A former Chapter President of the African Shipowners Association (ASA), Capt Ladi Olubowale, has said the estimated $700 million in the Cabotage Vessel Financing Fund (CVFF) could transform Nigeria’s indigenous shipping fleet if strategically deployed to vessels backed by identifiable cargo and long-term trade contracts.
Olubowale spoke at the Maritime Reporters Association of Nigeria (MARAN) Roundtable yesterday, where he stressed the need to link CVFF-backed vessel acquisition to actual commercial opportunities.
He said a $25 million facility could be sufficient to acquire a sizeable vessel, provided the financing was tied to a specific trade and guaranteed cargo.
According to him, the availability of cargo and a long-term trade contract would enable shipowners to acquire vessels, generate revenue and repay the financing, making the investment commercially viable.
Olubowale said the Nigerian Maritime Administration and Safety Agency (NIMASA) had indicated that applicants were expected to provide about $3.7 million to attract financing of up to $25 million.
He, however, said the critical issue should be the trade for which the vessel would be deployed.
He said: ‘NIMASA wants you to bring out $3.7 million in order for you to be able to attract $25 million. They will now look at it in your own case. What trade will you be using that for?’
The shipowner explained that the $25 million facility should not be considered in isolation because different categories of cargo require different types of vessels.
He said Nigeria needed to identify available cargo volumes and match them with the appropriate vessels before deploying the CVFF.
Olubowale cited dry cargo, cement and other commodities as examples of trades requiring specially built vessels, warning against financing vessel acquisition without first establishing the commercial demand for such vessels.
He said a properly structured $25 million facility could enable an operator to acquire a vessel suited to a specific trade, particularly where a one- or two-year contract guarantees cargo.
The proceeds from such operations, he added, could then be used to repay the financing while ensuring the commercial sustainability of the vessel.
Olubowale also called for the CVFF to be deployed as part of a broader national fleet development strategy rather than being treated solely as individual financing for shipowners.
He said the estimated $700 million in the fund could be used to develop a national fleet covering different cargo segments if the resources were strategically allocated and guided by industry professionals.
‘Most of this shipping does not require a big capital. It requires you have a 10 per cent deposit as long as you trade to cover up that money,’ he said.
He argued that linking financing to guaranteed trade would significantly improve the viability of CVFF-backed vessel acquisition and reduce the risks associated with ship financing.
Olubowale further disclosed that several banks had approached his company regarding the CVFF, with some presenting term sheets outlining financing requirements, including equity contributions and other conditions.
According to him, the development represents a departure from previous years when shipowners complained about the prolonged process of accessing the fund.
He said the priority should now be to ensure that the CVFF delivers tangible economic value by expanding Nigeria’s indigenous fleet and enabling Nigerian operators to capture a greater share of the country’s maritime trade.