Adegboyega Oyetola, Nigeria’s minister of Marine and Blue Economy has directed the Nigerian Maritime Administration and Safety Agency (NIMASA) to work with participating banks to speed up disbursement of the $700 million Cabotage Vessel Financing Fund (CVFF), weeks after BusinessDay reported that shipowners were still waiting for their first payout after 7 months of application.
The ministry said Sunday that NIMASA had received 92 applications for the fund, with 20 submitted to the fund’s 12 approved Primary Lending Institutions (PLIs). Only one has been reviewed and submitted back to NIMASA for approval so far.
The CVFF was established under Nigeria’s 2003 Cabotage Act to help indigenous operators acquire and build vessels and expand Nigerian participation in coastal shipping. Eligible fully Nigerian-owned operators can apply for up to $25 million. The fund accumulated for more than two decades without a functioning disbursement process before the government revived the scheme in January this year with an application portal.
BusinessDay reported in August that as many as 60 shipowners had applied, but no funding had yet been disbursed after over 200 days. Shipowners were promised that the entire process would not exceed 90 days.
The paper was informed that although operators were informed in January that they could start applying for the fund through a portal, the process did not become operational for several months due to some ‘fine-tuning’ being completed between the banks and NIMASA.
NIMASA did not comment when contacted.
Under the financing structure, shipowners contribute 15 percent of project costs as equity, NIMASA provides 50 percent, while the PLIs finance the remaining 35 percent and assume the credit risk.
The 12 banks must assess applicants for creditworthiness before successful applications are returned to NIMASA for further review and approval.
Zenith Bank, one of the PLIs told BusinessDay in earlier reporting that it had processed five applications for vessels serving the oil and gas cabotage trade, with three considered successful and expected to be submitted to NIMASA. It is not certain if this is connected to what has now been reported by the ministry.
Due to the risk factor, Zenith Bank said it only prioritises applications in which the vessel has a clear commercial purpose, preferably backed by a contract or identifiable business opportunity.
Oyetola said the government’s intervention was intended to strengthen indigenous shipping capacity, create jobs and reduce Nigeria’s dependence on foreign vessel operators.
Each year, Nigeria transports over 180 million tons of seaborne trade, generating more than $6 billion in freight revenue, 80 percent of which goes to foreign firms.
The ministry estimates that the vessel-financing initiative could generate more than 30,000 direct and indirect jobs across shipyards, marine engineering and maritime logistics.
If approved by NIMASA, the application passes to the Ministry of Marine and Blue Economy for final approval. If the ministry does not make a decision in 30 days, NIMASA has veto power to do so.