Oil firms, shipping lines to pay 2% cabotage fees in Nigeria after landmark judgement, says NIMASA

By Samson Echenim

Following a landmark judgement that redefined oil rigs as cabotage vessels, the Nigerian Maritime Administration and Safety Agency (NIMASA) has urged all operators of oil rigs and owners of vessels operating in Nigerian waters to pay up their two percent cabotage surcharges, saying it is committed to ending waivers on foreign vessels in the next five years.

A federal high court sitting in Lagos, June 14, 2019 delivered a judgement in favour of NIMASA in the case involving Seadrill Mobile Unit Nigeria Limited and the Federal Ministry of Transportation (FMOT), which defined offshore oil drilling as a cabotage trade and oil rigs as cabotage vessels, thereby, confirming NIMASA’s right to collect fees from drilling operations.

NIMASA was later joined in the case as a necessary party in the suit originally instituted by Seadrill Mobile Unit Nigeria Limited against the FMOT.

Dakuku Peterside, NIMASA’s director-general said the judgement was “yet another landmark attempt by the judiciary to set the record straight and boost implementation of our Cabotage law, while generating opportunities for jobs.”

“The suit instituted by Seadrill Mobile Unit Nigeria Limited was to determine whether drilling operations fell within the definitions of ‘Coastal Trade’ and ‘Cabotage’ under the Coastal and Inland Shipping (Cabotage) Act, and whether on a proper interpretation of the Cabotage Act, drilling operations fell within the definition of ‘vessels’ under the act,” NIMASA noted in a statement by Isichei Osamgbi, the agency’s spokesman.

On the first issue, the court, presided by Justice Babs Keuwumi, ruled that drilling operations fell within the ambit of exploration, exploitation, or transportation of the mineral or non-living natural resources of Nigeria, whether in or under Nigerian waters, as provided under the definition of coastal trade in the Cabotage Act.

Similarly, the court held that the combined reading of the Admiralty Jurisdiction Act, Interpretation Act, and Cabotage Act meant that drilling rigs fell under the definition of vessel under the Cabotage Act.

Having determined the two questions in the affirmative, the court granted NIMASA leave to collect all outstanding payment of the two percent Cabotage surcharge from owners of drilling rigs and associated platforms.

The implication of the judgement is that oil rigs operating on Nigerian waters are subject to the provisions of the Cabotage Act.

Reacting to the judgement, Dakuku said it marked the opening of an important opportunity for job, incomes, and economic growth.

“The Cabotage Act is very clear and it has again been interpreted and confirmed by the court. We expect that with this judgement, all parties will obey the court order and do the needful. It is all for the growth of the Nigerian maritime sector and the country’s economy at large. On our part, as a responsible agency, we will continue to sensitise stakeholders, because every craft that is engaged in Coastal and Inland Trade must pay the Cabotage fees,” Peterside was quoted in the statement.

He reiterated NIMASA’s determination to end the waiver regime in the next five years, stressing that “measures had been put in place by the agency, in collaboration with stakeholders in the sector, to achieve a seamless waiver cessation.”