Home Maritime Much ado about $350m Cabotage Vessel Financing Fund

Much ado about $350m Cabotage Vessel Financing Fund

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The Cabotage Vessel Financing Fund (CVFF) is to assist indigenous ship owners in the acquisition of assets, although they are expected to pay back. However, 19 years after the idea was floated and approved, the $350 million CVFF remains inaccessible, thereby defeating its objective of boosting international trade and creating jobs. OLUWAKEMI DAUDA writes.

IT was a laudable idea aimed at boosting the fortunes of the maritime sector. The Cabotage Vessel Financing Fund (CVFF) is to assist indigenous ship owners in acquiring assets, although they are expected to pay back the loan. However, 19 years after the idea was approved by the Federal Government, the $350 million CVFF remains inaccessible, no thanks to civil service red tapism, which has defeated its objective of boosting international trade and creating jobs.

The Director-General, Nigerian Maritime Administration and Safety Agency (NIMASA), Dr. Bashir Jamoh,  is, however, passionate about the actualisation of the Fund. A few days ago, speaking on Inspiration 92.3 Fm Lagos Shipping on Radio, he said nine primary lending institutions (banks) had been listed for the disbursement of the CVFF by the agency’s Governing Board and that their names had been forwarded to the Minister of Transportation for approval.

Explaining the cause of the delay, Jamoh, who assumed duties as DG in 2020, said NIMASA was only trying to avoid the previous pitfalls experienced under the Ship Building and Acquisition Fund when beneficiaries diverted the funds to other areas.

He said NIMASA, with the support of the Federal Ministry of Transportation (FMoT), was exploring other options to ensure that the CVFF is properly disbursed.

His words: “If you can recollect, last year, we advertised for expression of interest as provided by the guidelines of the Cabotage Vessel Financing Funds and after the advert, about 12 banks indicated their interest and we shortlisted nine. As the law provides, we forwarded it to the Minister of Transportation.

“The delay is to avoid the mistakes made with the disbursement of the Shipbuilding and Acquisition Fund where beneficiaries collected the funds and refused to pay. Every Minister is scared and afraid to be part of that failure.

“What every Minister of Transportation wants to do is to make sure that before disbursing these funds, let it not turn out to be another national cake, just like the case of the moribund Ship Acquisition Fund. New ideas are now on the table as to how best to avoid this pitfall.’’

In 2020

In late 2020, Jamoh raised the hope of players in the sector when he announced at a virtual meeting with the Shipowners Association of Nigeria (SOAN) that the immediate past Minister of Transportation, Chibuike Amaechi, had approved the disbursement of the fund.

He said: “Only the details are being discussed with a view to avoiding former mistakes and ensuring effective and efficient utilisation of the fund. We have also submitted proposals to the minister to seek fiscal and monetary incentives for our ship owners.  Since then, the fund is yet to be disbursed by NIMASA.’’

The CVFF

Observers say that CVFF is not government, or free, money. It was created by the Coastal and Inland Shipping Act, 2003, popularly known as Cabotage Act, which states: “There shall be paid into the Fund, a surcharge of two per cent of the contract sum performed by any vessel engaged in the coastal trade; money generated under this Act, including the tariffs, fines and fees for licences and waivers; such further sums accruable to the fund by way of interests paid on and repayment of the principal sums of any loan granted from the Fund.”

Also, there are primary lending institutions (PLIS), that is, commercial banks, accredited to handled the CVFF. They are expected to contribute 50 per cent of the CVFF. They are Fidelity Bank, Skye Bank (now Polaris Bank), Sterling Bank, and Diamond Bank (now Access Bank).

Manager of the fund

The fund is not managed by NIMASA as many seem to erroneously believe. The PLIS does, while NIMASA provides fund administration and corporate governance. The Federal Ministry of Transportation is the third party to the CVFF, while the obligor (i.e. an applicant that has accessed the fund) the fourth. Schedule 44 of Part VIII of the Act states: “The fund shall be collected by the National Maritime Authority (NIMASA) and deposited in commercial banks and administered under guideline that shall be proposed by the Minister and approved by the National Assembly.”

Beneficiaries

According to Schedule 45 of the Cabotage Act, “the beneficiaries of the fund shall be Nigerians and shipping companies owned by Nigerians … for “the development of shipyard/maritime infrastructure to facilitate vessel construction, repairs and maintenance,” as well as “other shipping auxiliary projects relating to the development of local tonnage capacity and shipyards”.

 How much can a ship owner get from the CVFF?

A ship owner can get about $25 million and shall have a maximum of seven years’ payback. The CVFF is to be disbursed on a single-digit interest rate of 5.6 per cent, 0.25 per cent processing fee, according to NIMASA.

Qualifications for accessing CVFF

Not all indigenous shipping service providers that are trading on Nigeria’s cabotage area will get the loan. The law, which establishes the fund, also states recommendations for accessing it. Firms wanting to access the CVFF loan must have been paying cabotage dues of two per cent surcharge, licence and waiver fees. The company will have contracts with international oil firms.

Also, the firm must have positive cash flow and bankable feasibility reports, which shall be verified by NIMASA and the PLIS, among others.

Indigenous shipping firms seeking to borrow from the CVFF are also expected to comply with the Cabotage Act and the CVFF guidelines, including domiciliation of company’s account with PLI of their choice. They shall provide full condition survey report on vessel to be procured, (for vessels) and legal mortgage on vessel to be procured.

A maritime lawyer, Dr Dipo Alaka, said the CVFF scheme was created in 2004. “Since then, indigenous ship owners have been longing to benefit from the fund after several unfulfilled promises by the successive administrations,’’ he said.

Alaka said the CVFF fund needed to be disbursed and urged NIMASA to do so before the end of the second quarter of this year.

“The fund, an off-shoot of Cabotage regime, was set up to empower indigenous ship owners, increase their tonnage, enhance their capacity to compete in coastal trade and generate employment. More important is that the fund is the two per cent contributions of ship owners deducted from the value of their contracts under the Cabotage regime. “But it is sad that almost 18 years after, no single dollar has been disbursed from the fund and the endless promises keep coming as if some people somewhere are benefiting from the nondisbursement of the fund,” Alaka said.

An analyst, Mr Kehinde Adeleke, urged NIMASA to disburse the fund and create enabling environment for the private sector to invest in the industry to achieve the objective of developing the nation’s blue economy and boost the revenue of the Federal Government. “But it is sad that almost 18 years after, no single dollar has been disbursed from the fund and the endless promises keep coming as if some people are benefiting from the non-disbursement of the fund.

Senator queries fund’s non-disbursement

The presidential candidate of the New Nigeria Peoples Party (NNPP), Senator Musa Kwankwaso, during the week, queried the non-disbursement of the fund to ship owners.

Kwankwaso, who spoke in Lagos at a town-hall meeting for Maritime Agenda, organised by the Prime Maritime Project, ahead of next year’s general elections, also expressed shock over failure to refloat the Nigerian National Shipping Line (NNSL), many years after it collapsed.

He said: “So many things have gone wrong with the industry. I can still remember the days of the Nigerian National Shipping Line (NNSL) with its beautiful ships flying Nigeria’s flag across the globe! Why did it die? Why do we not have a replacement as the giant of Africa? What has become of the Cabotage Vessel Financing Fund (CVFF)? Why has it not been disbursed to the beneficiaries? From my little knowledge of the sector, a lot of questions are begging for answers.

“In summation, the desired assistance to importers of goods, manufacturers, including exporters and other ancillary stakeholders associated with port operations and management, will be guaranteed under our party’s regime, by the special grace of God.”

Kwankwaso also bemoaned the underutilisation and overutilisation of the Eastern and Apapa Ports. He said: “Lagos port system originally designed for a population of less than 50 million in the 1950s with less than 20 million cargo throughput has remained almost the same for over 200 million population in 2022. Our government will look into constructing a rail line from both Apapa and Tin Can Island ports to a dry port area outside Lagos, where arrived goods should be domiciled for clearance in order to stop heavy trucks from causing gridlock in Lagos.

“We should also look into the possibility of opening other ports such as Warri, Port Harcourt and Calabar, among others, to decongest the Lagos port. He requested the stakeholders’ forum to form the nucleus of the group that will design “a workable and actionable maritime sector reform template, which should include clearance of goods arriving our ports within 72 hours, as done in other countries.”

Kwankwaso also vowed to place the control of the nation’s maritime sector in the hands of stakeholders, saying: “Under our watch, maritime professionals will take charge of the maritime sector.”

 ‘Too many changes in govt’s agencies affecting sector’

Earlier, chairman of the occasion, Mr Kunle Folarin, had enumerated the rot in the sector, regretting the incessant changes in the leadership of maritime regulatory agencies and the supervising ministry, which are often headed by appointees that have no knowledge of the industry, which adversely affects its growth.

This was also listed by the Prime Maritime Project, which said the series, which would be availed presidential candidates, was meant to extract a social contract from them on their plans and commitment to placing the maritime sector in the front burner as a major economy driver.

 

New road map

Nigerian ship owners may soon heave a sigh of relief as the Federal Government may have unveiled a new road map that will see Nigeria actualising the dreams of becoming ship owners under the CVFF very soon.

According to Jamoh, “we have approached the Bank of Industry and commenced discussions on using the CVFF as seed money, getting additional funding, and by this getting as many beneficiaries as possible on board the scheme.

“We are also into some research as to what types of vessels or boats we need for inland waterways so we could maximise our waterways. The issue of these small crafts having constant accidents is also giving us worries.”

Jamoh also said the Minister of Transportation Ma’uzu Sambo has agreed that some of the ministry’s officials would travel to Kenya this month because the biggest ship building industry domain is building a shipyard in Kenya that will address the kind of issues we are facing.

“So, they want us to go and see the kind of shipyard they are building for the Kenyan Government. If we see it and it is in line with our thoughts, then we would now come and replicate same here,” Jamoh said.

He said indigenous ship owners would be part of the trip and decisions taken would be consensual. “ But what I am telling you is just a proposal. The stakeholders will be carried along and they will be able to see what we are doing and everything,” he said.

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