The Ministry of Marine and Blue Economy recently announced plans to begin disbursement of the CVFF. In this exclusive interview with the President of the Ship Owners Association of Nigeria (SOAN), Mr. Sonny Eja, he spoke on eligibility for the funds and why some operators might struggle to refund:
The Minister of Marine and Blue Economy, Adegboyega Oyetola recently mandated the Nigerian Maritime Administration and Safety Agency (NIMASA) to begin the process for the disbursement of the Cabotage Vessel Financing Fund (CVFF). What’s your take on this?
Well, first of all, I would say that it’s the right step in the right direction. I recall the last time we had an interactive session with the minister at an event in Ikeja, the National Single Window event, when I had the chance to speak with him, the minister was the one that even brought up the issue of the CVFF. When he mentioned the CVFF, I told him that it’s long overdue, that they should look at the playbook that was adopted by the Nigerian Content Development and Monitoring Board (NCDMB) when they had to disburse their intervention fund. And so, he said, okay, they will look at it. Frankly speaking, I thought it was one of those rhetoric’s. But when we saw the marine notice from NIMASA, we then realized the minister was serious about disbursement this time around. it’s a welcome development, and it’s the right step in the right direction.
Equally encouraging is the fact that they are going to partner with the Bank of Industry (BOI) for disbursement of this fund. That in itself is also encouraging because if they had wanted to partner with the commercial banks, then the interest portion of it would not be very favorable to ship owners or beneficiaries of this fund.
The marine notice released by NIMASA indicated that each ship-owner will get at most, $25 million. What types of ships can $25 million buy?
Now, in terms of whether the $25 mllion will be enough, of course, you and I know that if you want to buy a tanker today, $25 million will not be enough. However, there are different types of vessels in different areas in the industry.
Let’s even say that I want to get a large-size Platform Supply Vessel (PSV) today, the $25 million may not be enough for me. But even if you’re not going to get a new vessel, there are fairly used vessels that one can afford to acquire. And I know that a lot of players in the industry oftentimes would embark on this type of vessels. Again, you can have one or two companies come together to acquire a new vessel. Don’t forget that we have the downstream, midstream, and upstream players. We could have a group, or one or two companies that can come together, you know, to acquire new vessels. To me, that is still very okay.
Aside buying vessels, what other options are available for the would-be beneficiaries of the CVFF?
The other option available to the would-be beneficiaries of the CVFF is that the fund can be used for refinancing. Refinancing is when I have a vessel that is associated via loan with another bank, I can get this CVFF funding which the conditions would be favorable than the one with the other commercial bank, and use the fund to refinance the vessel attached to the other bank. That is refinancing. These are options open for ship-owners to explore.
The major reason the CVFF disbursement has been delayed up till now is down to fear that the funds might be mis-used by ship-owners. Do you have such fears?
I was at an event two days ago, and I said that this development is a welcome one. But there must be very strict measures put in place for people accessing these funds, so that these funds are not diverted for other purposes. I am not saying that people that would apply for this facility would be very irresponsible not to use it judiciously. That’s why I am happy that the BOI is involved. We had a very successful outcome with the NCDMB intervention fund and I believe also that this is going to be very successful because measures will be put in place to ensure that the beneficiaries will be able to pay back. I don’t expect people to be funny with the funds in terms of getting these funds, and then diverting it for other purposes.
I believe that if you have not identified a vessel that you want to acquire, or a tanker, there’s no need wanting to access the CVFF. If you don’t have a valid contract, and you apply for the CVFF, how do you repay? It shouldn’t be a case of, I want to just acquire this vessel, and then begin to source for a contract. How do you intend to pay back?
I am confident that there will be very good and strict measures put into this to guarantee these funds. For the Ministry in partnership with BOI to come up with this, they would have taken all this into consideration to see how they can guarantee these funds. I am confident that even if people want to be funny, measures will be put in place to get these funds back.
If a ship-owner does not have a valid contract, and gets the funds, how does he repay?
I am not saying anybody should not be given the opportunity, but then look at the dynamics yourself. Even the commercial banks, if you approach them today that you want a loan, they will ask you, what do you want to use the loan for?
We are talking about having a valid contract. if you approach the banks today, the commercial banks, and then you want to access $25million to buy a vessel, and you have a six-month contract, how do you expect that six-month contract to pay off the $25 million loan?
So, having a valid contract is key. That’s why I talked about refinancing. It will be tricky if people just want to access these funds without a valid contract.
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From the Marine Notice released, what are the criteria for accessing the funds?
The Marine Notice talked about certain things like a bankable feasibility report which will be subjected to independent verification by an approved submarine lending institution.
Again, because the funds are held in NIMASA, the beneficiaries must provide minimum equity contribution of 15 per cent. So, if you are trying to access $25million, you have to come up with about $3.7million as your equity contribution. So, it means you must have that liquidity.
You must also be able to pay all the prescribed fees. You must equally satisfy the funds managerial and operational ability. Those are things that they’ve put in place already.
Again, you must be able to provide evidence of contribution to the fund. This means that you must have been contributing to that fund for quite some time now, which, of course, is the 2 per cent capital tax that has been deducted from your receivables on a month-to-month basis when your client pays you.
So, if you have not been contributing to the fund, you have no business wanting to come and access this fund because you cannot reap where you did not sow.
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