NIMASA, Don’t Disburse The CVFF To Individuals

No one could yet state categorically why the Nigerian Maritime Administration and Safety Agency NIMASA has not disbursed the about $22 million dollars so far realized in the Cabotage Vessel Financing Fund (CVFF), but I guess it might not be unconnected with government’s past experience at how similar funds, particularly the Ships Building and Ships Acquisition Fund (SASBF) were managed. Well, I want to focus on how the current CVFF should be managed.
Since 1969, the Organization for Economic Cooperation & Development (OECD) countries, have developed the shipyard credit arrangement which allows their shipyards to offer overseas customers loans up to 80 percent on new ships, with the ship buyers making a down payment of only 20 percent. The loan is repayable in eight and half years from delivery at 8 percent annual interest (subject to global demand and supply for new ships). The OECD is made up of 30 countries which include the United States, Canada, Japan, Germany, France, United Kingdow, South Korea and Australia, amongst others. Countries that attempt build ships but do not belong in the OECD clique may find their ships difficult to be classified by the Classification Societies. This is however a topic for another day.
But given the ship credit arrangement, I strongly recommend that NIMASA use the current CVFF to negotiate for shipyard credit for a number of coastal vessels from these countries. South Korea’s Samsung and Daewoo are particularly skillful at building export ships. NIMASA as custodian of the CVFF is also in a vantage position to guarantee repayment on behalf of the ISAN. Such brand new ships should undoubtedly secure contracts in the oil and gas industry, given the provisions of the local content law as being administered by the Nigerian Content Development and Monitoring Board (NCDMB). It is all a matter of will.

This arrangement however has implications for the Indigenous Shipowners Association of Nigeria, ISAN. They need to be organized into one strong body to manage the pool of vessels, a kind of shipowners’ cooperative. I wish to emphasize that cooperation amongst our shipowners remains inevitable if we want to make cabotage work. Better to own 1 percent of a viable fleet with strong cashflow and balance sheet than to own 100 percent of a cash-strapped shipping company dotted with obsolete ships.

To hone in my recommendation, I want to draw a parallel between what I am proposing here and the experience of the Lagos BRT operation with members of the National Union of Road Transport Workers, NURTW. At the kick-off of the BRT, the Lagos State Government asked the Union members who used to own the notorious molues to form a cooperative which would own the new BRT blue buses. The Union’s response gave birth to the NURTW Cooperative, popularly called “1st BRT Cooperative”. A second operator, the LAGBUS, owned by the Lagos State Asset Management Company was formed ostensibly to create competition. The state government, through LAMATA, then provided the loan syndication with selected banks (the world bank being the lead lender), from which they provided the infrastructure (dedicated lanes, bus shelters, maintenance workshops), the buses, and the working capital for running the buses. The cooperative own the buses, they supply the drivers, but they operate in synergy with LAMATA in rendering daily return of fares, training, certification, monitoring and discipline of errant drivers, and maintenance of the buses. LAMATA, with experts trained in public transportation systems, carries on researches to improve the BRT operationally and commercially. Whatever novel idea LAMATA has is passed to the Cooperative’s board and this is implemented with dispatch. A current idea is to change the ticketing system from paper ticket to e-ticket. LAMATA has run the pilot study on some of the buses with the cooperation of the Cooperative, and the public is merely awaiting implementation. Any wonder then that the BRT has remained a cash-cow for the Lagos government, the consortium of banks and the Cooperative. I have it on good authority that the Cooperative paid off in eighteen months, the 2 billion naira loan that was used to purchase the first 200 buses that launched the BRT operation. The initial pay-back period was to be four years! With their unexpected but now predictable stream of daily incomes, most members of the 1st BRT Cooperative have sold off or scrapped their molue buses; they have become of little use anyway.

Now LAMATA encourages individual members of the Cooperative to form companies and obtain franchises to run dedicated routes. With the wealth of experience they have garnered running the Cooperative’s blue buses, such franchises should be easy to run. The once foremost opposers of BRT have today become its most ardent supporters, thanks to the power of planning and teamwork.
Who says then that we cannot replicate this feat with cabotage. If ISAN would shun individuality for now, and embrace teamwork, and NIMASA would judiciously manage the CVFF without vested interest, learning from past mistakes and making good use of experts opinions, local and international, cabotage implementation would get on stream. It has been stalled for long enough.

Tunde Omoju, is a Consultant Maritime Economist, 08038125934