Direct Bank Finance Model Won’t Work for Nigeria Shipping Industry - Ogbeifun

ABIOLA Seun I

The President of the Shipowners Association of Nigeria (SOAN), Greg Ogbeifun, has argued that direct bank finance will not be favourable to indigenous shipowners.

This was even as he disclosed that the failure of the federal government to disburse funds from the Cabotage Vehicle Financing Fund (CVFF) has shrunk indigenous shipping business by 42 percent.

Ogbeifun stated that in a Nigerian environment, a shipowner equally has the option of senior secured loans or private equity investors, who would buy into the company with an exit strategy.

He stated, “They give you the loan, take a stake in your business, work out an exit date and thereby work out the bullet payment.

“But the issue here is that they put a noose around your neck; any slight default, they call the loan; where you cannot pay, they take the asset, sell it and recover their money, and they are gone.

“And when the asset is not enough, sometimes they have a lien on your debenture, and they can call in all in your debentures, sell everything and waive you goodbye. So, a lot of people try to run away from that but it is an option of acquiring vessels, because if you are able to keep your contract, you can pay out and own that vessel.”

Calling for funds to be disbursed from the CVFF, he said the Minister of Transportation should engage some financial experts working with representatives of the Nigerian Maritime Administration and Safety Agency (NIMASA) and the shipowners to come up with the structure of disbursement that would ensure that every money disbursed was appropriately utilised for ship acquisition, and the means of pay back clearly ascertained.

He said that the CVFF should also be used to assist existing ships operating with funds borrowed at high interest rates.

Ogbeifun also called for the quick passage of the Petroleum Industry Bill, saying it would give confidence to the IOCs to make long-term commitments resulting in long-tenured contracts.

“The situation has been exacerbated by the high cost of funds in local money deposit banks where exorbitant interest rates have made borrowing for ship acquisition untenable.

“Today, you will find that there are no companies coming up to commission new ships. So, the country is dying in terms of shipping.

“The number of shipping companies from the time I took the mantle of leadership as the president of the Ship Owners Association of Nigeria to now has reduced by 42 per cent.

“The vessels are laid up; the banks have repossessed some of them. The owners cannot even dry-dock them; so, they pack them because of our financial challenges” Mr. Greg Ogbeifun, reportedly declared to a national tabloid, saying in the 14 years the CVFF has been in existence, no shipowner has been able to access it.

“Our financial system is not designed to support long term funding such as the type we experience in the shipping sector. And when you have to take such a facility, you are taking it at very unfavourable terms,” Ogbeifun stated.

“In the absence of support on the local front, Nigerian companies are finding succour in off-shore financial institutions where loans are obtained at business-friendly rates “, he concluded.