N904bn funding gap threatens vessels acquisition by Nigerian shipowners
The Nigerian shipowners will need an additional N904 billion to the N36 billion accrued in the Cabotage Vessels Financing Fund (CVFF) to acquire vessels needed for the maritime industry in the next four years, a report has shown.
This was even as the Director General of the Nigerian Maritime Administration and Safety Agency (NIMASA), Dr. Dakuku Peterside said that the CVFF is not enough to finance the acquisition of maritime assets by indigenous shipowners.
According to Nigeria’s Maritime Industry Forecast 2019-2020, tagged: “Harnessing The Maritime And Shipping Sector For Sustainable Growth” launched in Lagos by NIMASA last week, Nigeria’s maritime sector has been estimated to spend about N939.5 billion ($2.588 billion) on vessels financing in the next four years
Dr. Peterside who was considering the fact that shipping is capital intensive said since the CVFF is not adequate to address the huge demand for maritime asset, NIMASA is looking at other Ship Financing Models to encourage the local operators.
“To enable Nigerians to play a major role in the maritime and shipping sector, two things are critical, the first is asset acquisition and the second is human capacity.
“It’s a known fact that shipping is capital intensive and that the CVFF which there is so much noise about isn’t adequate to address the huge demand for Maritime assets. Because of that NIMASA is working with other stakeholders and we are looking at other ships financing models.
He continued, “We have had series of engagement at the highest level with the Central Bank of Nigeria (CBN) Federal Ministry of Finance (FMOF) and we are pushing for special intervention funds at special interest rate not more than a single digit interest rate and other incentives that will drive optimal performance in the sector.
“We shall not relent in our drive to put the right framework together to help beneficiaries and investors have a good return on investment.”
The outlook showed that the top five vessels in projected demand between 2019 and 2023 would be tugboats, security patrol vessels, jargon barges, and crew boats, among others.
Breaking down the expected expenses, it noted that industry’s expenditure on category 1 vessels was would be $1.65 billion or 51 percent of total spend compared to $1.04 billion or 33 percent for Category 2 vessels and $519 million or 16 percent for Category 3 vessels, totaling $2.588 billion (about N939.5 billion).
However, the nation spent about N1.09 trillion on vessels in the last four years. Between 2014 and 2018, the industry expenditure of $2.21billion on category 1 of marine vessels accounting for 73 percent of total funds spent on marine vessels. Category 2 expenditure stood at $393 million or 13 percent, while $ 437 million or 14 percent was for category 3 vessels.
Though, the Director-General, NIMASA, Dakuku Peterside, said the maritime sector has the potential to contribute at least 10 percent of Nigeria’s Gross Domestic Product (GDP) in no distant future, adding that Nigeria has the biggest market in Africa; and generates about 65 to 76 % of cargo throughput in West Africa, while 65 percent of all cargo heading for these regions will most likely end up in the Nigerian market.
It is also noteworthy that while growth in the global maritime sector is expected to slow over the next five years with crude oil projected to decline by 0.1%, containerized trade to decline by 0.4 % and seaborne trade by 0.2%, Total fleet increase was projected at slightly over 4% growth for both 2019 and 2020. The baseline forecast is based on the 2018 outcome and 2019 Economic Recovery and Growth Plan (ERGP) forecast for total trade and foreign reserve.
The optimistic forecast is based on the assumption that total trade will increase to N28.55 trillion in 2019 and N30.11 trillion in 2020, while foreign reserves are $44.7 billion in 2019 and projected to be $61.7bn in 2020. NIMASA has an optimistic projection of a 0.67 % increase in 2019 and the same to be maintained in 2020.
While noting that the drivers of the macroeconomic outlook for 2019 include the general elections and its aftermath, prices of crude oil and policy imperatives such as fiscal, monetary and regulatory, Dr Dakuku disclosed that the maritime forecast model adopted by NIMASA projects an increase in demand for maritime services in Nigeria considering the global and domestic economic conditions.
On the regulatory aspect of the 2019 forecast, Dr. Dakuku stated that it is expected that the Suppression of Piracy and other Maritime offenses Bill (Anti-Piracy) will be passed into law within the margin of the 8th National Assembly to provide a robust and detailed framework to criminalize and punish piracy and unlawful acts in the Nigerian maritime domain as well as give further expression to the relevant provisions of the International Maritime Convention on maritime security to which Nigeria is a party.
Accordingly, he said that all these will provide the necessary assurance to foreign investors that Nigeria and the Gulf of Guinea to a large extent is a safe hub for International trade. Other Bills that would impact on the sector are National Transport Commission Bill, Petroleum Industry Governance Bill, National Inland Waterways Authority Amendment Bill, Coastal and Inland Shipping (Cabotage) Amendment/Revised Bill and Ports and Harbour Bill.
The challenges highlighted for stakeholders in the Nigeria maritime sector to contend with in 2019 include funding, ethnological change, the supply of specialized maritime industry skillset, and efficiency of Ports and Shipping Companies amongst others.