Four weeks ago, Mu’azu Jaji Sambo, the minister of transportation announced that the ministry has obtained the approval of President Muhammadu Buhari to immediately disburse the money in the Cabotage Vessel Financing Fund (CVFF) to qualified Nigerian ship owners to enable them to buy new vessels.
To implement the directive, the ministry went further to appoint five banks including Union, Zenith, Polaris, UBA, and Jaiz Banks to serve as the Primary Lending Institutions (PLIs) for the disbursement of the funds.
Established alongside the Nigerian Coastal and Inland Shipping (Cabotage) Act of 2003, CVFF was set up to empower indigenous ship owners to take control of the nation’s coastal and inland shipping business, otherwise known as the Cabotage trade.
Cabotage money is generated from the 2 percent levy paid on each cabotage trade carried out by all indigenous ship owners on Nigerian waters.
Presently, the fund has accrued to slightly over N16 billion and $350 million because it is collected in naira and dollar components, according to Bashir Jamoh, the director general of the Nigerian Maritime Administration and Safety Agency (NIMASA).
While the naira component is about N16 billion, the Dollar component is about $350 million (equivalent to N160.9 billion at N447/$).
Cabotage fund, if disbursed will give Nigerian shipowners access to cheap funds that would enable them to buy new vessels in order to fully participate in the coastal and inland shipping business.
Shipping is a capital-intensive business with a long gestation period but Nigerian banks invest in shipping and expect to get returns in three years when it takes between 10 and 12 years for such investment to mature, according to the National Fleet Implementation Committee (NFIC).
In Nigeria today, the interest rate for borrowing is extremely high and rated as one of the most expensive in the world. This makes it impossible for Nigerians to compete with foreign-owned ships that get loans at a lower percentage. The collateral and equity contribution required to get a loan are also too difficult to achieve.
Adewale Ishola, a master mariner, told BusinessDay that Nigerian banks need to understand that the shipping business is a long-term investment that requires specialised funding.
He said that shipping requires a credit facility with a competitive interest rate of a single digit.
By giving more Nigerians access to funds to buy, own and crew ships, Cabotage Fund will help to create jobs in the nation’s shipping sector.
It is estimated that thousands of direct seafaring jobs and hundreds of thousands of indirect jobs in marine insurance, shipyards, and others can be created within a short period if Nigerians are encouraged to buy ships.
Read also: Cargo clearing delay, mounting demurrage worry freight forwarders
Apart from the employment potential of ship owning in the maritime industry, the training and certification of seafarers will be impacted positively because many will be provided with the opportunity for sea-time training onboard seagoing vessels.
The fund will enable Nigerians to own different kinds of ships including roll-on roll-off vessels, general cargo ships, tanker vessels, barges, tug boats, offshore supply vessels, and passenger/crew boats among others used to bring in imports and take out exports.
It will also enable Nigeria to develop a fleet that will match Nigeria’s diverse international trade and reduce foreign domination of the nation’s shipping business.
Nigerian shipowners said that they rarely benefit from the millions of dollars in annual earnings from freight expenditure on ships undertaking the direct sale-direct purchase (DSDP) contracts of the Nigerian National Petroleum Corporation (NNPC) due to a lack of vessels to compete with their foreign counterparts.
This is because despite reserving cabotage trade to local shipowners, the Cabotage Act recognises that there may be some capacities of vessels that might be needed for the lifting of crude oil and refined petroleum products in Nigeria that may not be owned by Nigerians. This was why the Act provided for granting waivers at the discretion of the Minister of Transportation.
Therefore, cabotage fund disbursement will reduce the millions of dollars in annual loss to foreign ships dominating the Nigerian shipping business.
Pointing out the need for clear modalities for accessing the Cabotage Fund, Aminu Umar, chairman of Sea Transport Nigeria Ltd., said the fund should be disbursed to genuine indigenous shipowners.
On the opportunities for shipping business in Nigeria, Umar said that beyond lifting crude oil that there are demands for ships that do offshore services, container carriers, as well as dry and bulk cargo carriers among others.
According to him, the implementation of the Africa Continental Free Trade Area (AfCFTA) agreement will increase cargo movement within the African continent and also create opportunities for the shipping industry.
“There have been a lot of cargoes coming out of Nigeria to other West African countries because Nigerians have started commodity export, which means there is cargo. All these cargoes coming in and out of Nigeria require ships to move them. There is a huge demand for shipping indicating a good outlook for shipping,” he said.
