On developing countries and maritime transport value chain

By Adekunle Segun

Sir Walter Raleigh once stated: “Whosoever commands the sea commands the trade, and whosoever commands the trade of the World commands the riches of the world and consequently the world itself”. Shipping and maritime trade has and will always remain the livewire of world trade. Shipping as a concept is a means to an end. In other words, it is something used to achieve another thing. If goods or persons need not move from one place to another then we might as well say that shipping in particular or transport in general is dead. But the fact remains that no nation, past or present, can survive by itself. What is produced in a particular part of the world is needed in another part hence a ship being the most efficient and reliable means of conveying huge tonnage of cargo from one point to another or what we call the origin destination phenomenon will always be in demand.

From the foregoing we can see that any factor that affects shipping and maritime positively or adversely will definitely reverberate on world trade. In 2019 alone, negative economic trade trends caused some major downturn in maritime trade growth. Countries’ GDP plummeted seriously with developing economies feeling the major hit. This is not to say that developed economies did not feel the impact either. World GDP soft pedalled at 2.5% from 3.1% in 2018. To further worsen the matter, the China-US trade dispute and the Brexit move by the UK cost the world some billions of dollars, a major chuck of which is to be borne by the maritime industry. But what is the stake of developing countries in maritime business?

According to UNCTAD (United Nations Conference on Trade and Development) in 2019, developing economies continued to account for the lion share of goods being loaded as against those being unloaded. The percentage distribution reveals that 58% of goods going to developing countries are loaded from developed countries while 65% of the vessels that loaded these cargoes depart their ports of call in the developing economies either with empty containers, in the case of TEUs; or an empty vessel in the case of bulkers and tankers, amongst other types of vessels. To the everyday person on the street this may seem a bit complex to comprehend but let’s do a brief mathematical clarification here. In world’s trade, there is what we call favourable and unfavourable balance of payment. It is the way countries of the world evaluate their trade progress based on certain factors that see them trying to improve their bargaining strength in world affairs. The more a country is able to export to other countries the higher their balance of payments and consequently their significance in world trade. The shortfall of 7% from the 58% of loaded tonnages and 65% from the unloaded tonnages earlier discussed is a bold indicator that developing countries are at the receiving end of unfavourable balance of payments in world trade, hence the urgent need to ensure that more investments from developing economies is funnelled into the maritime arm of their trade.

Now, in a bid to push more investment into shipping certain factors need to be put in place to ensure that we have a thriving shipping or maritime industry. These days we see vessels calling at our ports on a daily basis. Every vessel transiting the world’s water either for the purpose of trade, reconnaissance or any other purpose are built with steel. In a nutshell, one of the very significant prerequisites for an effective maritime industry in developing countries is the steel industry. The steel mills of developing economies need to be running at optimal capacity if not maximum. It is apposite to note here that various nations of the world get hold of different shipping routes with the use of ships which are built with steel. This underscores how important shipping is to the world. To compete in world trade today developing economies need to take the bull by the horns in building quantity steel mills that will serve as the springboard to build various giant-like vessels, amongst others, that will ultimately be used in conveying tonnages from one point of the world to another.

Another factor we need to observe closely is that of ship building, ship repairs and fabrication yards. Developing economies score very low in participation in ship building and repairs. Developing economies, including Nigeria, are still struggling with the capacity to build vessels that can compete in the international shipping league and world trade. This is not to say that various efforts are not being made, but there is still a lot of work to be done on the part of government and private industry players. When we discuss shipping as a very important factor in world trade, various types of vessels and their carrying capacity come to mind. In LNG (Liquefied Natural Gas) for instance, we discuss various gas carriers in which the cost of building runs into several millions of dollars; there are also the bulkers that are used to transport dry cargoes from one point of the world to the other. Cargoes like flour, cement, sugar and ore are being transported these days using large ore carriers. Nigeria consumes a lot of the products mentioned above. These only come to the shores of our country through these carriers. Another type of steel giant on the world’s oceans today is the TEU (Twenty-foot Equivalent Units). They are also known as the container carrier ships, vessels like the MV “Ever Given” have the capacity to carry over twenty thousand containers. Nigeria as a developing economy is currently one of the world’s largest producer of crude oil. Crude oil remains the anchor hold of our economy, but for every drop of crude that leaves our shores, how many are being transported using a Nigerian built vessel? To fully benefit from crude as one of our major strengths in world trade, there is the need to have an oil tanker ship building yard in various strategic locations in the country. A typical crude oil vessel daily charter rate goes for as high as 40,000-50,000 dollars daily. But the question we should ask ourselves is, of all these charters how much is being netted into the Nigerian economy?

On a final note, it is important for developing economies in general and Nigeria in particular to work vigorously on the various economies of scale that will boost our chances of competing favourably in world trade. Unless concepts like steel processing vessel building, vessel maintenance, energy production and consumption are properly harmonized, developing economies will continue to struggle to be relevant in world trade; and by extension, world shipping and maritime business.

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•  Adekunle Segun is a maritime professional…He writes from Lagos; Nigeria…