$25m CVFF can fund vessel purchase with guaranteed cargo, says shipowner

By Joy Enamuna

A former chapter president of the African Shipowners Association, Captain Ladi Olubowale, has said the $25m available to individual beneficiaries under the Cabotage Vessel Financing Fund could be enough to acquire a sizeable vessel if backed by assured cargo and long-term trade contracts.

Olubowale spoke at the Maritime Reporters Association of Nigeria roundtable on Monday, where he argued that the success of the CVFF should be judged by the commercial viability of projects financed with the fund rather than the amount disbursed to individual operators.

He said linking vessel acquisition to identifiable cargo and firm trade agreements would enable beneficiaries to generate steady revenue, repay their loans and sustain their operations.

The shipowner noted that the Nigerian Maritime Administration and Safety Agency requires applicants to provide about $3.7m in equity to access financing of up to $25m, but said the more important question was what type of trade the proposed vessel would serve.

“NIMASA wants you to bring out $3.7m in order for you to be able to attract $25m. They will now look at it in your own case. What trade will you be using that for?” he said.

Olubowale advised the government to identify available cargo and its volume before approving vessel financing, stressing that commodities such as cement, dry cargo and other products require different types of ships.

He said a one- or two-year cargo contract could provide sufficient assurance for an operator to acquire a vessel and use the proceeds from the business to service the financing, thereby reducing the risk of default.

Olubowale, who disclosed that the CVFF had an estimated $700m, urged the government to deploy the fund strategically as part of a national fleet development programme, saying this could expand Nigeria’s indigenous fleet, strengthen local shipping capacity and enable Nigerian operators to take a larger share of the country’s maritime trade.