Cabotage fund: 15 years of blame games and still no ships

NIMASA DG Dakuku Peterside
NIMASA Director-General, Dakuku Peterside. PHOTO CREDIT: SHIPS & PORTS archive

The Nigerian Maritime Administration and Safety Agency (NIMASA) last Monday blamed ship owners for the agency’s failure to disburse the Cabotage Vessel Finance Fund (CVFF). Created by the Cabotage Act of 2003, the CVFF is aimed at promoting the development of indigenous shipping via ship acquisition. The CVFF is also meant to provide assistance to Nigerian operators in domestic and coastal shipping. To this end, a two percent levy is charged against ship owners on any vessel engaged in coastal trading. In addition, revenues accumulated from tariffs, fines and waivers under the Cabotage Act are also paid into the fund. NIMASA Executive Director, Finance and Administration, Bashir Jamoh, identified the inability of Nigerian shipowners to come under one umbrella in order to access the fund, as a major hindrance. He said, “The Minister of Transportation has tried to resolve this issue. He asked ship owners to organize themselves as one team and come to discuss this matter with him. Only when this appeal is made in one voice, will the government listen to ship-owners and take them seriously.”

The controversy over the disbursement of the CVFF is almost as old as the existence of the fund itself. Year after year, various reasons are deduced and proffered by both NIMASA and maritime stakeholders over the lingering delay in disbursing the fund. In 2009, after six years of taxing shipowners and other players in Nigerian waters, the first disbursement was announced. Then Minister of Transportation, Ibrahim Isa Bio, ordered NIMASA’s management to disburse CVFF to local ship owners. At an October 2009 Annual press briefing of his ministry, Bio directed that the over N14 billion generated by the CVFF, be disbursed to indigenous ship owners before December of the same year. Bio also announced that modalities were being worked out for the disbursement of the fund to boost indigenous shipping. Several months later, there was no disbursement in sight and the failure blamed on the complexity of the process. At the time, then Director General of NIMASA, TemisanOmatseye, reassured stakeholders that the disbursement process was at an advanced stage. Four banks had been painstakingly selected to act as Primary Lending Institutions (PLIs) for the fund; they were Diamond, Skye, Fidelity and Equatorial Trust Banks. The first tranche of disbursement was due to be concluded. Applications from shipowners at this time had reached $I billion, more than twenty times the entire amount in the fund, while the fund itself had grown from $48 million in July 2009 to over $66 million in June 2010.

Meanwhile, all over Nigerian waters, foreign ships were receiving petroleum products from mother vessels for local distribution. Going by the Cabotage Law, all vessels operating in Nigeria’s territorial waters must be owned by Nigerias, manned by Nigerians, built and maintained in Nigeria. However, due to Nigeria’s lack of capacity to build ships, the law granted a waiver; a Cabotage craft would be one built outside Nigeria. Following the Act, any ship found operating in Nigeria’s coastal waters, short of these conditions would be arrested and prosecuted. Unfortunately, none such arrest has been made till date, even though foreign vessels dominate local shipping. Discourse over the disbursement of CVFF continued into 2011. By this time, the NIMASA had a new man at its helm of affairs; Patrick Akpobolokemi. His appointment brought a new twist to the disbursement of CVFF as he claimed he was being inundated with requests from politicians who viewed the fund as a their own share of the national cake. Citing this as the reason for the prolonged delay, Akpobolokemi added that applications were being scrutinized while the facilities and logistics of intended beneficiaries would be inspected to ensure the loans were used for the right purpose.

By September 2012, the fund had crossed the $100 million mark and Akpobolokemi reiterated that plans had indeed been finalized by NIMASA to commence its disbursement. The agency,according to him, was only awaiting approval from the then Minister of Transport, Idris Umar. In preparation for the disbursement, notices were sent out to Nigerian ship owners under the auspices of the Indigenous Shipowners Association of Nigeria (ISAN). The notice spelt out guidelines for disbursement; specifying that a loan of not more than $25 million could be applied for by verifiable ship owners, ship agents and fully established companies with the ability to charter vessels. Interested parties were also expected to provide evidence of the type of vessels they intended to acquire with the fund. In addition, ships owners were required to own a minimum of one classed vessel with a P&I coverage, totally Nigerian-owned with five years operational work experience and a fully structured shipping company, verifiable and registered with NIMASA. The entire process was later truncated without any explanation from the government.

Ten years later, it is the same story; the CVFF has not been disbursed. A fund conceived to grow indigenous shipping by providing loans for the purchase of ships for Nigerians, grows daily without corresponding access. In 2016, the current Director-General of NIMASA, DakukuPeterside, said the controversial fund was trapped in the Central Bank of Nigeria (CBN) under the Treasury Single Account (TSA) arrangement. Meanwhile, reports surfaced at the expiration of Akpobolokemi’s tenure that the fund had allegedly suffered some depletion as the proposed maritime university at Okerenkoko, Delta State, and the National Seafarers Development Programme(NSDP) were illegally financed from it. Meanwhile the number of indigenous ship owners in Nigeria, starved of funds to play their role in coastal shipping, shrinks daily while the government whose responsibility it is to grow the economy plays politics with the fund. At a time, a former employee of NIMASA claimed the designated financial institutions selected for the disbursement of the loans were reluctant to fulfill their part of the agreement. According to the then Director, Cabotage Department of NIMASA, Boniface Igwe, in order to fast-track the disbursement, a proviso had been included in the guidelines; NIMASA would contribute 55 percent of the total application of a particular applicant company; the banks will contribute 35 percent of the total and the applicant company will contribute 15 percent. He claimed that $200 million had already been sent to the banks in anticipation of disbursement. With allegations of the misappropriation of the CVFF already being levelled against Akpobolokemi, the fate of this $200 million and indeed, what is left of the fund, remains unknown.

Concerned ship owners at varying times have expressed their disappointment with the entire process. Chief Executive Officer of Starz Marine and Engineering Limited, Greg Ogbeifun, a few years ago, lamented the enormous contributions made into the fund. He listed the various contributions made by shipping companies to include Starz group, $1.25 million; C&I Leasing, $1.8 million; Slok, $1 million and Seabulk, $1.3 million. He insisted that it was the right of genuine ship owners to engage the government on the disbursement of the funds. However, numerous meetings with the government on this issue have yet to yield the desired result. To further complicate the issue, the various arms and agencies of government with jurisdiction over the maritime industry are seemingly unable to agree on the current amount in the CVFF. While the Chairman House Committee on Maritime Safety, Education and Administration, Mohammed Umar Bago, s at December 2017, insists that the fund holds over N100 billion ($250 million), the Minister of Transportation, ChibuikeAmaechi, insists the amount is far less. Amaechi, however, has failed to provide his own figure.

In the area of international shipping, Nigeria has already lost to foreign domination. Executive Secretary of Nigerian Shippers Council, Hassan Bello, estimated this loss to be $25 billion. Compounding this drain on foreign reserves with an annual loss of revenue in coastal shipping spells disaster for maritime development and the economy at large. Unfortunately, there seems to be no end in sight for this charade, neither is the government showing the willingness to end the two percent surcharge on ship owners, seeing that the CVFF has failed to achieve its set purpose. Instead of developing the indigenous shipping industry, the fund has become another tax and levy of sorts, among many others, that further depreciate the financial capabilities of indigenous ship owners. There is no better time to stop the collection of the two percent surcharge and enable a public inquiry into the current situation of the fund. There must be accountability and the government must show some responsibility in this regard.