$350m Cabotage vessel financing: 20 years delay, a national shame — Minister
…As Indigenous shipowners plan $500m for assets acquisition
By Seun Ibiyemi
Minister of State for Transport, Ms Gbemi Saraki has described 20 years delay in the disbursement of the Cabotage Vessel Financing Fund (CVFF) as a national shame. The CVFF was established in 2003 by the Federal Government through the Ministry of Transportation to address the lack of capacity among indigenous shipowners in Nigeria. However, the fund is yet to be accessible.
Reacting on the non-disbursement of the fund, the Minister of State for Transport, Senator Gbemisola Saraki during a Ministerial briefing held in Lagos over the weekend after a week-long inspection tour of the Lagos and Tin-Can Island Port Complexes.
Senator Saraki expressed regrets over the non-disbursement of the CVF, describing it as a national shame.
According to her, it is a shame that no indigenous ship owner has been able to access the fund that was designed to enable them to acquire vessels nearly 20 years after it was established.
She however assured indigenous shipowners that the fund was still intact contrary to speculations in some quarters that it may have been misappropriated.
“The guidelines for the disbursement of the fund have been formulated and would soon be presented to the National Assembly for approval. It would immediately be followed by the actual disbursement of the funds to the already shortlisted beneficiaries.
“The delay in the disbursement is not the fault of the Federal Ministry of Finance, but rather more of securing approval of the guidelines for the disbursement from the National Assembly. This would be done in no distant time.
“It is really very disheartening that the fund has not been disbursed but we will work with the National Assembly to ensure its disbursement; just watch, it has to be disbursed, especially with the coming on stream of the African Continental Free Trade Area (AfCFTA).
“In the course of this visit, I have also interacted with so many stakeholders including the indigenous ship owners. I know the number of vessels that Nigerians had 10 years ago and I know how many they have now.
“It is really a shame that this fund has not been disbursed, I learnt the value is $350million now and I am not sure any part of it is missing. We will work with the National Assembly to pass the guidelines. It is not really about the Federal Ministry of Finance but I think it is more of the political will to disburse it and I think we have the political will to do so,” she said.
The fund is a two per cent contribution by indigenous shipowners from every contract executed in the nation’s waters.
The CVFF was inserted into the Coastal and Inland Shipping Act of 2003 otherwise referred to as Cabotage Act 2003, in order to provide funds for vessel acquisition amongst indigenous operators.
The disbursement of the CVFF is backed by the provisions of Section 42(1)-(2) of the Cabotage Act 2003, which aims to promote the development of indigenous ship acquisition capacity by providing financial assistance to Nigerian operators in domestic coastal shipping.
The Cabotage Vessel Financing Fund (CVFF), a two per cent contribution by indigenous shipowners involved in coastal and inland shipping trade in Nigeria’s maritime domain, has risen from 195 million dollars to 350 million dollars (N210bn) in one year.
This figure represents a percentage increase of 56 per cent between 2021 and 2022.
However, in March 2021, the agency received the approval of President Muhammadu Buhari to disburse the fund to qualified indigenous maritime operators in line with the Treasury Single Account (TSA) policy and the CVFF Guidelines of 2006.
Recall that the immediate past Minister of Transportation, Rt. Hon. Rotimi Chibuike Amaechi had in 2020, set up a committee to formulate fresh policies for the disbursement of the fund which included that only indigenous ship owners who contributed into the pool were qualified for the loan.
Contrary to speculation in the Nigerian maritime industry that funding for the Suppression of Piracy and Other Maritime Offences (SPOMO) Act will erode indigenous ship-owners contributions made into the Cabotage Vessel Financing Fund (CVFF), which currently stands around $195m, the Nigerian Maritime Administration and Safety Agency (NIMASA) over the weekend assured that the maritime administration won’t be sourcing for funds to implement the anti-piracy law from the contributions as there are other funding options available for the SPOMO Act implementation.
The Director-General of NIMASA, Dr Bashir Jamoh explained that the CVFF is just one out of five funding options available for the SPOMO Act.
According to the NIMASA DG, “Yes, the CVFF is one of the options stated in the SPOMO Act where funds can be obtained to implement the anti-piracy law. However, it is just one out of five options.
“If you read the SPOMO Act very well, you will see that the Act says that NIMASA, under the supervision of the Minister, shall establish and maintain a fund which will be known as the Piracy and Maritime Offences Fund otherwise referred to as the Maritime Fund. It is this fund that will be used for the implementation of the SPOMO Act.
Also reacting on the fund, a member of NISA and Chairman of the defunct Nigerian Maritime Expo (NIMAREX), Ayorinde Adedoyin said, “What the fund is meant to do is to encourage Nigerians to go and bid for jobs and when they win, the fund will buy the asset on a five -year loan at a single digit interest.
“This is something we have been working on for almost five years. What we are trying to do is to be able to pull money together like $500m dollars and I think we are almost getting there. What the fund will do is that it will acquire assets for operators, not only vessels but other ancillaries of the shipping industry and they can own it. It can be leased to them for about five to seven years and afterwards when they finish paying, the assets become that of the original owners.”
Ayorinde said the fund will serve as an alternative that would help increase capacity of indigenous shipowners beyond the Cabotage Vessel Financing Fund (CVFF), which operators have been unable to access for the past 18 years.
“It is not all about CVFF, we too are actually thinking and we hope and pray that by early next year, the maritime fund should come into fruition.
“We realised overtime that the cabotage law without funding is like a waste of time. Everybody was hoping that the CVFF will be used to empower shipowners to acquire more assets but that has not happened. But the truth is, there is a limit to what CVFF can really do.
“So that is the whole idea of looking at partnership with foreign funders to put funds together with a minimum of about $500milllion as this can actually help local shipowners with one digit interest rate. If we are not getting two or four percent like the foreign shipowners at least if we are getting seven or eight percent is still better than the 23 to 25 percent that we will be getting from the local banks which is part of why most of the shipowners in Nigeria can’t grow and why so many of them have lost their fleet because the Nigerian banks still not understand maritime funding.
“I don’t blame them (banks) really, they can only use money that they have and, in most cases, greed also comes into being because the majority of them still gets this money at two to three percent but the funny thing is that they still give the money out at about 12 to 13 percent.”
