Overcoming The Challenges Of Maritime Financing

Sir Peter Olorunfemi is the Head, Peter Maritime Consulting Services Limited. In this interview, he tells Ifeoma Oguamanam the challenges inherent in maritime financing and how to overcome them; he also educates you on how the presence of maritime banks of merchant nature can help to monitor the activities of maritime and how ship owners can be beneficiaries. Read on.

Before now you were in the banking industry can you tell us your experience?

I was not in the maritime industry directly, I used to work with Skye Bank and Skye Bank happened to be the first bank to go into maritime business in Nigeria, about 10 years ago, I happened to head the maritime desk and from there I got enough experience and developed a deeper interest in maritime issues both in Nigeria and outside the country.

Can you tell us what financing Maritime in Nigeria is all about?

When you talk about financing maritime business through banks in Nigeria, it is very low because banks and other institutions are not actually investing much into this sector for now. As I mentioned earlier, some banks that got involved in it, like the bank that I used to work for was involved in maritime but there were mistakes that we made then and when a bank makes mistakes in lending and  don’t get their money back on time, it may not interest them to go further. But from being outside now and with my experience, I realized that it is just for the banks to learn how better to do the business because it is very lucrative.

Also, the Federal Government has not shown any positive interest in the maritime business in terms of financing, and recently, the Central Bank of Nigeria (CBN), came up with financing for certain sections of the economy and they included agricultural sector, hotel business and some other groups but they left out maritime and what our company did then was to write and ask why maritime was not included, we also remember that the Bank of Industry also set up some financing for aviation at one time but they did not do anything for the maritime industry and we wondered why, it is either they do not know how to fund maritime or there is that perception that it will be difficult to get their money back, but unless we change, the industry may not grow because without funding Nigerian ship owners may not be able to meet their business needs, since every aspect of maritime calls for big money and unless Nigerian ship owners are able to get investors coming in to assist them, they won’t be able to compete with the international maritime operators that have cheaper sources of money and availability of funds from their country.

Can you enlighten us on the criteria that a ship owner needs to go through to access finance?

The major prerequisite to obtaining loans is that you must have business, you must have a contract that you want to execute, and ironically while they are bidding for contracts, the company that have contracts to give, insists that the ship owner must have an acceptable  vessel, so it now depends on which one comes first, the bank is asking that you must have a contract and the contractee is insisting that you must a vessel that they can check and that create a problem for the Nigerian vessel owners. So how do we link the chain?  that is where we the consultants that are into maritime consulting, we come in, if anybody is interested in buying vessels and they come to us,  we look at what they want to do with the vessel, we can  get the banks for them and then present their case to the banks better than the way they will present it themselves and if they need any assurance from the contractee we can also send to them details of what they are working towards in meeting their terms. So we bridge the gap between the two or three groups; the person that wants to buy the vessel, the bank that wants to fund the vessel and the company that has a business contract.

What do you perceives are the challenges of financing maritime aside from sourcing funds?

The first one I mentioned is the availability of funds, the second major one is for them to actually have the contracts from the maritime operators because if you are able to get contracts and you are able to get funding it will make it easier to build indigenous capacity, so those are the challenges that they do have, the other challenge is the creation of an enabling environment by the government, there are legislation that the government is working on, there is the local content that is already in place and they are not doing too badly in making sure that Nigeria gets contracts that are due to them.

There is the aspect of lifting crude oil, no Nigerian vessel is involved in crude oil lifting, and I mean in terms of international crude oil, they are working on it but the earlier that is done the better. If Nigerian ship owners can come together and own a company that will be involved in lifting Nigeria crude oil how good it will be, because that means that they can give more jobs to Nigerian ship owners, that is, like twenty-five thousand tones, fifteen thousand tones even one thousand tones, and maybe the supply of other things, they can also bid for the vessel of their choice. Another one is having good dockyards in the country, today we have Niger dock, and apart from that there is the continental ship yard, naval dockyard and other smaller ones. In Niger dock, because their business is much, their customers complain that they delay a lot, the continental ship yard is not big enough for some of the Nigeria vessels, many of the Nigerian ship owners go outside the country to go and work on their vessels whenever they have issues, so we need good dockyards to come into the maritime business, the banks and institutions are ready to finance it, and then if we have two or three more dockyards in the country it will help a lot. Many of Nigerian ship owners take their vessels outside the country, either to Ghana or Cameroon or other places for dockyard business and going from here to that place means they could spend up to seven hours or more, it is money and time wasted and they still have to queue when they get there, but if we have this in this country which can easily be done it will make life easily for ship owners.

What will it take to have Nigerian built ships?

The first thing that it will take is, the Nigerian government taking a positive posture towards it, when government decided to show interest in Agriculture, it started improving, and people outside started coming into to invest and make sure that Agriculture grows, when the aviation was going down and they tried to assist, now that place is coming up, Nigerians now have private aircrafts and they are now more developed even though it is more volatile than shipping but it is being developed. If government now shows positive interest to the aspect of maritime, then the dockyard owners outside the country will want to come and invest in Nigeria and Nigerians can join them and Nigerian banks can now come in to provide funding.

So until when we have all these things; the first one is the government showing positive attitude towards maritime, I might be wrong but we have not seen it so far, NIMASA has tried in their own little way but they have not gotten to the level expected, and the area I think that NIMASA has not performed very well (maybe it’s not their fault totally) is the Cabotage Vessel Financing Fund (CVFF) and also if the CVFF had come out and the ship owners have access to it, some of them will have gotten the money at a very good rate from CVFF and they will leave the banks, the money they will give the bank is just about 35% of the total money, so the banks just have N1b on maritime and will have spent only a part to assist the CVFF, they will still have more money to give to other people instead of giving the whole N1b to everybody, but because some of their customers have won CVFF, the money they will take will be lower, it now makes it easier for them to finance others both from the CVFF and the banks but because the banks are not seeing the CVFF coming in, they are not seeing government opening lines for lending to maritime, that has made the business to be dull, the result is that there is no good dockyard except the two or three that I have mentioned.

The ship owners are suffering, they were happy that they are still allowed to do the single hull which is not good for the business, single hull is not good for the nation, but you can’t scrap it, because about 70 – 80% of nearly all the ship owners, that is what they have, so if you scrap it today a lot of them will be out of business and banks are going to lose lots of money because they financed and funded these vessels and they have not been paid in full, so when you scrap it and all the people have to stop at the same time, the price of the vessels will come down and that will affect what the banks will get from their loans, it may not cover the loans, but it is a good thing that this has been done now, that is, they have been given some years more, but between these five years that they have, there must be an enabling environment from the government and from everybody that is involved in maritime, from the banks and from the ship owners.

Then another thing that I have noticed from ship owners which has to change, is their attitude when they want to go and borrow money from the banks, some of them are just after cheating the banks, that means, taking money and not properly investing it where they are supposed to, the banks need to put in place good consultants to make sure they check what they are giving and what the ship owners are buying. What I mean by that is that everybody has to play their own part, the ship owners have to play it well, the banks that are involved in maritime have to play it well and government has to play it well. If that is done, you will find out that maritime business will grow, maritime business is a business that will give jobs to many people of various backgrounds, the caterers, electricians, painters, etc, they have people that can be employed but unless this sector is opened and not only the Federal Government should be involved, Lagos state and all the coastal line states should be involved, they should play prominent roles is maritime so that they can develop the industry, what is wrong if we should have a very good passenger carrying vessel that can take people from Lagos to Port Harcourt by sea? So that we can reduce people travelling by air and road, what is wrong if we can have our goods coming into Lagos and then we have other smaller vessels that will take imported goods to other areas in other reverine and coastal states? What is wrong if those people that want to export timber and so on, instead of going by road they can go by sea they can go to Lagos or Port Harcourt or wherever and from there, they go international? It can really turn Nigeria into the hub for West Africa even for Africa because we have everything, God has given us everything we need, and it is just for us human beings to develop that aspect further.

The ship owners are not organized and united; there is no strong front so to speak because a new association called SOAN just came up so with this issue on ground,

What is the implication for the maritime sector in Nigeria?

Well, every association is made up of human beings coming together so they do have a time that they disagree to agree, what you just mentioned now has just occurred this year and that must be the Nigerian Ship owners Association (NISA), during their elections some people were not happy with the results and things like that, but it does occur even within a nation, where you have a nation having interim management and so on, Nigeria had it at one time when we were to move from military to civilian government and it sorted itself out. This one in question is not the main problem of the ship owners, these are just grievances and I can tell you within the next three four months they will come together because whatever had driven them apart will still bring them together, there is no way you can have splinter group in maritime, when they were just one group they did not achieve much, how much will they achieve within a splintered group? So, my advice to them is that every one of them should come together to drive the industry forward.