Thursday, 30 September 2010 By David Ogah

SHIPPING companies that applied for vessel acquisition loans under the nation’s Cabotage Vessel Financing Fund (CVFF) may soon access the facility as the Nigerian Maritime Administration and Safety Agency (NIMASA) had already transferred $71 million (N11.06 billion) to four commercial banks for disbursement to the applicants.

 

The four banks are Fidelity Bank, Skye Bank, Diamond Bank and Equatorial Trust Bank.

The banks were selected among 25 others that applied to serve as primary lending institutions under the CVFF scheme.

 

Sources at the banks confirmed the deposit of $18.6 million at each of them at the weekend, but they said, going by the huge cost of vessels, only few applicants might benefit from the fund.

 

They said loans from the fund would attract only 5.6 per cent interest yearly.
The primary lending institutions were asked to ensure that only applicants with ability to contribute 15 per cent cost of the vessels to be acquired under the loan scheme are attended to during disbursement.

 

Besides, the banks were asked to carry upon them a financial obligation to the applicants by availing them a loan opportunity of 35 per cent cost of the planned vessels to be acquired at below 10 per cent interest rate.

 

The government had since 2007 released the guidelines for the fund administration. It said the fund would be managed by primary lenders, which should be commercial banks.

 

The loans under the CVFF scheme ought to have been disbursed earlier as the process, which was put in place was truncated by the National Assembly, which had erroneously believed that it ought to mediate through approval before the fund could become operational.

 

The misunderstanding by the lawmakers was only recently cleared when they were intimated with the provisions of the Cabotage Act, which empowers the Minister of Transport to formulate guidelines for the fund administration.

 

From the guidelines released by the then Transport Minister, Cornelius Adebayo, there were indications that NIMASA would not be involved in the CVFF management, apparently to avoid a re-occurrence of what happened about 14 years ago, when many Nigerian ship owners benefited from a similar scheme and refused to pay back.

 

This is the second time the government would assist Nigerian ship owners. The first assistance came 14 years ago when government gave out over $170 million from the then Ship Building and Ship Acquisition Fund (SABSF).

 

The loans were given without collateral and many of the beneficiaries capitalised on the institutional lapses and refused to pay back at maturity.

 

The SABSF was poorly handled and up till date, many of the beneficiaries have not paid back because there was no collateral or security at the time the loans were disbursed.

 

The arrangement under the CVFF guidelines then was that the intended beneficiaries would first apply to the Primary Lending Institution (PLI), which should normally be the bank with relationship with NIMASA.

 

Besides applying to PLI, each of the beneficiaries would need to tie their respective loan application to a maritime project for which he must provide 15 per cent of the cost, having been pre-qualified by NIMASA that would be made to guarantee repayment.

 

According to the guidelines, the PLI would prepare a bankable and feasibility report of the project to be subjected to NIMASA’s verification.

 

The Transport ministry, which released the guideline then, said that only Nigerian citizen or firms wholly owned by Nigerians would be qualified to benefit from the loan scheme.

 

They would, however, be made to show evidence of managerial ability and acceptable equity in the project in the case of joint venture project.

 

It said that all agreements under the fund would be signed with the primary lenders, even when parties to the fund would include NIMASA, Federal Ministry of Transport, the banks and the applicants.

 

 

Source: Guardian