Expert hinges indigenous shipping capacity growth on long-term financing

Worried by the low involvement of indigenous operators in the nation’s shipping business currently dominated by foreign ship owners, Olisa Agbakoba, a maritime lawyer, has identified long-term financing option as a means of growing capacity among indigenous ship operators.

“Funding is required to help the industry to grow, and workable ideas are required to boost local content and cabotage administration. Shipping requires long-term funding hence government intervention is required to boost investors understanding of the market potentials, concessions, incentives, etc. The stock exchange has an advocacy role to educate prospective indigenous investors,” he said recently at a media briefing in Lagos.

Agbakoba, who highlighted lack of finance as one of the major challenges facing Nigerian shipping sector, said laws such as Cabotage Act of 2003, NIMASA Amendment Act of 2007, Nigerian Content Development and Monitoring Board, among others, were introduced in the last 10 years to develop capacity among indigenous operators so as to maximise the potentials of the maritime sector.

The Cabotage and local content regime, he stated, are landmark legal developments and have been recognised as a fundamental tool in restricting coastal trading to the citizens of Nigeria.

According to him, there is also need to critically assess and block the leakages in the rules that favour foreign operators. “Why is it easy to use foreign owned or registered vessel to execute contracts while the acquisition framework for such types of vessels by indigenous operators are constrained by tax, import duties, tariffs, concessions, interest rate on borrowed finance inflicted by national agencies, financial institutions among others,” he said.

It has become imperative, he stated, for Nigerian financial institutions to play active role in providing the required long-term funding for shipping sector owing to the fact that credit financing is shrinking and that Cabotage Vessel Financing Fund (CVFF) would not be able to fund ship acquisition. “It also requires developing confidence in the sector to attract the lenders and investors,” he said.

BusinessDay check reveals that the nation’s shipping sector suffers an annual capital flight estimated at N2 trillion owing to foreign domination of shipping business. Here, foreign vessels are used to carry out local seaborne and other cabotage related trade, which ought to be done by indigenous ship owners.

It has also been discovered that Nigerian ship owners lack the needed capacity in terms of having quality ships of international standard that is capable of competing favourably with ships owned by its foreign counterparts.

This, according to close industry watchers, is where funding, especially long-term funding, comes in owing to the fact that vessel acquisition is a capital intensive project. Therefore, Nigerians need long-term fund to be able to participate adequately in the business.

“The capital flight occasioned by pull of capital by foreign investors from local maritime businesses interest dealt a serious blow to growth seen by emerging local brands such as Japaul, etc. Foreign and local investments are also dwindling. The International Oil Companies (IOCs) are divesting,” Agbakoba said.

While calling for the passage of the Petroleum Industry Bill, which affects investment decisions of the international oil companies, he noted that it was obvious from the work of various government committees and legislative inquiries that the nation’s oil and gas industry was in a complete mess due to no accountability, no transparency, governance failure, etc.

“It is expected that Nigerian government have to construct an entirely new and institutional framework for oil and gas regulation and transportation. This is because one cannot talk about shipping, oil and gas transport, which thrives on maritime sector, without recourse to government interventions. There is need for Ocean Policy and Regulations for Nigeria cannot be overlooked particularly with the current trend internationally among coastal states and all the increasing focus and attention on the oceans. Our deep-sea exploration activities (for oil and natural gas) and generally transport and fishing are a pointer in that direction. The enactment of the requisite Ocean Policy Law in Nigeria has become necessary to harness the potentials,” he said.