can be calculated on the basis of: (1) net savings in foreign exchange from Nigeria's (shipping operations, (2) net incomes or profits in Nigerian currency from shipping, ports, dry docking services, and skill acquisition activities, (3) trade expansion and earnings, (4) government revenues and taxes, and (5) spill-over effects of the investments. 427 The overall costs (capital and recurrent) would tend to be averaged out. The real benefits would be the annual cash flows and values of other benefits quantified for the purpose. Thé benefit-cost ratio will relate the annual fixed and recurrent costs with annual cash flows and quantified benefits (Table 84). On the estimates made, the overall benefit-cost ratio on the four investment areas turned out to be 143 percent or an excess of 43 percent. Since costs have not bee precisely assessed nor are market prices of services and incomes properly evaluated, it turns out that the benefits are apparently depressed. On higher levels of computations, the benefits-costs ratios ought to have been higher. Even the breakdown by sectors of investments would show positive benefits-costs ratios. Shipping in particular seems to have maintained identical ratio with the overall investments. This is because it isnot in a monopolistic position like the Ports investments and when the exigencies of the markets are taken care of, it seems more prudent to depress the anticipated incomes. From all calculations, nonetheless, investments in shipping expansion seem worth- while. 428 Conclusion National merchant marines have been justified on ' the score of national prestige, defense, strategic and se- curity reasons apart from rendering services which may be uneconomic by monetary results. Consequent on this, national governments have taken steps to boost their na- tional merchant marines by all types of supports, prefer- ences, and subsidization devices. In all the countries engaged in maritime enterprises, government support had never been denied the shipping companies. Based on the analysis, it was discovered that the one preferred option for Nigeria is to assist the Nigerian. National Shipping Line to continue its operations. This means not mere cargo support for the National Line but also the manipulation of those variables which can influence the markets and gain favorable outcome for the National Line. Since the manipulation of these variables was found to be mandatory to ensure the objectives of a virile national merchant navy and, especially, the National Shipping Line with respect to fleet expansion and modernization, a pro- gram of activities has been drawn up. Such government- patronized investments will cover port development, inland 429 transportation improvement, naval skill acquisition by establishing a nautical school, fleet expansion, and shipping dock yard facilities. On balance of costs against benefits the investments were found justifiable. APPENDICES 430 APPDDIXI SHIPPDB LINE W NICERIA Shipping Line Gumtry of Omferema, etc. Origin 1.31adc8tarLim1md. Giana m.m,m 2. Elder mar Lira Ltd. U.K. mom 3. Guinea Gulf Line Ltd. (John Pblt) U.K. mom, me 4. M Lina (Nigeria) Ltd. Ibrway Independent 5. Delta Stemahip Lines Inc. U.S.A. AFN-‘C 6. iblland Neat Africa Line N.V. Holland mom 7. Nigeria Natioral Lina Ltd. Nigeria mm. INC 8. Palm Lina Ltd. (U.A.C.) U.K. mom, IWPC 9. Scandinavian West Africa Line Sueden wow 10 Bank [in U.K. Indepenient ll Barber West Africa Lina Norway AWAFC 12 Brodopas Neat Africa Line Yugoslavia Independent 13 mam ”:33 9'” Frame mm, mm. comm: 1‘ mm 9: mgdg‘mm France m, oourua 15 F. Italo Croce Line Italy IWAC 16 Parre1 Lines, Inc. U.S.A. mm 17 Guiliana West Africa Line Italy INAC 18 Gold Star Line Ltd. Israel mac l9 Hanaeatischer Afrika Dienat heat Germany AWAFC 20 mm. Line Japan mac warmers.” m» we 22 Naersk Line Demark mm, Fm 23 Mitsui, and Osaka, Schoesn Keisha Line (o.s.x.) “9““ was 24 Nautilm Line Switzerland m 25 Port Lina Ltd. U.K. Independent" 26 Elm Star Lira Ltd. U.K. W9 27 Shaw Savill and Albion Co. Ltd. U.K. Irriependent' 28 New Sealand Shipping Lina U.K. Independent" 29 Mal Inter Ocean Line Holland ram 30 Scindia Steam Navigtion 0). Ltd. India IWAC 31 Seven Stars (Africa) Lina (2.1m) Israel AMI-T: 32 Societe Navale de l'QJeat France OOHNAU 33 Societe Neale Dalmas Vialjeux France (IDLINAU 3‘ fi°§$fuamum France (mm 35 South American West Africa Line Holland Independent 36 United Arab Marine Oo'rpany Egypt Independent 37 United West Africa Service Poland Independent 38 N. Sidarne East Germany Independent 'Serves Amtralia, New Zealand. Samoa: Ministry of Information, lagoa, 1964. Notes: RUIN-Neat African Lina Conference—serves ma Limited Kingdon and Europe. MFG—The Amrican West African Height miferencs serves U.S. Atlantic, Gulf Ports, Canadian, Atlantic and St. Iaurence Sea ports. Farm—Far East-vest African Conference is a very loose rats sgraauant association serving the Far East and West Africa. lino-Italian West African Omference often referred to as the Mediter- ranean Conference serves Mediterraraan and West African ports. mam conference misting of French shipping lines mainly Fruah speaking countries in Africa but stopping in Nigeria a well. Foreifl: 431 APPMIX IIA LIST (F SHIPPDB GNPANIES IN NIGERIA'S SHIPPIM'S TRADE A. ASSEIA'IES OF THE NIGERIAN NATICNAL SHIPPIM; LINE (a) (b) (C) (d) (e) (f) (g) (h) (i) (j) (k) (1) Woermann-Line Hatrburg Holland West Africa LIJN N.V. Amsterdam Elder Derpster Lines Ltd. Liverpool Palm Line Ltd. London Black Star Line Accra Guinea Gulf Line Ltd. Liverpool The Scandinavian West Africa Line Gothenburg Oanpagnie Martina Des Chargeurs Reunis Paris Hoegh Lines, 0130 Carpagnie De Navigation Denis Preres Paris Societe Navale de L'anst, Paris Societe Navale Delmas-Vieljeux, Paris B. CHEER FOREIQ‘I 1. 2. Scan Unlafrica Scan Polish Scandinavian Shipping Agencies, Ltd. MISR Mitsui OSK (Palm Line of Nigeria) K.K.K. Line (Palm Line Of Nigeria) Farrell Lines ZIN (W.A.) Lira C . INDIGENGJS 1. 2. Maritime Associates Nigerian Maritime Services Equitorial Lines Faola Line Nigeria Trans-Atlantic Line limited Eurafrica line New Africa Line CaIpiled by Central Bank of Nigeria Research Departrent. 432 WI)! IIB PARI‘ICUIAIB or INDIGZNIB SHIPPING LINE Registration Date of Indigenous Shipping Ooupanies“ Naniral Share Mater Registration Capital (a) 5379 21/6/67 Anansa Lines Ltd. 5,000 4812 16/3/66 African Shipping Agencies Ltd. 10,000 4252 5/4/65 Ado Ibrahim : Co., Ltd. 1,000 5082 8/10/66 Atlantic Global Shipping Agencies, Ltd. 100 5515 1962 Bakado Line Ltd. n.a. 4506 3/9/65 Eagle Line Limited 40,000 5075 3/10/66 Equitorial Line Ltd. 3,000 5416 20/7/67 Famert Produce and Shipping Line Ltd. 3,000 5485 9/10/67 Faola Line Limited 12,000 3546 21/9/63 Ibru Sea Foods Limited 5,000 5207 30/1/67 International Shipping Line Ltd. 500 5430 9/8/67 Interlink Nigeria Linuted 2,500 5496 20/10/67 more Shipping Agency Ltd. 10,000 5502 25/10/67 Ieragu Line Limited 10,000 5487 12/10/67 Maritime Associates (International) Ltd. 1,000 3917 29/7/64 Nigeria International Shipping Agencies Ltd. “5,000 1014 17/11/52 Nigerian Shipping and Trading (1)., Ltd. 250,000 3112 15/8/62 Nigerian baritine Services Ltd. 1,000 1959“ Nigerian National Shipping Line Ltd. 211. 5572 11/1/68 Nigeria Trans Atlantic Line Ltd. 1,000 4361 7/6/65 Northern Nigerian Shipping Agencies 500 5532 28/11/67 Oceanic Shipping Agercies Ltd. 5,000 5274 6/4/67 Ocean Lines Limited 20,000 5355 31/5/67 Piblicolam Agencies Ltd. 1,000 5439 19/8/67 Progressive Napping Agencies Ltd. 1,000 5436 1967 Sahara Lion Shipping Agarcies, Ltd. 1,000 3937 12/8/64 Sm Africa Shipping 00., Ltd. 10,000 4072 2/11/64 Shipping Travels (Nigeria) Ltd. 200 2973 7/5/62 The Quayside Agents Ltd. 2,000 5224 10/2/67 universal Shipping Agencies 1,000 5534 1/12/67 union Line Ltd. 3,000 1745 4/9/58 West Africa Lina Ltd. 50, 000 *As on the Register of Buinsss Name by 1967. "none carparg Source: Ministry of Trade, Lagos. 433 AHHBIHXIIIC SHIPPING STAITSHTCS mwmngeofweeelemteredudclnredattheporuofnigeriafmlno. Arrived Departed British Enreign wotal British Foreign motel Year W W or vessels of vessels Vessels Tens vessels Inns Entered vessels Ions vessels mans Entered 1910 340 467,371 217 338,644 806,015 329 448,892 216 343,828 792,720 1911 349 476,175 202 346,544 822,719 325 439,663 201 347,596 787,259 1912 312 470,196 221 358,842 829,039 307 455,415 235 371,361 826,779 1913 310 530,876 253 351,010 881,986 300 510,910 251 342,239 853,150 1914 293 504,724 197 226,168 730,892 272 467,074 208 225,675 692,749 1915 266 530,882 70 30,889 561,771 272 537,148 69 30,444 567,592 1916 250 490,957 79 32,258 523,215 252 486,000 80 33,167 519,167 1917 241 447,181 86 26,969 474,150 242 436,267 86 28,742 465,009 1918 222 395,506, 64 13,640 409,146 218 381,742 67 15,093 396,835 1919 319 490,887 76 44,655 535,542 319 495,844 76 40,762 536,606 1920 296 604,057 111 118,051 722,108 296 589,237 110 112,877 702,114 1921 277 571,571 197 263,868 835,439 270 556,729 198 265,626 822,355 1922 275 565,556 260 339,958 905,514 272 572,613 243 303,164 875,777 1923 321 687,411 236 366,432 1,053,843 318 669,303 234 363,728 1,033,039 1924 307 668,410 217 433,076 1,101,486 310 675,689 212 416,730 1,092,419 1925 320 813,818 210 521,907 1,335,725 317 808,861 204 510,415 1,319,276 1926 339 879,405 277 658,777 1,538,182 350 908,012 274 649,921 1,557,933 1927 394 960,354 351 740,426 1,700,780 387 944,160 345 722,372 1,666,532 1928 480 1,000,403 549 969,751 1,970,154 478 975,696 32 926,000 1,701,696 1929 518 1,036,726 556 981,965 2,018,691 505 1,038,308 551 961,802 2,000,110 1930 512 1,014,188 516 932,800 1,946,988 504 1,006,703 516 930,470 1,937,173 1931 407 783,708 452 868,364 1,652,072 413 791,352 448 863,028 1,654,380 1932 365 721,859 376 694,925 1,416,784 372 733,077 380 708,614 1,441,691 1933 368 722,168 411 747,135 1,469,303 362 721,481 417 759,643 1,481,124 1934 388 795,549 527 930,219 1,725,768 381 781,389 534 946,372 1,727,761 In 1913, 154 British and 225 Phreign steamers,‘uith a total tonnage of 530,737 tons, entered at Lagos. In 1931, 276 British and 257 Pbreign steamers with a total tonnage of 1,114,716 tons, entered at the sale port. From 1925 inclusive the figures include the Cemeroons under British Mandate. Source: Nigeria Handbook, Chief Secretary's Office, Lagos, various issues. 434 APPENDIX III FEATURES G‘ INDIGMB SHIPPDG LINES 1967-1968 (a) Year of Registration Year of Registration Distribution of Oonpanim Before 1960 2 1960 - 1961 - 1962 2 1963 1 1964 3 1965 3 1966 3 1967 16 Total 30 Average Per Year 3 (b) Naninal Share Capital Nominal Share Capital Distribution of Cbnpenies 5 100-5 500 4 B SOl—b 1,000 8 L 1,001—5 5,000 9 L 5,001-i10,000 6 £d0,001-£20,000 2 CNer £20,000 2 (c) Office Acoamodation Distribution No. of Total No. of RCKHEi CImrxmxies of RDoms One rtxrn 2 2 Two rooms 8 16 Three tonne 6 18 Fbur teams 6 18 Five rocns 2 10 Six rtrxns 2 12 Eight rooms 1 8 TEn rooms 1 10 Tuelve [true 1 12 Total 29 106 Average per (xxmruur —- 4 (d) Staff Strength Staff Strength No. of Tbtal (Intenies Staff Strength Under 10 16 69 Fran 10 to 20 5 64 Fixzn 21 to 30 2 55 From 31 no 40 3 105 Ffixrn 41 to 50 2 92 Fran 51 to 60 l 60 Tbtal 29 445 Average per cxntemy - 15 Source: Central Bank of Nigeria Research DeparUnent. 435 MUN mmam 3H) m, 1968 MM '10:- ALL INSJ'FAPCE (WANTS ALL SHIPI DC (341532415 WTICN CF MIG“ mom SIIPPINS ND W mum With effect fro 9th September, 1968, all applimtione for foreign MumforpaymntofShippingandHarineInstmdtm, udeecribed indebdmngemntrolmmlhwinbeamsidetedbytheforeign adage Caxtrol Offloa, Pechral Ministry of Finance, laps, to via:- all such applications should be addressed. 2. this new adainistrative procedure is designed primarily to aansem furthertheoomtzy's foreignedmyeresewesbysavimmsaxy draimmidiocwrintluetuosectors. Appliantianwillbeconsidered along with the following [rincipler (a) Wideneofrealorreasaubledmartermtebemeenme charterers and Ship Gum's/Bruters/Agentez (b) in respect of chartered vessels for export mmdities, not lesstlmwtofthetomldisbmtumderthem Agreement should be paid in local currenw: (c) in respect of Baqntriate Shipping Ompuiies regiemred in Nigeria, applications will be considered on their merits as at present: (d) inreepectofdurtered fishing vessels, foreimachange applimtiom forpayualtofdiarterandotherdtmwillbe anditional mm the Goverment being satisfied that their foreign exdmange earnings arising from their mentions outside Nigeria‘s territorial waters, are pttnptly remitted to Nigeria; applications frm rm-expabriate Nigerian Qiipping (Inpaniee wincmtinircunshipe, willbemideredmtheirnerits, as at present: (f) application for wetness payment in respect of vessels carrying Myriam groutinuts and pain kernel will be given syupathetic comideratim. 3. 'lhe purpose of this saunter-dun is to correct the existing inhalanoe as detailed belon- V (e Peirce-11% of man Shim and Trawler Transfers (a) local Shipping Charter s/stem M (b) Local Trawler Charter Systen 27.2% (c) Nigerian National Su’pping Line 5331 (a) Foreign Shipping 25.2% mm 192-.92 4. It should be appreciated that, (mile Goverment foreign exchange measures have affected all other aspects of the econauy, the two sectors to which referaioe is trade is this releae, have amped the net. 5. Likaaise, the principle governing oaxsideration of amlimticms for remitwms in mmectim with Marine Insurance will be the reucnablenees of the request. 6. ‘lhe Govermt emects to receive the fullest cooperatim from all unearned in ensuring that these measures are successfully carried out. Permnent Secrem. Federal Ministry of Finance, Lupe . 3rd Septmber, 1968 436 APPENDIXV Ref. No. F.12393/102 Federal Ministry of Finance, Private Mail Bag 12591, a- Tinubu Square, Q Lagos. 18th Novenber, 1968. To all Shipping Ooupanies operating in Nigeria. Dear Sir, Suspension of Voyage Charter by Nigerian Shim Oarpanies I amdirectedto infomyouthatwitheffect fmnlsthvenber, 1968, and until further notice, this Ministry will not entertain any application for foreign exchange from any shipping carpany in Nigeria in respect of vessels obtained from overseas shipowners/brokers/agents on voyage charter unless it can be detonstrated that such application are in the national interest. For those vessels which the whistry's clearance hadalreadybeengiventobe loadedwithNigerianproduce, due consideration will continue to be given to applications received inconnectionwithpaymentof charter fees andother dishirsements in respect thereof. 'l‘heMinistry willalsocontimietogivedueconsiderationto applications submitted by Nigerian shipping oarpanies in respect of vesselstobehiredonTineCharterprovidedthetemrofthecharter ismtlessthandxnonthsardtlutthecharterrateoonformsto foreign exchange regulations. Yours faithfully, Exchange Control Officer for: 'Penuanent Secretary 437 APPENDIXVI INIERNNI‘ICI‘EL SHIPPII‘B SERVICES FOR NIGERIA Questionnaires for Shippers, Shippers ' Councils and Chartbers of Oamerce l . Incorporation (a) Name of Oonpany (b) location of head office (c) Year of imorpcration (d) Nationality of incorporation (e) Nationality of najor share holders (f) Major areas of operation 2. Assets, capitalization etc. (a) (b) (C) (d) (e) (f) (9) Fixed capital (estimate) Vbrking capital (estiirate) IIlotal assets 'Ibtal liabilities Net worth Business turnover, 1972 11223 Volune Exmrts 1970 1971 1972 1973 value Inports 'Ibtal Sources of financing— (i) Foreign capital? (ii) local banks? (iii) Nigerian public? (iv) Others? 438 3. Shim services ' (a)Doyoupatroniseanyshig>ingline orhaveymafixed patronage agreenent with a specific line or group of lines? (b) Any reasons for your croioe in (a) above? (c) What privileges are enjoyed by your clnice in (a) above? (d) Does your: shinning line or group have any arranganents for ensuring your continued patronage? (e) If yes, which are they? (1) deferred rebate systan? (ii) contract rate systan? (iii) non-contract rate system? (f) If deferred rebate system . (i) whatisthesizeoftherebate? .‘ (ii) what is the period of defermnt? (9) Do you join a shippers' council or organization? (h) this is this? . (i) Mat is the umber of that organization? (3) Inveyouorywrumberseverrequestedtheabolitimoftm deferred rebate systan? If so, with what result? (k) Forthe shipping lineorconferemewithwhichyouorymir umbersareoonoerned, isthedualrateoontractsystanin operation either exclusively or as an alternative to the de- ferred rebate systan? (1)Areexistingarrangemntsmccessfulinmingyworyour othermatbers' loyaltytotl'xeshippinglinesorgroupof lines? (m) Dothelinesympatrmisegivefirmmdertaldmtoprcvide spaceat alltin'esforloyal (tied) shippers? (n) Ifnot, areyouorotterrrmbersprauptlygivenaocessto engagearyothershippimlinemeremregularlineehave mimediatespace? 4. 5. 439 (0) Do the loyalty agreements cover f.o.b. and f.a.s. shipnents in addition to c.i.f. shipments? (p) Do you find these provisions (if any) inconvenient to your business? (q) What penalties have to your knowledge been imposed on disloyal shippers by your shipping line or group of lines for breach of loyalty agreements? Adequacy of Service (a) Are you generally satisfied with the frequency and standard of (b) (C) (d) (e) (f) (g) (h) (1) service of the lines you patronise? If not, what is the nature of the dissatisfaction you experi- ence? Do shipping lines consult with you or marbers of your organiza- tion on the frequency or rescheduling of services? Where services are inadequate, are you prepared to pay higher rates for better quality of services? Do your shiming lines offer a choice to you between a better service at a higher price? Do you find the shipping agents of your patronised lines help- ful in your activities? In what ways? Are the agencies indigenous? Do you prefer foreign or indigenous agencies in your shipping activities? Why? Freight Rates (a) (b) (C) (d) Do the lines you patronise make tariff books available to you and other shippers? If no, have you asked for it? If yes, do you have practical difficulties in interpreting the tariff books? 7' . What are the criteria for fixing rates which you consider objectionable? 440 (e) Are you and other member shippers always given advance notice of rate changes? (f) Have your objections been over taken into account in the final fixture of rates? (9) Are you generally satisfied with the rate changes when properly apprised of the reasons? (h) Are shippers generally notified- (1) before a decision to change rates is taken? . (ii) between dates of decision and eventual coming into effect of the new rates (iii) none of above? (1) Do you find the rate levels generally eroding your profit margins- (i) seriously?" (ii) moderately? (iii) none at all? (j) Do you discover the notices of general rate changes to be too regular? At what time intervals? (k) Are general cargo rates applied to other camodities by your shipping lines? (1) Do you find this objectionable? General (a) Do you generally experience difficulties in securing adequate shipping space for your shipment purposes- (i) all times of the year? (ii) certain times of the year? (iii) tone at all? (b) Besides shipping problans, which other services do you find inconvenient to your business activities- (i) warelnusing/ storage? (ii) customs clearances? (iii) other? (c) What suggestions do you offer on the above? 441. (d) Which do you find more efficient and suitable to your activities-- (i) Nigerian shipping carpanies? (ii) Foreign shipping lines? (iii) Nigerian shipping agencies? (iv) Foreign shipping agencies? (e) What assessments do you have on the- (i) forwarding/clearing agencies, (ii) road transport agents, (iii) rail transport, with respect to efficiency of your business? (f) wratctherpointsdcymhavecnthegeneralshippingandport operations? 442 APPENDH VII IN'JERJA‘I‘ICNAL SHIPPING SERVICES FOR NICERE Questionnaires for Shiming Ompanies and/ or Shimim Agencies 1 . Incorporation (a) (b) (C) (d) (e) (f) Nan'e of Company Location of head office Year of incorporation Nationality of incorporation Nationality of principal share holders Major areas of operation 2. Assets, cgfitalization etc. 1970 1971 1972 (a) (b) (C) (d) (e) . (f) (g) (h) Fixed capital (estimate) 1973 Working capital (estimate) Total assets All liabilities Net worth Business tunover (last year) gm Volume Value ECPOI‘tS Imports 'Ibtal Gross profit or loss (last year) Source of financingb- (i) Foreign capital? (ii) Local banks? (iii) Nigerian public? (iv) Others? 3. 4. 443 ‘Ibnnage Fleet (ocean going) (a) (b) (C) (d) (e) (f) (9) Fleet strength—(i) No. of ships? (ii) Gross dead weight tons? (iii) Bale capacity? No. owned No. on long-term charter No. of dry cargo ships No. of specialised liquid cargo ships No. of oil tankers Others (unspecified above) Shipping market organization (Business alliggnent) (a) (b) (C) (d) (e) (f) (g) (h) (i) (j) (k) Is Company conference n'errber? Which conference No. of lines in the conference Have all nerrbers equal powers of decision making? If no, how are voting rights determined? What is situation with associate umbers? What criteria are applied in accepting applications of new lines for membership? Have such applications been rejected within last five years? Isconferenceopentoaccqatanceofnavnatbersforrmi? What nachinery is there for conference sclndulirg vessels of manber lines? Any arrangatents for berthing additional ships in peak periods? 444 (1) Has conference restrictions on berthing rights of individual members in relation to—(i) ports of call (ii) number of sailings If so what are they? (m) How are existing shares (if any) in pool arrived at? (n) What penalties are possible for lines not keeping strictly to quota or share of ports/sailings? (o) Is conference considering palletization and containerization in trades served by conference? (p) What are the changes considered necessary to effect these? 5 . Freight Rates (a) How are freight rates charged? (b) If conference manber, have member lines agreed to charge some rates? (o) Are tariff books nede available to shippers in advance of implenentation? (d) If no, any objections to doing so? (e) How are overall new rates determined? (f) Under what circumstances does the line or conference ccnsider general rate changes, necessary? (g) How is conference rate change intention notified to shippers? (h) Are shippers consulted (a) before or (b) after a decision to change rate is arrived at? (i) Are governments of country served notified of rate change in- tentions? 6. 445 (j) Give details of rate changes between 1960-1970. Effective date Size of Increase Reason for increase (k) Under what circmstances is an individual rate in the tariff (1) (m) (n) (C) (p) (a) (b) (C) (6) changes? Are there hearings fran shimers before such- rate changes? Has line or conference any special rates on certain camodities based on quantity and shipnent regularity? Are shippers sugaosed to enter into contract to enjoy such advantages? On what criteria are comrodities selected for such special rebates? Has line or conference any special rates for government cargoes? loyalty arraragerents ms line or conference any special arrangenent to ensure con- tinued patronage of shippers? If deferred rebate systen— (i) what is the size of rebate? (ii) what is the period of rebate? Has line or conference objections to abolishing such deferred rebate system and relying on other loyalty arrangemelts e.g. dual rates? Is the dual rate contract systen in operation eitl'er exclu- sively or as alternative to deferred rebate systen? (e) (f) (g) (h) (i) (j) (k) (1) (m) 446 What is the differential between the freight rate for contract and a non-contract shipper? Are existing arrangements successful in securing the complete loyalty of shippers? It»! does the line or conference detect instances of disloyalty by shippers? Whatare theoptionsopentoa lineor conferenceindealing with suspected disloyal shippers? Do loyalty provisions cover f.o.b. as well as c.i.f. shipments of your shippers? Do shippers corrplain of this provision? Has line or conference given undertaking to provide space re- quested by loyal (tied) shipper on line or conference vessel within a reasonable tine of such request? What is considered reasonable time here? If line or conference is not in a position to provide such space within a reasonable time of request, is shipper given dispensation to accept non-line or non-conference oppor- tunities? 7. Non—Conference Lines (specifically) (a) (b) (C) (d) (e) (f) (g) (h) Why is your line outside the conference? Have you applied. for entry? Whatdwas the result? If unfavourable, what were the reasons? Are there conference practices to which you object? V Which are they? In what ways are they objectionable? ‘ L (that suggestions do you have for rectifying these objectionable practices? ' ' ‘I (b) v 447 General (a) What are the problems your firm encounters in its shiming operations? (b) Which of them are attributable to— (i) port struqure/operations? (ii) stevendoring activities? (iii) customs clearing duties? (iv) others? (0) What advice would you offer to rectify these constraints? (d) Other renarks? 448 APPENDIX VIII A. SUFMARY 5' mm SURVEY OJ SHIPPIM; SERVICE IN NIGERIA Notes 'I‘hesurveycoveredthetaelve stateswithatotalpopulationof 327 regis- tered major shippers (Business Register of 1971) . Also a total of 25 shipping carpanies were included in the survey out of a reasonably large undetermined nunber. The shippers' population was stratified into states and the state sanples derived firm the following fornulae. (l) Forty and over shippers in a state, 10 samples were randanly selected. (2) Between 30 and 39, select 6 samples. (3) Between 20 and 29, select 4 sanples. (4) Below 20, select 3 samples. All told, a total sample of 69 was selected per this distribution. States Total Nunber Samples of Shippers Lagos 47 10 North Central 20 4 Rivers 20 4 South East 9 3 Kwara 10 3 Beme—Plateau 16 3 Western 49 10 Kano 40 10 East Central 62 10 North Western 9 3 North Eastern 10 3 Mid West _3_5_ _6_ Country 327 69 Response was 40 out of 69, or 57.9 percent. The scatter of the response by states is as follows: States Samples Response Response Index Lagos 10 7 .70 South East 3 2 .67 Mid West 6 S .83 Rivers 4 2 .50 East Central 10 4 .40 Western 10 6 .60 here 3 2 .67 Benue-Plateau 3 2 .67 Kano 10 4 .40 North Central 10 4 .40 North Eastern 3 l .33 North Western 3 l .33 'meoverallneanresponse is .S7andsince 60percentofthestateshad respmseindioesabovethegeieralneananitheresponse, howbe it, werescattered covering all the states, the overall response was found satisfactory. ENen though the sanple nationally was only 21 percent of population, the high response irriex hadterriedminvalidateanydavrmrdbias. 449 B. mammmmm WS‘IIPPDGSERVICEINNICERIA Respane 12/ 25 Questions Shippi. m. Negative Positive Negati ve 1. Is shipping service considered to be adequate to needs of trade? 2.Ifnot,docnnferencesallavtheir clientsresortmtranpsincases ofsalepreesingneeds? 3. Doyouconsiderthestandardsof service generally satisfactory? 4. Are rates generally too high for level of service? 5. Areincreaseinfreight ramstoo regularandmstfrequent? 6.Areshippersmnsultedinadvance ofrroposaltointroducenavrates? 7. Are tariff books nede available to shippers in advance of inplelaitatim? (a) Special Rates (b) Cmtract rates 8. Are dual rates and deferred rebates used sinultanemsly? 9. Are there tying agreements to ensure shipper loyaltY? 10 Do sud: tying agreenents cover c.i.f. and f.o.b. traffic? 12Arestmmangesfomxisatisfactory toyourtradeneeds? 13 Do you experience servim difficulties with reference to (a) custom clearances (b) stevecbring operations (c) Intra-port traffic? 14 If pilferage is a nenace would you accept higher tariff changes for containerimd services? 15 Are there regular consultations between shippers and shippping lines m (a) individual basis (b) representative basis 16 Haveyoufoundtheserviwsofthe Nigerian ports authority satisfactory? 17 Vbuld you prefer abolition of dual rate and @ferred reaate system? lBDoymfindtheprivatetranprates higher then the conference rates? 22 14 28 l3 13 31 37 39 13 13 40 4O 40 31 15 32 16 18 26 12 27 27 27 27 00° 24 10 11 12 10 12 11 11 HHCO BIBLIOGRAPHY BIBLIOGRAPHY Books Akpan, N. U. The Struggle for Secession 1966-70: A Per- sonal Account of the Civil War. Frank Cass, London, 1971. Bain, Joe S. Price Theory. 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