Local shipping industry operators are kept in suspense as they await the decision of President Jonathan over who benefits from the repackaged Cabotage Vessel Financing Fund, CVFF, soft loan in which about $180million is set aside for indigenous fleet expansion programme, reports Francis Ugwoke
It is a waiting game. And anxiety too. But this is not new. It has been this way since 1998 when the Ship Acquisition and Ship Building Fund, SASBF, was first suspended. Although, the local shipping companies interested in SASBF had given up hope because of the government position on the issue after the failure of SASBF, hope was however rekindled few years later. That was when government decided to repackage the SASBF as Cabotage Vessel Financing Fund (CVFF) following the passage of Cabotage law in April 2003. The initiative was to ensure that beneficiaries of the fund do not see what is given to them as national cake like the SASBF.
Under the CVFF, beneficiaries are getting the fund under strident conditions that will compel them to pay back. This means that they will have good business plans that are viable for them to repay the loan. Under the SASBF, apparently because it was the first time, there were so many irregularities among the beneficiaries and officials of the apex regulatory agency that made it impossible for the fund to be paid back.
It was a combination of political interference and corruption in the system that made it appear that those who benefitted were simply getting their own share of the national cake. So, while few were able to utilise the fund judiciously, others diverted the fund to some other types of business. The result was that the objective of the fund, which is to grow indigenous fleet expansion among local operators was defeated.
However, the Nigerian Maritime Administration and Safety Agency, NIMASA, appeared to have no choice in repackaging the fund considering its commitment to the development of indigenous shipping industry. The shipping sector holds so much hope as part of the economic transformation agenda of the present administration.
Besides, the NIMASA collects 3% ship levy, out of which 2% percent is expected to be set aside for indigenous shipping development. Stakeholders believe that the shipping sector has waited for too long for government to address the mistakes of the SASBF and effectively introduce CVFF considering the benefits of such fund to the growth of the shipping industry.
Repackaging of CVFF
The new ship fund is promising. It is a commitment on all sides. The beneficiaries, government and the banks as the primary lending institutions are all committed to the success of the fund. Government chose four banks out of the 25 that applied to manage the CVFF. The banks include Diamond Bank, Fidelity Bank, Skye Bank and Equatorial Trust Bank. These banks, according to sources close to NIMASA, are expected to scrutinize the applicants for the fund which is put at $180million.
One cheering news about the repackaged fund is that it will attract a single digit interest rate as against what is the case in the money market where interest rates are currently between 17 and 24 percent. The Transport Minister, Senator Idris Umar had during a ministerial briefing in June disclosed that NIMASA will provide 50 percent of the fund and take 4.3 percent interest. The primary lending institutions will provide 35 percent and take 5.7 percent interest.
On the other hand, the beneficiaries are expected to provide 15 percent of the funding of any vessel they want to acquire individually. Few months ago, Director-General of NIMASA, Mr Patrick Akpobolokemi assured that the fund will not be given to politicians in whatever guise as a way of ensuring the objectives of CVFF are realized.
Awaiting the President’s Approval
So far, six indigenous firms are believed to have passed the screening exercise of the Transport Ministry. The exercise started from NIMASA before it was handed over to the Ministry which has in turn forwarded the request for final approval to the President. It is expected that the Presidency may after scrutinizing the names of the beneficiaries also make its approval through the Federal Executive Council, FEC, meeting.
An official of the NIMASA said the names of the beneficiaries remain secret as the President can decide to make alterations on what was submitted to him based on security reports on these companies. This has created anxiety among those who applied for the funds. Concern being expressed in the industry is that the government is taking time in arriving at a decision to give final approval for the disbursement of the fund. This in turn will equally be slowing down growth in the sector and the objectives of the fund.
Senator Umar had in June disclosed that the Ministry forwarded the request to the Presidency. One expects that given the importance attached to the fund, the Presidency ought to have treated the matter with urgency.
Masquerading the Beneficiaries?
From NIMASA in Lagos to the Ministry of Transport, no one has been able to say who are the lucky companies that will eventually benefit from the fund. Although, the Transport Minister disclosed that six firms met all the conditions required, he did not identify the companies.
An official of the NIMASA disclosed that the names of the firms are being kept secret to avoid pressure on the leadership of the apex maritime agency. He said that so much interest has been attracted on the fund because of the low cost of the fund. With the interest rate below 10 percent, every local shipping firm would want to benefit from the exercise. What is not clear is whether those who are on the list are aware of this.
Our NIMASA source said that everyone that applied for the fund is kept in suspense. But he said that the applicants were given clear conditions for qualifying for the loan. With this, he opined that those who did not qualify may have had the hint based on their submissions to NIMASA and the lending banks.
Stakeholders on CVFF Disbursement
Shipping industry stakeholders who spoke to THISDAY were of the view that government must have the full political will to ensure the success of the exercise after the disbursement of the fund to the beneficiaries.
A maritime lawyer, Mr Emmanuel Ofomata was of the view that government should intervene in getting oil majors and the Nigerian National Petroleum Corporation, NNPC, to always give indigenous firms the right of choice of refusal before inviting foreign firms to bid for petroleum products affreightment within the coastal waters. Ofomata said that with the expectations that the firms will acquire good vessels after receiving the fund, government owes it a duty to ensure that NNPC and oil majors cooperate with the local firms for them to succeed.
Ofomata said that if the firms and others that are already in the system are given opportunity as provided in the Cabotage Law, the local shipping industry will develop fast and look forward to be given the chance to carry crude oil products under a revised Cost of Insurance and Freight (CIF) trade term.
A top official of NIMASA who did not want to be quoted told THISDAY that the local firms over time have been operating under hard conditions, competing with foreign firms who secured cheap loans of five percent interest rate from Malaysia to acquire their vessels. Some of these vessels are what you find on the territorial waters being preferred by some oil majors for coastal wet cargo operations”.
He disclosed that some Nigerian firms also go into shoddy arrangements with foreign ships in order to get jobs from oil majors and NNPC. But he added that under such arrangement, the owners of the foreign firms were the ones who gain as Nigerians involved in such deals get what he described as crumbs.
Information from This Day was used in this report.