Indigenous ship owners have identified the need for the Federal Government to encourage investment in shipping business through creation of funds and credit facilities with single digit interest rate to enable vessel acquisition in 2017.
The ship owners, who pointed at lack of quality vessels as the major reason Nigerian shipping companies found it difficult to compete with its foreign counterparts, say foreign-owned ships currently dominate the nation’s shipping business.
According to them, ship owners spend huge sums on payment of import duty, and this takes close to 14 percent of the total cost of importing fully built vessels and their corresponding spare parts, as Nigeria currently lacks capacity to build ships in-country.
They say that the nation’s shipping business is enormous and it is estimated at N2 trillion annually, yet foreign flagged and registered vessels carry over 80 percent of Nigerian seaborne cargoes. It is expected that creation of cheap funds will provide Nigerians the opportunity to own different categories of oceangoing vessels such as crude tankers, containerised vessel, bulk cargo carrier, general cargo and dry cargo carriers, among other types of vessels.
Margaret Onyema-Orakwusi, chairman, Shipowners’ Forum, who notes that banks are not lending to ship owners at single digit, says that cost of funds has been a major challenge to financing of vessel acquisition in Nigeria.
“There is huge gap in indigenous ownership of vessels in Nigeria, largely due to lack of fund to acquire new vessels or refurbish the existing fleet. This is why Nigerian ship owners need cheap funds with single digit interest rate to finance vessel acquisition,” she said.
Onyema-Orakwusi, who laments that ship owners are drowning in repayment of debts to banks, blames the situation on lack of special lending terms, despite the fact that shipping is an investment with long gestation period.
Adewale Ishola, a master mariner, who says in a telephone interview that Nigerian commercial banks ought to be very active in funding ship acquisition given its economic benefits, adds that shipping business is a long-term project that requires specialised funding.
“Shipping requires credit facility with a competitive interest rate of single digit. Our banks want to make returns in a very short-term. This is why banks find it difficult to invest in ship acquisition. There is need for the establishment of a Maritime Development Bank that would understand the intricacies of shipping,” Ishola says.
He observes that a specialised maritime bank would give ship owners’ loans at a very competitive interest rate and not in a double-digit rate, which makes it difficult for Nigerian ship owners to compete favourably with their foreign counterparts.
He further identifies the need for the disbursement of over N52 billion accumulated in the Cabotage Vessel Financing Fund (CVFF) as option of ship finance available to Nigerian shipping investors.
In his view, Greg Ogbeifun, president, Shipowners’ Association of Nigeria (SOAN), who notes that the cost of import duty and taxes levied on imported vessels and spare parts amounts to approximately 14 percent of the total cost of ship acquisition, says there is need for the Federal Government to review the laws guiding the importation of vessels into the country.
According to Ogbeifun, there is need for the Federal Government to give comprehensive risk backing and equity support for ship acquisition, so as to help scale up indigenous private sector involvement in the industry and promote ship financing.
He says the Federal Government needs to earmark shipping industry intervention fund, especially in the face of Nigeria’s drive for export trade through increased agricultural yields and with its expected boom in cargo movement.
“There is also need for the Federal Government to change the nation’s crude oil trade policy from free on board (FOB) terms to cost, insurance and freight (CIF). This would encourage more investment in vessel acquisition with the attendant multiplier effects on job creation including banks and insurance boom,” he says.
Source: Business DayPrevious Next