With the failure of the federal government to disburse funds from the Cabotage Vehicle Financing Fund (CVFF) where over N60 billion is believed to have accumulated since its setting up in 2004, the fleet of vessels owned by Nigerian companies has shrank by over 42 percent.
The situation has been exacerbated by the high cost of funds in local money deposit banks where exorbitant interest rates have made borrowing for ship acquisition untenable.
“Today, you will find that there are no companies coming up to commission new ships. So, the country is dying in terms of shipping.
“The number of shipping companies from the time I took the mantle of leadership as the president of the Ship Owners Association of Nigeria to now has reduced by 42 per cent.
“The vessels are laid up; the banks have repossessed some of them. The owners cannot even dry-dock them; so, they pack them because of our financial challenges” Mr. Greg Ogbeifun, president, Ship Owners Association of Nigeria, according to a report in The Punch. He said in the 14 years the CVFF has been in existence, no shipowner has been able to access it.
“Our financial system is not designed to support long term funding such as the type we experience in the shipping sector. And when you have to take such a facility, you are taking it at very unfavourable terms,” Ogbeifun stated.
In the absence of support on the local front, Nigerian companies are finding succour in off-shore financial institutions where loans are obtained at business-friendly rates.
The Chief Executive Officer, Marine Platforms Limited, Taofeek Adegbite, listed some of he foreign banks as the Manufacturers Credit, China EXIM Bank and United Kingdom Export Financing, among others. He said that his firm was able to source £24 million from the UK Export Financing.
Similarly, the Chairman, Genesis Worldwide Shipping, Captain Emmanuel Iheanacho, said he was able to source $100 million from the United States of America for the ship yard, modular refinery and other projects he is setting up.
According to him, the preliminary homework had been executed to a level and when the Americans saw it, they were impressed and decided to invest to enable him complete the projects.
Ogbeifun, who noted that direct bank finance was not favourable in the Nigerian environment, said a shipowner equally had the option of senior secured loans or private equity investors, who would buy into the company with an exit strategy.
He stated, “They give you the loan, take a stake in your business, work out an exit date and thereby work out the bullet payment.
“But the issue here is that they put a noose around your neck; any slight default, they call the loan; where you cannot pay, they take the asset, sell it and recover their money, and they are gone.
“And when the asset is not enough, sometimes they have a lien on your debenture, and they can call in all in your debentures, sell everything and wave you goodbye. So, a lot of people try to run away from that but it is an option of acquiring vessels, because if you are able to keep your contract, you can pay out and own that vessel.”
Calling for funds to be disbursed from the CVFF, he said the Minister of Transportation should engage some financial experts working with representatives of the Nigerian Maritime Admiistration and Safety Agency (NIMASA) and the shipowners to come up with the structure of disbursement that would ensure that every money disbursed was appropriately utilised for ship acquisition, and the means of pay back clearly ascertained.
He said that the CVFF should also be used to assist existing ships operating with funds borrowed at high interest rates.
Ogbeifun also suggested the quick passage of the Petroleum Industry Bill, adding that it would give confidence to the IOCs to make long-term commitments resulting in long-tenured contracts.