Thursday, May 30Nigeria's Authoritative Maritime News Magazine

Poor Ship Financing: Nigeria May Lose Out From Africa’s $2.7trn Freight Earnings


Unless Nigeria’s shipping sector is resuscitated or over $100 million in the Cabotage Vessel Finance Fund (CVFF) is disbursed to ship owners who met the requirements, the country may lose out from the $2.7 trillion freight earnings, which is anticipated from Africa by the year 2020.

According to report, about $2.7trillion freight earning is expected to come from Africa, with Nigeria ship owners not positioned to maximise the huge freight earning.

The leading cause of losing out of the freight earnings is poor ship finance, which has led to inability of Nigerian ship owners to acquire vessels.

Also, inability of ship owners to access the Cabotage Vessels Financing Fund (CVFF), a special fund set aside to aid indigenous ship owners has affected their business.

The National Assembly, in 2003, enacted the Coastal and Inland Shipping Act, now popularly known as the Cabotage Act, to avail the indigenous shipping companies a competitive edge over their more sophisticated foreign counterparts in doing business in Nigerian waters but foreign vessels still ravage Nigeria coastal water as the Act remains unenforced.

Unfortunately, Nigeria indigenous ship owners are now shadows of themselves, as they are in huge life-threatening debts. Same tale is replicated among new entrants who are only waiting to wither away.

Indigenous entrepreneurs are said to be owing some Nigerian banks huge non-performing loans to the tune of N5 billion for ship purchases, thereby making it difficult for the banking industry to give fresh loans for new investors.

Available statistics show that Nigeria loses up to N2 trillion annually in capital flight to foreign countries, that own vessels used to lift about 150 million tonnes of cargo.

Another statistics indicate that Nigeria exports about 900 million barrels of crude oil annually, but foreign vessels earn the freight of about $2.25 billion yearly by carrying the country’s crude with no freight earning benefits to Nigeria.

This was because the country had failed to finance her local shipping industry. The industry could have provided jobs for five million citizens if explored to its fullness.

However, speaking on the way out of the quagmire, the President, African Ship Owners Association, Temisan Omatseye, said government should adopt simpler ways of ship finance.

According to him, Nigeria has a large market and tonnage hence it must take control of its market.

He said, “We won’t reinvent the will. We will do what is needful since there is a law in place. The Minister of Transportation, Rotimi Amaechi, needs to be guided and he should be told there are simpler ways for ship finance to be managed without government playing apart but using the CVFF.

“Nobody in the world uses his/her money to buy a ship but seek finance from banks but in Nigeria we cannot seek bank finance with the present huge interest rate. There are ways we can do it since we have institutions in place but what is happening is that the right hand is not helping the left hand. So, what needs to be done is for the minister to know that this is doable without committing a funds”.

Omatseye a former director-general of Nigerian Maritime Administration and Safety Agency (NIMASA) said no Nigerian bank has the capacity to fund ship acquisition.

His words: “The Nigeria bank capital cannot fund acquisition. So, we need to use other people’s money to run our economy, we have the business, we have the tonnage we have the manpower”.

He confirmed the freight earnings that Africa would generate by year 2020 but said government must make policy towards benefiting from the earnings.

“A report on CNN has said the amount of total freight that is anticipated from Africa in 2020 is 2.7trillion dollars of that 0.1 per cent.

“We are exporting so much raw materials and importing so much finished goods but we are not carrying them. That is why we at African ship owners are trying to make it African policies that must be spread to all African countries. We don’t mind big ships bringing cargoes to designated hub spot but the cargoes brought are what we are saying. For instance, if you want to move containers we African shippers should move them from Cotonou to Benin, from Warri to Calabar or even to Lagos.”

From LeadershipFeed