In this interview, Mr. Emeka Akabuogu, a renowned maritime lawyer looks at the Nigerian Cabotage market, the non-disbursement of Cabotage Vessel Financing Fund (CVFF) and the counterpart funding required from shipowners for the PIL-Nigeria partnership on the development of a national fleet. Akabuogu is also firm on the need for government to completely withdraw from the CVFF application and approval process. Ezinne Azunna writes….
Let’s talk on the status of the Cabotage trade and the non-disbursement of Cabotage Vessel Financing Fund. What implication does this have on the Industry and what should be government’s focus?
The CVFF (Cabotage Vessel Financing Fund) is meant to boost the capacity of Nigerian entrepreneurs to acquire vessels which will operate within the Nigerian coastal waters. One important issue about the CVFF is that its funding is actually from the same operators who are meant to benefit from it, which means that in the very first place, we should have an active market, an active Nigerian Cabotage market to ensure that the CVFF is actually effectively funded. So, you will see that the analogy will take us to the beginning of Cabotage and the efficacy or otherwise of the implementation of Cabotage towards ensuring that the Nigerians are benefitting.
So, the success of CVFF is a direct corollary of the success of the implementation of Cabotage. The wider the scope of the participation of Nigerians in the Cabotage trade, the bigger the purse of CVFF is going to be. Now, in that regard, we have not had the success which was anticipated at the beginning and as a result we can also see the concomitant effect on the purse of the CVFF which is limited.
We don’t have records or we are not keeping tracks so we are only rely on what government says every now and then and if I recall, the last statement I had government issuing was that CVFF has accrued to something in the region of about 50 billion, I’m not sure of the specific scope. Now, that is a drop in the ocean compared to what the market needs. That is an amount which can barely acquire one or two significant bottoms that can operate within this market. So, it is a challenge.
The further challenge is that even at that, the process of disbursement is opaque at best; it has been one story after the other. This was not what was expected. When the CVFF regulations were issued with banks designated as primary lending institution, the essence was to move the application and approval process out of government into the hands of professionals. The idea was to ensure that being in the hands of professionals; it will be given to people who merit the applications. But what we see in practice is that the banks are all beholden to the government and indeed don’t have the power to independently proceed and give out monies without final approval from the government, and the government are seen to be playing politics or probably even worse has been marred and in a self-inflicted miasma of self-interest so that it is the self-interest of individuals who are interested in one thing or the other that has seen the CVFF not being disbursed.
So, ultimately what we need to happen is that we define a framework which guarantees 100% that CVFF will be given to the deserving persons without government interference, without government interference in the least. Let the responsibility be that of the Primary Lending Institutions (PLIs) 100%, just as the Primary Lending Institution also bears 100% risk relating to the outcome of the lending process. That way we will have a more commercial approach which achieves two things; it achieves the commercial framework for beneficiaries and at the same time it gives the beneficiaries money which is priced significantly below the market rate. Those are the two things which we want to guarantee and we should not be interested in who gets what or what party who gets what belongs to and those are the reasons which have constrained the effectiveness of the CVFF up to this point.
So in summary, the issue is that the scope of the CVFF purse needs to be significantly enlarged. At this point in time, I would have thought that in CVFF, we should be talking of a purse which goes to trillions of naira and not a few billions. That’s why the scope needs to be significantly enlarged. For the scope to be significantly enlarged, the implementation of Cabotage needs to be on point. It is a shame that the Nigerian Content Initiative which came on stream at least six years after Cabotage did has achieved phenomenally much more success than Cabotage. It is a huge shame. So, as a result, the implementation of Cabotage needs to be really really rigid. And in doing that, the CVFF regulations probably need to be remodeled to remove that final approval which is given to government whether through the Minister of Finance or NIMASA. It has to be removed completely and given 100% to the banks. That, would be of immediate benefit to the Industry.
On PIL-Nigeria Partnership for the development of a National Fleet, it has been suggested that given the current decline in trade, government should assist indigenous shipowners by providing the counterpart funding needed for them to co-own the venture. Would that be a move in the right direction?
I don’t think that government should spoon-feed shipowners by giving them money. No. Shipowners should bear that risk by putting their money where their mouth is. But then, they would only be able to do that effectively if government does its part. And government part is very simple- Government should ensure that the captive market which will support the investments which you are requesting of these individuals is there for them. If the captive market is there, it makes commercial sense for them to go and source money and invest because there is a guarantee that they will get a return. So, that is the role of government. That is the primary responsibility of government. If government fails in that responsibility, it ultimately fails in its responsibility to individuals because those individuals who will take the risk to do what is needed of them will find themselves losing on all sides. So, it is not the place of government to bring in the money. I assure you, if government brings the money and puts it there, the money will go down the drain and that is applicable to all types of investment which has government participation.
So, as far as this new initiative is concerned, government’s role should be ensuring that if there are rules and regulations which must be implemented or must be enforced to ensure that the markets which are available for these potential investors are utilised, the government must ensure they enforce it. And, there are very simple examples. The NIMASA Act has examples of minimum volumes which need to be shipped on national carriers by State Governments, Federal Government…. If those ones alone are satisfied, I can assure you that this PIL initiative will not be enough to meet the market need. You will need more vehicles than that so, that is where government should focus its efforts.