Oil rig operators to pay NIMASA 2% cabotage arrears

An oil rig

Following its ruling that oil rigs operating on Nigerian waters are subject to the provisions of the Cabotage Act, the Federal High Court has granted the Nigerian Maritime Administration and Safety Agency (NIMASA) leave to collect all outstanding payments of two per cent cabotage surcharge from owners of drilling rigs and associated platforms.

In its case against the Federal Ministry of Transportation (FMOT), in which NIMASA was later joined as a necessary party, Seadrill Mobile Unit Nigeria Limited had asked the court to determine whether drilling operations fell within the definitions of “coastal trade” and “cabotage” under the Coastal and Inland Shipping (Cabotage) Act.

It further sought clarifications on whether, on a proper interpretation of the Cabotage Act, drilling operations fell within the definition of “vessels.”

This was pursuant to Section 2(d) of the Cabotage Act, which provides that coastal trade or cabotage means the engaging by vessel in any marine transportation activity of a commercial nature in Nigerian waters and the carriage of any good or substance whether or not commercial in nature within the waters of Nigeria.

Ruling both questions in the affirmative, the court, presided by Justice Babs Keuwumi, held that drilling operations fall 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.

It further 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. Therefore, it granted NIMASA leave to collect all outstanding payments of the two per cent cabotage surcharge from owners of drilling rigs and associated platforms.

Reacting to the judgement, NIMASA Director-General, Dr. Dakuku Peterside, said the ruling was “yet another landmark attempt by the judiciary to set the record straight and boost the implementation of our cabotage law,” and marked the opening of an important opportunity for jobs, incomes and economic growth.

He appealed to all persons engaged in inland trade to pay their cabotage fees, while reaffirming the agency’s commitment to enthroning global best practices in the Nigerian maritime sector. According to Peterside, “the Cabotage Act is very clear and has again been interpreted and confirmed by the court.

“We expect that with this, 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. 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.”

He further reiterated the NIMASA management’s determination to end the cabotage waiver regime in the next five years, stating that measures were already in place, in collaboration with stakeholders in the sector, to achieve a seamless waiver cessation.

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