NIMASA engages NNPC, CBN to change crude oil trading policy, reduce ship financing cost

Determined to find lasting solutions to the problems limiting shipping development in Nigeria, the Nigerian Maritime Administration and Safety Agency (NIMASA), said it has started engaging the Nigerian National Petroleum Corporation (NNPC) and the Central Bank of Nigeria (CBN).

Dakuku Peterside, director general of NIMASA, who disclosed this in Lagos last Thursday at a Stakeholders’ Discuss organised by the Nigerian Ship Financing  Conference and Exhibition, said that the engagement with NNPC, was aimed at pushing for the change of the nation’s crude oil trading policy from Free on Board (FoB) that enables buyers of Nigerian crude to engage their vessel of choice to Cost Insurance and Freight (CIS), to enable NNPC vis-à-vis Nigerian ship owners to be responsible for freighting the crude to the buyers’ destination ports.

According to him, this will create the right environment for Nigerians to benefit from the opportunities that exist in the nation’s shipping sector by creating more jobs for Nigerian owned vessels.

“We are also engaging with CBN to deal with the issue of cost of financing and we have made appreciable progress so far. NIMASA is also negotiating for cargo support from the government to give Nigerians the exclusive right to lift cargo generated by the various levels of government,” Peterside said.

Stating that there is renewed enforcement to the implementation of the Coastal and Inland Shipping Act (Cabotage), the NIMASA boss disclosed that the agency recently started the Cabotage Compliance Strategy, which seeks to stop foreign flagged vessels from trading on the nation’s coastal waters.

“The new policy denies foreign vessels waiver to participate in Cabotage trade but in doing this, we must ensure there was alternative ships from indigenous ship owners to fill in the gap,” he said.

“NIMASA started by refusing to have foreign personnel onboard the vessel except the captain and chief officers, every other personnel, who is not a Nigerian cannot work onboard any cabotage vessel because we believe that Nigeria now has the competent personnel to work onboard those vessels,” he warned.

Peterside further stated that NIMASA is also hunting for foreigners to partner with Nigerian ship owners in the area of funds and technical capacity, needed to accomplish more.

On funding, Peterside, who noted that the high lending rates of banks to ships owners for vessel acquisition, has been one of the problems of ship financing, also said that NIMASA is determine to disburse the Cabotage Vessel Financing Fund (CVFF), which has been in the agency’s custody since inception in 2003.

“The industry is capital intensive and has long gestation period, meaning that the current debt financing regime cannot support ship financing in Nigeria. In many countries, you get as low as 1 to 3 percent lending rate for ship acquisition, making it difficult for Nigerian ship owners that get same facility at 25 percent unable to compete with foreign  counterparts,” he added.

He said the industry has a big problem that must be tackled, which is to make Nigerian financial institutions understand that ship acquisition is a peculiar business. “We need partnership with the financial sector that will create a competitive rate because the cost of ship is so high that someone cannot pick money off shelf to finance it. We need to crash the rates right now.

Listing the benefits of CVFF, which is now over $100 million and seating with the CBN under the treasury single account (TSA) arrangement, Peterside said that the fund would crash the rate of borrowing from the bank because it comes at almost nothing compared to that of banks. “CVFF has the capacity to attract foreign funds that would also come at cheaper rate. We are looking at all of these models to determine the best for Nigerian ship owners. We truly know that Nigerians need the fund to acquire vessels, which comes with multiplier effects like creating jobs for seafarers and other vessel crew and opening lots of economic activities,” he added.

Margret Orakwusi, former president of Nigerian Ship Trawlers Association, who lamented that Nigerian ship owners struggle to compete with their foreign counterparts due to lack of quality vessel, further said that Nigerian economy and banks were losing to capital flight due to none funding of ship acquisition.

“CVFF is ship owners’ contribution and does not belong to the government. Therefore, the role of government as the regulator is to ensure effective utilisation of the fund and not to squeeze life out of ship owners,” she said.

According to her, ship owners want the money to be used to finance maritime projects and set up maritime bank, which would understand the nature of shipping business, finance ship acquisition and building among other maritime infrastructural projects. Earlier in her welcome address, Ezinne Azunna, convener of the event, said that Nigerian ship owners need funds required for vessel acquisition, which had been a main challenge to the development of shipping business in Nigeria.

She said that the aim of the conference is find a way to get cheap funds for ship acquisition and maritime infrastructural financing so that Nigerians can leverage on the opportunity in the sector.

“The forum provides opportunity to re-examine the things government is doing towards the development of indigenous fleet in Nigeria,” she added.

Uzoamaka Anagor-Ewuzie