By Elizabeth Toyon, Maria Yusuf & Habeeba Sule
The Director General of Nigeria Maritime and Safety Agency (NIMASA), Dayo Mobereola, has stated that the utilization of Cabotage Vessel Finance Fund (CVFF), which is a Nigerian initiative designed to boost the domestic maritime industry by providing financial assistance to Nigerian shipping companies for vessel acquisition will be monitored accordingly to ensure that the intended objectives are achieved.
In his remarks, during a stakeholders forum on the operationalization of the CVFF in Lagos , Mobereola said that the fund is not a grant program, but a strategic investment in Nigeria’s maritime future with single-digit interest .
He also reiterated that to ensure transparency and accountability, the agency has established a dedicated Secretariat Cabotage Unit adding that the agency is partnering with 12 Primary Lending Institutions (PLI) to facilitate assets to the fund. He urged all prospective applicants to follow the established procedures through partnering financial institutions.
The NIMASA DG assured stakeholders that the potential and proposed impact of the CVFF on the maritime industry would be transformative for the maritime industry by empowerment of industrial shipowners and indigenous shipowners to compete favorably with international shipowners boosting legal consent in the maritime sector, creating employment opportunities for Nigerian seafarers, amd strengthening auxiliary maritime services in Nigeria.
“The CVFF was established under the Coastal and Inland Shipping Act of 2003 to support indigenous shipowners for vessel acquisition and capacity development financially. Despite nearly two decades of regulatory challenges and bad experiences of the past, I am delighted to announce that under the leadership of President Bola Ahmed Tinubu , with the support and directive of the Minister of Marine and Blue Economy, Mr. Adegboyega Oyetola we have secured the necessary approvals for disbursement of the CVFF.”
The agency’s Executive Director, Maritime Labour and Cabotage Services, Mr Jubril Abba in his welcome address said the PLIs are major parties required in the disbursement of the Cabotage Vessel Financing Fund to qualified applicants.He added that the critical roles of the PLIs in operationalizing the CVFF cannot be overemphasized.
Abba stated that the potentials of the nation’s marine and blue economy when harnessed would be a significant contributor to the nation’s GDP and catalyze activities in other sectors that would lead to rapid economic growth and development in line with the renewed Hope Agenda of this Administration.
He noted that it is in line with this mandate that the Minister of Marine and Blue Economy, Adeboyega Oyetola, had since inception of office rolled out various action programs and revived critical policies for immediate implementation by agencies under the Ministry.
He also said that Oyetola has given the directives for all hands to be on deck to ensure the immediate operationalization of the CVFF as Nigeria gravitates towards building a resilient and robust economy that would not be solely dependent on fossil fuels as a key resource provider of its revenue streams.
” It is with great honor and a profound sense of gratitude and expectation that we welcome the dawn of a new era for Nigerian maritime industry as we seek to unlock its immense potential through the operationalization of the CVFF. This is another significant milestone in a stronger maritime industry that would stimulate economic growth, sustainable development, enhanced capacities and job creation, NIMASA’s unwavering commitment in empowering local ship owners and operators, stimulating domestic maritime commerce and reducing our reliance on foreign vessels by providing accessible financing options.
The clarion call is for collaborative partnerships to ensure the success of this journey to harness the full potential of our domestic shipping and ensure the sustainable growth of the maritime industry.We call on all stakeholders to rally around NIMASA as we pledge our renewed dedication, innovation and partnership in achieving a shared vision for a vibrant and self-reliant maritime sector.”
The financial consultant to NIMASA on CVFF, Buhari Yusuf, in his presentation on roles and responsibilities of parties /stakeholders said the operationalization of the funds is hinged on an efficient collaboration amongst all parties including the applicants, lenders, NIMASA, PLIs and regulatory authority.
He said applicants of the funds would have to admit eligible bankable transactions, which is a form of an application. He emphasised that there is a very pertinent point which is the provision of minimum equity contribution of 15% and it is the minimum but it could be much more than that , depending on risk, appetite and the commitment for the project under consideration.
The PLIs, he said which are the banks are are expected to review them, conduct credit assessments, issue term sheets which will guide both NIMASA and also the applicants as to what they are going into. He announced that the terms and conditions will be spelled out and the covenants will be made known on those term sheets. It’s expected that term sheets should be brought out to serve as a template for decision-making by the parties who will be borrowing and also the parties who will be bringing in the counterpart funding.
On funding framework he said that applicant are to bare the minimum of 15% of the project. Asset acquisition cost and their primary responsibility is a bankable transaction and equity contribution, while PLIs are to bare the minimum cost of 35%. Of acquisition cost, NIMASA 50% or $25m and the no direct funding will come from the ministry as they are to process the approval of transactions.
Buhari disclosed that on the disbursement of the funds, upon fulfilment of the Conditions Precedent (this involves a complex series of activities, confirmations, verifications, checks, payments and document executions), NIMASA will be notified by the PLI to activate its obligation of funding to the designated PLI escrow account as defined in the transaction for onward disbursement on behalf of the Applicant.
According to him, after that NIMASA will activate its internal funds disbursement process flow as this is expected to be specialised for the CVFF in consideration of its unique features which differs from the regular financial payment process for regular activities of NIMASA and the agency shall engage the Ministry of Finance and Central Bank of Nigeria (CBN) in consideration of the funds being held in the Treasury Single Account (TSA). He noted that the process is expected to be completed by the NIMASA within 15 days of procuring the Ministerial approval.
Aburime Ehimare, Zenith Bank Assistant General Manager said there is need to have a post-disbursement stakeholder working group which can comprise of the PLIs, NIMASA , and industrial experts, so that the CVFF can be monitored to achieve the intended purpose.He requested for an agreement on a security-shared delivery framework that would define the recovery process clearly as the PLIs will pay 100% of the credit risk, while NIMASA will pay 50%
“For instance, if there is a vessel liquidation, what would be the sharing formula between NIMASA and the PLI? Even though we have shared interests in these vessels, we play our part. We’re talking about the credit risk of 100%. For the bank, we want to appeal to NIMASA, and this is a strong appeal from our end.”
