Most bank loans to indigenous ship-owners structured to fail ― Operator
The immediate past President of the Nigeria Ship-owners Association (NISA), Mallam Aminu Umar, has said that the reason commercial banks have failed to salvage the plight of Nigeria’s indigenous shipping is that many of the bank loans given out to operators are structured to fail.
Speaking to Tribune Online in his office, on Thursday, the immediate past NISA President explained that commercial banks need to understand the Nigerian maritime sector more to play a part in it.
According to Mallam Aminu Umar, “It is important for the commercial banks to provide long term funds for indigenous Ship-owners to access. Yes, the Cabotage Vessel Financing Fund (CVFF) is there, but the maritime sector is too big for that fund. The CVFF cannot cater for Nigeria’s Indigenous shipping sector.
“There is a need to discuss with all the banks and encourage them to do more for Indigenous shipping because globally, banks finance shipping. That is why indigenous ship-owners will continue to have issues with the Asset Management Company of Nigeria (AMCON).”
On loan defaulters among indigenous operators, Aminu explained that it is not peculiar to shipping alone.
“Loan defaulters are not peculiar to shipping alone. We have huge loan defaulters in the manufacturing and oil and gas sectors, but maybe because the numbers of Indigenous Ship-owners are fewer than investors in this other sector, there is always much emphasis on ship-owners when it comes to loan default.
“It is important for the commercial banks to understand the difference between a shipping facility and a trading facility. You cannot give the same type of loan to somebody who is supposed to buy a commodity and trade it out within six months or one year, and also give somebody who is expected to buy a ship and pay in five years that same type of loan. In this kind of setting, the loan is already structured to fail for an indigenous ship-owner.
“From day one that the loan was given out, the banks already know it will fail because the facility is not done in the way it should be done. If you dissect all the failed shipping loans, you will find out that most were structured wrongly from inception. This is where most.of the mistakes are.”
On way forward, the former NISA President stated that; “We have already engaged the Director-General of NIMASA on this, and he has assured us that after the COVID-19 pandemic is over, he will have a meeting with the Heads of most commercial banks to discuss this issue.
“If the commercial banks are not willing to give loans to the shipping sector, it will be extremely difficult for Nigeria to develop her indigenous shipping sector, irrespective of any bailout that is injected into the sector by the government.”