Experts in the nation’s maritime industry have called on Nigerian ship owners as well as other stakeholders in the shipping sector to embrace groupings and joint ventures as alternative sources for ship acquisition.
Principal Partner of the law firm, Kenna & Partners, Prof. Fabian Ajogwu (SAN) stated this while presenting a paper at the second edition of the Nigeria Ship Finance Conference and Exhibition (NIFSCOE) in Lagos on the theme:
“Advancing Ship & Maritime Infrastructure Financing in Nigeria: Innovative Concepts & Sustainable approaches.”
Ajogwu, said shipping has evolved globally lamenting, however, Nigeria has continued to look at the issues from the traditional standpoint.
He argued that ship ownership has gone beyond one man owning and managing vessels to an era where group of individuals/ organisations own vessels and outsource the management to experts in the business.
Nigerian ship owners, he said, need to utilise the power pool system as it would be better they own five per cent of a vessel working for any of the international oil companies (IOCs) and the Nigerian National Petroleum Corporation (NNPC) than to own several vessels without businesses and the vessels end up making them bankrupt.
Ajogwu said: “You could either have the money to buy the ship or you have to take on debt capital or a hybrid of both equity and debt. Today’s sophisticated shipping and the resources required means that the traditional way of it is obsolete.
“People need to raise funding but a ship isn’t a hotel that you build and expect patronage. Rather, you have to secure the source of repayment upfront by having contracts within the oil and gas sector. It is this stream of cash flow that would enable you repay the debt.”
He also warned the Nigerian Maritime Administration and Safety Agency (NIMASA) not to disburse the Cabotage Vessel Finance Fund (CVFF) to individual ship owners because the NIMASA doesn’t have the capacity to ensure repayment.
“NIMASA doesn’t have to reinvent the will with regards disbursement of CVFF. They should do onward lending to the banks so that they lend to the ship owners. The banks have the wherewithal to do the feasibility study of the projects as well as the business plan. The banks are also in better position to chase after the ship owners to ensure that they are successful and repay the loans,”he said.
He also noted that there are some ship building and ship acquisition funds all over the world that Nigeria can benefit from.
“These funds help the European ship builders to sell while it helps us acquire the vessels. We should be able to tap into such opportunities. We have to build companies or funds that own ships. Nigeria isn’t in Mars; we are in a world where some of these processes have been tested so we just have to replicate the initiatives to suit the local environment in the country, ” he added.
Meanwhile, he stressed the need to separate assets ownership from operations as most Nigerian ship-owners lack the managerial skills to handle the management aspect of the assets.
On his part, the Managing Director of PAC Capital Limited, Mr. Christopher Oshiafi noted that British Airways owned less than 10 per cent of the airplanes in its fleet.
He stated that ship owners could approach Export Credit Agencies (ECA) with the Nigerian Import-Export (NEXIM) Bank and other Pan African banks.
Oshiafi maintained that availability and reliability of cash flow from the project would convince the financiers that the ship owners would be able to repay the debts.
He also admonished the NIMASA to provide assurances to the financing banks to provide the deficits if the revenue from the investment falls below projected expectations as this would enable the financiers become more willing to sponsor ship acquisition.
President of the Nigerian Indigenous Ship owners Association (NISA), Mr. Aminu Umar described the business environment for ship owners in the country as “extremely challenging.”
He lamented that beyond the obvious challenges of funding; there was also another tasking problem of infrastructure.
“The infrastructure isn’t up to the global best standards and it has posed several safety issues to ship owners. We have ugly experiences as a result of channels that aren’t dredged and there are no tugboats to assist the vessels.
The channels aren’t well dredged so vessels encounter accidents and we can’t see the underwater. We only use the chart to see the draft of the water. These are infrastructure challenges and there are no provisions for emergency vessels for incidents offshore Nigeria. These are infrastructure deficits that the government should address” he said.