Ship-owners position for $3.5bn oil freight contracts, seek vessel financing from China

By Samson Echenim

After many decades of posing akimbo, indications have emerged that Nigerian ship-owners are taking vessel acquisition financing into their own hands, as they have turned to China and Norway for investment aid.

Business a.m. gathered exclusively that the ship-owners, under the aegis of Ship-owners Association of Nigeria (SOAN), having got tired of the spectator status in the shipping business, have decided to go to China for 85 percent financing of a shipping concern in a strategic plan to position for about $3.5 billion crude oil freighting contract expected to be hulled out by the international oil companies (IOCs) in Nigeria within five years after the country’s ban on waivers for foreign ships take effect.

MkgeorgeOnyung, President of SOAN and Lucky Akhiwu, chairman, technical committee of SOAN, told Business a.m. in Abuja on the sideline of a shipping industry forum that the association was going to China and Norway to seek 85 percent funding for a planned shipyard and vessels acquisition to deepen capacity in readiness to take over cabotage trading from foreign vessels.

The plan is part of the indigenous ship-owners upcoming summit in November, at which the local shipping investors intend to come up with policies and ways to finance vessel acquisitions to take over the country’s maritime business from a tight foreign grip.

Onyung said, “The Nigerian Content Development and Monitoring Board (NCDMB) has unveiled a five-year strategy for local content in marine spread for oil and gas and about $3.5billion worth of contracts is going to be dished out in the next five years by IOCs. So, that is a staggering value. It is $3.5 billion contracts coming on; it is like when they say a movie is coming soon. If you are not ready you will be sleeping on duty. What we are saying is that we ship-owners are thinking outside the box to move around to see who can help us acquire that capacity that will make us ready for the kind of business that is coming. It is not rocket science. We are saying that if Singapore is selling ship to us and they don’t have steel, why are we suiting down here and say because the Ajaokuta Steel mill is not working we cannot do anything?”

“We are bringing a team of financial experts and investment bankers to discuss how we can get finance; how we can leverage the bank for funding our shipyard and ship acquisition. Banklink Africa will be there on the panel to tell us how we can get money. We have planned a trip to China where we intend to get 85 per cent of our financing for our shipyard and the other 15 percent can be financed in the next 15 years, because we are aware that in the next five years, these foreign vessels will no longer be in our waters. That capacity is what we want to deliver in Nigeria. We are looking at getting 85 percent finance from a shipyard in China, while the remaining 15 percent will be financed by leveraging the banks here in Nigeria over a period of 15 years. We are taking it at SOAN level. We also want to start building vessels in Nigeria. It is that capacity we want to build,” said Akhiwu.

Before now, ship-owners have relied on Nigeria’s Cabotage Vessels Financing Fund (CVFF), which is reported to have reached $124 million in May this year and under the custody of Nigerian Maritime Administration and Safety Agency (NIMASA). But the ship-owners said they were tired of waiting for very small fund that cannot help their dream.

“Ship owners are just simply tired, relying on one source of funding, relying on CVFF. We have cried so much all these years talking about CVFF. Now, this CVFF is being handled by a committee to get to the root of it and make it work. However, we ship-owners no longer want to sit down and cry over spilt milk. That is why we are trying to make up with friendly ship building nations like China to be able to understand our peculiar challenges and come up with projections for the next five years in line with the abolition of waivers in the next five years to know what capacity, what kind of ship we need in the next five years so that we can collaborate with them (Chinese partners) and understand how we are going to acquire the ships while they are also thinking that they can help us as an alternative source of financing,” Onyung said.

“We can longer wait, because as posterity comes, our children will ask us, what we did as ship-owners to develop the industry. Shipping is 90 percent of global trade. So if we don’t take the bull by the horns now, we are going to remain spectators,” said Onyung, SOAN president.

While the ship-owners still covet the CVFF, they maintained that the fund remained too small to help their plans

“We are not giving up on CVFF, but what can the CVFF do for us? For instance, a DSV is about $150 million. How much is the CVFF? How much does government have? We are not talking about security patrol boat here,” he noted.

According to the SOAN boss, Nigeria has done only very little to tap her maritime resources, which has potential to employ more than half of the country’s unemployed population.

He said, “The world is made up of two thirds water, which is the ocean. Oceans of the world are still largely untapped, that is why we always talk about the blue economy. It has very huge potential for Nigeria which has not been tapped. That is why the theme of our conference is “Ocean blue economy and national development.” The wealth of the sea can feed the world. We have not even tapped into fishing. We have not tapped into luxury, such as cruising; we don’t have cruises, so the leisure of the ocean is also enough to prolong people’s life.

“We want the game to change and the laws are helping us. The Nigerian content law requires that the capacity to export our product should be minimum of 70 percent or thereabout, but if we don’t have ships, the CIF challenge will continue. The truth of the matter is that what ship-owners are doing about that is to engage the NNPC. We are going to seat and dialogue with them. They will get our own point of view. That is why we are talking about collaboration with shipping nations. If I bring VLCC (very large crude carrier) well managed, according to international best practices, NNPC will not look down on the ship; the world will not look down on the ship.”