Shipping Development: FG approves disbursement of N16bn, $350m CVFF
…Lists five Administrative Banks
President Muhammadu Buhari has approved the disbursement of the Cabotage Vessel Financing Fund (CVFF).
The CVFF is anchored on the Coastal and Inland Shipping Act 2003, aimed at boosting indigenous capacity in shipping trade.
The Hon. Minister of Transportation, Mu’Azu Jaji Sambo, disclosed the development on Saturday after a flag-off ceremony of the Nigerian Seafarers Development Programme code-named ‘NSDP TERRA 3’ program facilitated by the Nigerian Maritime Administration and Safety Agency (NIMASA).
Speaking, the Minister promised to formally communicate the approval to the Director General of NIMASA, Dr. Bashir Jamoh, on Monday, and expect him to take immediate action for a memo concerning the disbursement.
Amount in the Fund
On the amount money presently in the Fund, the DG NIMAS, Dr. Bashir Jamoh, told newsmen that the two components of the Fund – Dollar and Naira, have, $350million and N16billion respectively.
He added that “we are going to develop an active working plan with key performance indicators and it will be made known to all stakeholders; it is going to be a transparent approach for everybody to be able to know and hear when the first check will be issued.”
The Administrative Banks
Sambo disclosed that five banks that had been approved by the president for the disbursement of the Cabotage Vessel Financing Fund are; Union Bank , Polaris bank, Zenith bank, UBA and Jaiz bank. He added that following the guidelines for the disbursement of the fund, as approved by the national assembly, criteria for choosing the banks were followed and the banks were recommended to Mr. President.
Who is Eligible
Speaking on who is eligible for the fund, Sambo said: “The beneficiaries of the funds are those who have been contributing to the fund. It’s as simple as that. So, if you have contributed to the funds, that is number one eligibility, and the ability requirement is as you meet the terms and conditions; for example, if you have 50% of the amount you want to borrow, you have to do a credit assessment of your request and the credit assessment consist of so many things. Until your application is successful, we cannot say this are the beneficiaries of the funds.”
The guidelines for the disbursement include that “applicants for the funds would make equity contributions of 15%, NIMASA would contribute 35% and the balance of the 50% would be provided by the banks. Other additional requirements for eligibility for the funds include contribution to the fund, because it can only be accessed by those who contribute.”
Other assessments, according to Sambo, include having both the Ministry of Transportation and NIMASA, and the Banks, look at the issue of off-taking.
He notes that the structure would ensure protect the Fund against any bad loan.” The easiest way to guarantee payback is that the applicant shows you that he already has an off-taker for his vessel; he has to show you a contract, and you carry out due diligence to ensure that contract for three years, five years, 10 years is true and irrevocable; that way, all proceeds from that contract goes straight into the applicant’s loan account. Of course, the banks know how to do that; they call it a domiciliation of payment under a tripartite agreement. Under a tripartite agreement, domiciliation of payment will be guaranteed. Therefore, proceeds from the off-taker on behalf of the beneficiary of the fund go straight to that loan account. That is a way that we can guarantee that we are giving this fund and that they will be paid back,” Sambo said.
Understanding the concept of National Fleet development
Sambo’s understanding of a National Fleet is have a carrier floated not necessarily by government, but the government providing an enabling environment for the ship or carrier to be floated. He said it may follow an expansion by making funds available to more Nigerians to acquire vessels or for those who already have vessels enable them expand.
The idea for him, is that if the CVFF disbursement enables an increase in the number of shipowners , with increased vessels from like 50 to 150, then it would be correct to say that the government’s effort has enabled the increased of the national Fleet. “We don’t have to have a carrier that says ‘Nigerian Shipping Line’. So, if by approving and disbursing the Cabotage Vessel Financing Fund and Nigerians are able to acquire more vessels, I think we have increased indigenous tonnage and we have therefore revived the National Fleet,” Sambo said.
What is at stake
The Hon. Minister of Transportation takes responsibility to see that action follows the approval for disbursement of the CVFF.
He said that gaps that impeded the disbursement earlier had been identified and properly addressed, thus giving assurances of the disbursement as planned.
He noted that his predecessor actually had an approval from Mr. President for the disbursement of the fund, but some administrative bottlenecks involving the Federal Ministry of Transportation and that of Finance, stalled the progress at that time.
“We are also going to ensure that we have an administrative structure in place very quickly it shouldn’t take more than three days, in such a way that the loan applications are formally and professionally scrutinized to ensure that this money is not given out as a largesse,” Sambo added.