Transportation of people and goods within the same country is known as cabotage and was originally applied to coastal transportation but it has since evolved to include aviation, road, and railways. The objective of this form of transportation is the protection of the domestic shipping industry by the preservation of locally owned shipping infrastructures and businesses.
Water transport is still very much important globally and in Nigeria. To preserve the sector, initiatives were developed to encourage participation in the maritime sector, one of such initiative is the Cabotage Vessel Financing Fund (CVFF of the Fund).
The CVFF is an intervention fund created by the Federal Government of Nigeria (FGN) for the development of indigenous shipping capacity, by providing funds for vessel maintenance and acquisitions among indigenous operators. Also, to ensure that the maritime sector could compete globally. To achieve these objectives certain measures needed to be put in place including adequate funding, monitoring, and adequate & efficient administration.
The CVFF coordinate funds as it relates to indigenous shipowners and any other incidental activities that evolved around indigenous shipping.
The CVFF was established by the Coastal and Inland Shipping (CABOTAGE) Act, of 2003. Part VIII, Sections 42 to 45 of the CABO-TAGE Act, provides that CVFF is solely to help indigenous shipowners to access funds for the acquisition of vessels, facilitation of vessel charters, development of shipyard/vessel construction/vessel repair, and other projects incidental to indigenous shipping. The CVFF is generated from the following sources:
The fund is collected by the Nigerian Maritime Administrative and Safety Agency (NIMASA) and deposited in commercial banks and administered under the guidelines that are proposed by the Minister and approved by the National Assembly.
Section 44 of the Act provides guidelines on the structure of the fund (Cabotage Vessel Financing Fund (CVFF) Guidelines, 2006). While Section 45 states that the beneficiaries of the fund shall be Nigerian citizens and shipping companies wholly owned by Nigerians. Even though the fund is majorly generated by all ship owners regardless of their nationality.
The parties involved in the dispensation of the funds are:
The requirements for accessibility of the fund are:
Every fund is subject to the approval of the Ministry of Transportation, this is to ensure transparency in the disbursement of the fund.
The fund was established almost two decades ago at the time of writing; however, it has never been disbursed by the Federal Government despite a continuous request by the indigenous shippers. Non-disbursement of CVFF has hindered the indigenous shipowners from acquiring vessels or maintaining the existing vessels, consequently, making it impossible for them to compete with their international counterparts. This has resulted in the Nigerian Maritime sector lagging and not being able to compete in the international space or function properly within the Nigerian shores.
It has been argued in some quarters that given that shipowners are unable to access the funds, the objective of the fund has been defeated. What then is happening to the Fund, as there are continuous or there should be continuous contributions to the fund. The question to be answered by the regulator or ministry is WHERE IS ALL THE MONEY contributed going?
The Fund does not belong to the Government, nor is it meant for public projects. The sole purpose of the Fund is for the utilization of the shipowners alone and any project incidental to indigenous shipping. The refusal of the Government to distribute the fund is an abuse of power, an infringement of the Indigenous Shipowners’ rights, and an obstruction of growth in Nigerians’ coastal trade.
The above has pointed out the negative effect of non-disbursement of funds, the positive angles are as follows:
7.1 Sometime in 2021, there was confusion as to what the Fund was meant for and who could access it. The Minister of Finance had protested publicly that the Fund should not be disbursed to private persons because it is a government Fund so it should be used for government projects. This clearly shows that the Minister of Finance does not have a sound knowledge of what the CVFF means and its purpose.
7.2 The CVFF is contributed by shipowners who are paying 2 (two) percent of their own money to the Fund. The collection and disbursement of the CVFF is backed by the provisions of Section 42(1)-(2) of the Cabotage Act 2003, which aims to promote the development of indigenous ship acquisition capacity by providing financial assistance to Nigerian operators in domestic coastal shipping.
8.1 Renewed hope was first given to the indigenous shipowners in 2022 when President Muhammadu Buhari announced the disbursement of $350 million. However, as the indigenous shipowners thought about the total contributions over a period of nearly 20 years, rather than being happy, they cried out to state that the amount of $350million could not be the true and accurate contributions of the shipowners, and to the fact that there have been different versions of the total Fund available from the various Ministers of Transportation over the years. The indigenous shipowners alleged that “the money accrued so far into funds since inception ought to be closer to over $2billion (Two Billion US Dollars).” They pointed out that the $350 million is not enough to acquire 6 vessels.
However, the Director-General of NIMASA, clarified that the Funds available under the CVFF in the naira component is about ₦ 16 billion while contributions in the Dollar component is about $350 million.
8.3 The Federal Government is set to disburse this Fund and has announced the appointment.
of Union Bank, Zenith Bank, Polaris Bank, United Bank for Africa, and Jaiz Bank as the Primary Lending Institutions (PLIs) for the disbursement of the Funds. Applicants of this Fund are expected to make an equity contribution of 15 percent while NIMASA would make an equity contribution of 35 percent and 50 percent would be provided by the banks.
9.1 SA is the body of all indigenous shipowners in Nigeria comprising individual and corporate bodies. There are two fractions of shipowners’ associations in Nigeria, they are i. Shipowners Association of Nigeria (SOAN); and ii. Nigerians Indigenous Shipowners Association (NISA). These 2 associations carry out the same course. However, the Director General of NIMASA, stated that the 2 bodies should come together as one to fight the cause of the Indigenous Shipowners to strengthen the code of the members.
It is clear from the above that the Cabotage Vessel Financing Fund has failed in achieving its objective of providing financial support to indigenous shipowners and enhance full participation of indigenous shipowners in the country’s coastal water.
It is recommended that for full implementation of the fund, the government and its agencies, and associations should consider the following:
The CVFF was established a long time ago, as it is, it has only been partly activated by the collection from all shipowners within the sector. It is essential that the funds are distributed as provided for in the relevant statute and its supporting guidelines for full activation. Full activation will see the indigenous shipowners having access to funds to maintain their vessels or acquire new vessels. The sector will be revived, and this will have an impact on the economy as the sector would start to function and make contributions to government revenue.
The Indigenous shipowners will be encouraged to be able to provide standard service and compete with their international counterparts. they will be relieved if the Fund is eventually disbursed in its totality as promised by the Federal Government.
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