Indigenous ship owners seek single digit interest rate in 2017

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Nigerian ship owners have demanded for a better deal with the Federal Government in this New Year to avert the pitfalls that inhibited the sustainable growth of the shipping sector of the economy in 2016.

The indigenous ship owners 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 them acquire vessels in 2017.

They identified lack of quality vessels as the major reason why Nigerian shipping companies found it difficult to compete with its foreign counterparts, even as they pointed out that this was why foreign-owned ships continued to dominate the shipping sector of the economy.

They argued that indigenous ship owners spend huge sums on payment of import duty and this takes close to 14 per cent of the total cost of importing fully built vessels and their corresponding spare parts, as Nigeria presently lacks capacity to build ships that meet international standards as stipulated by the maritime watchdog, the International Maritime Organisation (IMO).

According to those who spoke to THISDAY, the nation’s shipping business was enormous and estimated at N2 trillion annually, yet foreign flagged and registered vessels carry over 80 per cent 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.

Chairman, Ship Owners’ Forum, Margaret Onyema-Orakwusi, said financial insitutions, especially the commercial banks were not lending to ship owners at single digit, pointing out that the cost of funds had been a major challenge to financing of vessel acquisition in the country over the years.

Her words: “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 expressed dismay that many ship owners were drowning in repayment of debts to banks just as she blamed the situation on lack of special lending terms, despite the fact that shipping was an investment with long gestation period.

On his part, a master mariner, Captain Adewale Ishola stated that Nigerian commercial banks ought to be very active in funding ship acquisition given its economic benefits.

The master mariner explained that shipping business was a long-term project that required specialised funding. He argued that a specialised maritime bank would give ship owners’ loans at a very competitive interest rate and not in a double-digit rate, which made it difficult for Nigerian ship owners to compete favourably with their foreign counterparts.

His words: “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 also stressed 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.

On his part, the President, Ship owners’ Association of Nigeria (SOAN), Mr. Greg Ogbeifun said the cost of import duty and taxes levied on imported vessels and spare parts amounts to approximately 14 per cent of the total cost of ship acquisition.

Ogbeifun, a marine engineer stated that the Federal Government need to review the laws guiding the importation of vessels into the country in favour of indigenous operators.

He emphasised the 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 maritime industry and promote ship financing.

The SOAN President stated that the Federal Government needed 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.

His words: “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”.
Source: Financial Watch

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