CVFF: Sad End to Indigenous Shipowners’ Drive for Financial Clout

To address the lack of financial power of indigenous ship owners to acquire vessels, the Cabotage Vessel Financing Fund (CVFF) was inserted into the Cabotage Act of 2003. But after 18 long years of promising to disburse the fund, the federal government last week shattered the hope of shipowners to access the fund, describing it as public fund. Eromosele Abiodun reports

To say that maritime transport remains the backbone of globalized trade and the manufacturing supply chain is like stating the obvious. As a matter of fact, more than four fifths of global merchandise trade by volume is ferried by sea. This has in no small measure enhanced growth in international maritime trade over the years.

According to a report of the United Nations Conference on Trade and Development (UNCTAD) on the review of the sector, in 2018, volumes increased at 2.7 per cent, below the historical average of 3.0 per cent from 1970–2017 and 4.1 per cent in 2017.

“Nonetheless, total volumes reached a milestone in 2018, when they achieved an all- time high of 11 billion tons,” UNCTAD said.

Over the years, despite its huge potential, Nigeria has been unable to contribute significantly to global merchandise trade due to the state of its shipping industry. It is not that efforts have not been made to redress this trend.

As part of efforts to address this challenge, the Nigerian Coastal and Inland Shipping (Cabotage) Act of 2003 was enacted to empower indigenous ship owners to take control of the nation’s coastal and inland shipping, otherwise known as Cabotage trade.

The Act was enacted to make Cabotage trade the exclusive reserve of indigenous ship owners, as obtainable in other climes. The law emanated after the realisation that foreign shippers dominated Nigeria’s Cabotage trade.

In passing the law, the lack of financial power of indigenous ship owners to acquire vessels was also put into consideration, which brought about the insertion of the Cabotage Vessel Financing Fund (CVFF). The law, however, made provision for 2 per cent contribution by indigenous ship owners from every contract executed to develop Cabotage fleet and local shipping capacity.Since the Act was established, it has remained a sort of mystery to stakeholders in the nation’s maritime sector.

Since the law was promulgated, local ship owners have religiously paid their 2 per cent contribution to the CVFF. With an estimated N136.5 billion now in the pool, efforts to disburse the money to shipowners in line with the law has remained elusive. This is after failed promises by successive Director Generals of the Nigerian Maritime Administration and Safety Agency (NIMASA), the agency in charge of the fund, which is domiciled at the Central Bank of Nigeria (CBN), to disburse the fund.

In 2018, following relentless agitation by the ship owners, NIMASA promised that it would commence the disbursement of the CVFF in 2019. It did not happen. Instead, the date was moved to 2020 and later the first quarter of 2021. We are now in the third quarter of 2021.

A Gale of Failed Promises
However, after 18 long years of promising to disburse the CVFF to deserving ship owners, the federal government last week terminated the disbursement of the fund, describing it as public fund.

Minister of Transportation, Rotimi Amaechi, who disclosed this during a ministerial retreat in Lagos, said despite the approvals by Mr. President and the Attorney General of Federation (AGF) for disbursal of the fund to ship owners, the minister of finance protested that the fund cannot be disbursed. Her objection was upheld by the government. Consequently, the hope of indigenous ship owners that they would soon have cheap and interest-friendly funds to enable them acquire ships and compete favourably against their foreign counterparts, has hit the rock.

Interestingly, this is coming barely one month after NIMASA said it has selected 11 indigenous ship owners to benefit from the fund, and that four Primary Lending Institutions (PLIs) would midwife the process of the disbursement after the guidelines for the disbursement is developed.

However, Amaechi heightened the confusion by asking the Nigerian ship owners to write a protest letter to Mr. President and copy him.

“The president made approval to go ahead and disburse the fund, and the attorney general also gave go ahead because the law says it’s a private fund, and then, minister of finance protested that it is a public fund, so it cannot be spent. So, the owners of the fund should then write to the president and copy me. Then, I will go back to the president because the law says it’s not public fund,”Amaechi said.

On maritime security, the minister said vessels are not sailing to ports in Port Harcourt, Warri and other eastern ports due to high cost of insurance resulting from insecurity on the waterways.

“If we address the issue of insecurity, which is the root course of high insurance premium, we will reduce the cost of insurance on cargo and more business will go to the South-South where we have other seaports,”Amaechi added.

It would be recalled that NIMASA had in March this year said it had received the approval of President Muhammadu Buhari to disburse the CVFF to qualified indigenous maritime operators in line with the Treasury Single Account (TSA) policy and the CVFF Guidelines of 2006.

Hapless Stakeholders’ Groan in Pain

Speaking on the matter, a Former Executive Director, Maritime Safety and Shipping Development, NIMASA, Dr. Ishaku Mabushi Shekarau rued the non-disbursement of the CVFF.

Shekarau, in a paper titled, “Cabotage Vessel Finance Fund: An Un-Utilized but Veritable Tool to Spring Maritime Economic Growth,” expressed dismay over the poor implementation of the provisions of the Cabotage Act.

According to him, the long delay in activating the funds, despite repeated promises by the authorities over the years has made the maritime industry lag behind in what he called “this season of buoyancy” and other several reasons.

He also listed the non-attainment of 24 hours cargo clearance target at the nation’s seaports; vehicular congestion at most of the ports; non-competitive port charges in relation to our sub-region and the non-implementation of the CVFF, as some of the ills plaguing the maritime sector of Nigeria’s economy.

He however called on the Federal Government to ensure that it addresses the disbursement of the CVFF before the end of the present administration.

His words: “I am persuaded (and I have good reason to believe that most maritime stakeholders share in this concern) that given the almost two decades span of Nigeria’s Cabotage Law and the humongous sums so far contributed by the operators in the name of CVFF, it is a major embarrassment that not a single ton has been added to indigenous shipping capacity via the financing of ships by this fund as intended.

“Abinitio, the underlining concern was that the Nigerian operators did not have cargoes to lift, even if they managed to secure platforms.This excuse is now anachronized by the fact that a good proportion of cargo in the petroleum industry inclusive of agro chemicals, construction, dairies, and so on is available for carriage by Nigerians.”

Shekarau, who is presently a maritime consultant, argued that besides the advantage of using the funds to purchase vessels or construct shipyards, it will directly or indirectly create employment and training opportunities for teeming Nigerian youths.

He was at a loss ass to why the CBN can sponsor agro dealers with money not contributed by them and yet maritime operators are denied their statutory right to borrow from funds contributed by them.

He wondered what alternate purposes the funds are being applied and what is the relevance of this application to the country’s national maritime development objectives?

He called on President Buhari, Amaechi and the management of NIMASA to recognize the CVFF as a specialized tool, which should be applied only to its specific purpose.

He maintained that it would be a legacy of the present administration if it breaks the ice and disburse the CVFF justly and equitably to the desired beneficiaries.

Shipowners React

Reacting to the debacle, indigenous ship owners under the Ship Owners Association of Nigeria (SOAN) accused the Ministry of Transportation and NIMASA of tossing them around like babies under the guise of working towards the disbursement of the over $200 million CVFF.

Speaking with newsmen, indigenous ship owners, who wouldn’t want to have their names in print, explained that just some few months ago, NIMASA had stated publicly that the CVFF fund is a public fund and is not owned by the indigenous ship owners.

According to the ship owners, “Recently, NIMASA during a media briefing said the money is a government fund. That statutorily, since they collect the money from ship-owners on behalf of the government, it is a public fund. Now the Minister of Transportation is asking us to write a letter of protest as owners of the fund. Who is fooling who?

“When NIMASA had already said publicly that the money is a government fund, on what basis are we going to write to protest that the Minister of Finance does not want the money disbursed? A month ago, NIMASA said the CVFF fund is a government fund. A month later, the Minister of Transportation said we should write as owners of the fund. Are we babies? It’s like they have forgotten from whose people they collected the money.

“For the past two years, all our correspondences to NIMASA have not been replied. Even the Minister of Transportation has not replied to any of our letters to him on this issue. Why does he prefer to talk to the media about it and deliberately refuse to respond to letters sent to him on it?”

Also speaking, the President of SOAN, Dr. MK George Onyung, explained that the group is currently reviewing the minister’s statement and will come out with a position paper soon.

“We are currently reviewing the minister’s statement on the CVFF and why it has not been disbursed, and will come out with a position paper soon,” the SOAN President told the Nigerian Tribune.