•Local shippers shortchanged in multibillion-naira crude lifting deals, can’t access $700m CVFF, $110bn lost annually to freight, shipping agency services
By Steve Agbota
Struggling in abundance aptly describes the dire situation of Nigerian shipowners who hold the shorter end of the stick in the juicy crude oil lifting contracts.
Without a national shipping line and with local players too weak to compete, foreign shippers now dominate the market. This dominance not only exacerbates foreign exchange scarcity but also leads to the loss of jobs that should be exclusively reserved for Nigerians.
However, in an effort to provide relief for local shippers, the federal government established the Cabotage Vessel Financing Fund (CVFF).
Yet, 20 years later, Nigerian shippers remain mere spectators in the freight carriage business. Despite the CVFF reaching $700 million and repeated government assurances, local shippers have yet to access the fund and are gradually withering.
The federal government established the CVFF to provide financial assistance and ship loans to Nigerian shipowners operating in domestic coastal shipping, enabling them to acquire new vessels and gain control of the nation’s cabotage trade. The Nigerian Maritime Administration and Safety Agency (NIMASA) manages the fund.
Cabotage refers to coastal trade, the movement of persons or goods on Nigeria’s internal waters and rivers for a fee. The Cabotage Law aims to build indigenous capacity in maritime tonnage, infrastructure and labour for economic reasons. The Cabotage Law is the second direct government intervention via NIMASA to reduce foreign dominance and support indigenous operators, the first being the UNCTAD 40:40:20 cargo-sharing formula introduced by Decree 10 of 1987.
While the cargo-sharing regime focused on cargo reservation for indigenous shipping companies, the Cabotage law extends protection to shipbuilders, seafarers and other allied maritime service providers. The law mandates that coastal trade vessels must be owned, manned, built, and registered in Nigeria, with waivers for foreigners only when indigenous capacity is lacking. Despite these protections, little has changed for indigenous shipowners.
When the CVFF was approved for disbursement by former President Muhammadu Buhari, it was claimed to be over $350 million and N16 billion. However, the exact amount accrued from the two percent deduction from the cabotage trade remains unclear. For years, the publicly revealed figure was static, between $100 million and $150 million. In 2021, former Minister of State for Transportation, Gbemisola Saraki, disclosed that the fund exceeded $350 million.
Since 2010, the federal government has promised to disburse the fund to qualified shipowners, but this has not materialized. In 2021, an agreement was signed with four primary lending institutions (PLIs) — Skye Bank Plc, Sterling Bank Plc, Diamond Bank Plc, and Fidelity Bank Plc — to ensure effective disbursement. However, due to mergers and acquisitions in the banking sector, most of these banks have since changed, potentially necessitating a new agreement.
Ironically, Nigeria remains reliant on foreign shipping liners for transporting both dry and wet cargoes, due to the absence of a national fleet that allows local indigenous shipowners to compete on the nation’s coastal waters.
Unending haemorrhage
Losses, according to experts, are staggering. They said Nigeria loses $10 billion annually as freight and $100 billion on an annual basis as shipping agency services to foreigners, totalling N110 billion. Between 2015 and 2023, Nigeria has lost over $100 billion as freight.
“It is so pathetic that Nigeria earns zero dollars from lifting its own crude oil and other cargoes”, a local shipper who craved anonymity lamented.
Local shipowners losing hope
Many local shipowners confided in Daily Sun that their hope of getting a slice of the $700 million CVFF dims with each passing day. With many failed promises, they have safely concluded that the CVFF is immersed in dirty politics to the detriment of the larger economy.
All eyes are on President Bola Tinubu and the Minister of Transportation and Blue Economy, Adegboyega Oyetola, to do the needful. Nonetheless, investigations by Daily Sun revealed that most of the local shipowners who contributed to the CVFF are no longer in the business and some have passed away.
In a conversation with Daily Sun, a shipowner, Mr. Ayorinde Adedoyin, said that the CVFF matter has become a recurring joke and a major campaign point used to titillate local shipowners especially during electioneering campaigns.
“You know, we heard the news the money would be disbursed on several occasions. But also, there are issues attached to this CVFF. Who owns the money? Is it the government or the shipowners? What are the roles the government is meant to play in this? What are the roles the contributors are meant to play on this fund?
“Personally, I think the money belongs to shipowners and the government is the custodian of the it,” he added.
Adedoyin pointed out that the government cannot arbitrarily decide who receives the funds, as they view it as their own money and feel they can dictate its disbursement. He emphasized the need for the government to consult with the shipowners who contributed to the fund to discuss its management and allocation.
“Government needs to ask them how can this thing work and who should be the beneficiary of this fund? The truth is that the majority of the people who contributed the money are no longer in the trade, and that is the reality because the government has not really supported the local shipowners. There have never been significant developmental programs put in place to grow local ship ownership.”
Adedoyin also expressed concerns about the money’s status and the potential issues with its disbursement.
“These are things that need to be looked into because this money is just sitting there. I hope it is yielding interest, if not… The truth of the matter is that this money has not been properly managed. “I don’t see how that money can be disbursed when there is litigation on it. I really don’t know what it is, but until the day they disburse, we will not know they disbursed.
“But who are they disbursing the money to? That is the fundamental question that needs to be answered first. Or else, if they disburse money into the wrong hands, it may develop into something different entirely. That is just my own personal opinion.”
Another shipowner, speaking anonymously, stated that the Federal Government and National Assembly have not been transparent about the money’s status.
“Don’t be surprised that the money will not be disbursed because nobody knows the status of the money. We have been saving the money for the past 20 years, all we heard is that the money would be disbursed. Someone like me is already losing hope that this money will ever be disbursed.
“Do you know why? We have been hearing about this disbursement since 2010, and the money has not yet been disbursed.
“Most of us are no longer interested in the shipping business. A lot of us have relocated abroad. How do you expect us to continue when we don’t have ships to do seaborne trade? The foreign liners will continue to dominate the industry due to our inability to own a ship that can put us on the global map. We are waiting for the day the money will be disbursed. For now, all fingers are crossed!”
Controversy
Controversy has continued to trail the planned disbursement of the CVFF. When the former Minister of Transportation, Mu’azu Jaji Sambo, announced that then President Muhammadu Buhari had approved the disbursement of the fund after 17 years in the custody of the Nigerian Maritime Administration and Safety Agency (NIMASA), he stated that the banks were recommended to the President and approved based on the guidelines, which clearly state that the applicant of the fund will make an equity contribution of 15 per cent while NIMASA would make an equity contribution of 35 per cent while 50 per cent will be provided by the banks.
This stoked fire among the ship owners as they kicked against the figure reeled out during the announcement, which was around $350 million.
Then the Nigeria Shipowners’ Association (NISA) debunked the Federal Government’s claim that the money contributed by shipowners to CVFF in the last 17 years was over $2 billion not $350 million dollars.
Chairman, Board of Trustees (NISA), Isaac Jolapamo, at the general meeting of the association, insisted that FG’s figure was abysmally low.
Jolapamo pointed out that it was the former Minister of State, Transportation, Gbemisola Saraki, that revealed that the fund contributed so far was around $350 million, which is against figures released by previous ministers as nobody has ever mentioned a figure higher than $190 million dollars.
The association argued that, if not for Gbemisola Saraki, they would have been sticking with the old figures.
The recent figure obtained from NIMASA showed that the fund has increased to over $700 million. During this period, five lending institutions have already been approved by the National Assembly for the disbursement, the institutions, which includes Union Bank,Polaris Bank, Zenith Bank, UBA and Jaiz bank.
However, shipowners demanded the auditing of the fund before the disbursement. This was the reason the House of Representatives asked the NIMASA to halt its plan to disburse the sum of $700m from the CVFF. The reason was to determine all monies that have accrued to the fund since its establishment in the year 2003.
Endless waiting
Year after year, various reasons are deduced and proffered by both NIMASA and maritime stakeholders over the lingering delay in disbursing the fund.
One of the reasons stakeholders adduced as the that cause of the delay in disbursing the fund is the inability of Nigerian shipowners’ associations to come under one umbrella to access the fund.
The shipowners have different associations, which include, the Nigerian Shipowners’ Association (NISA) and Shipowners Association of Nigeria (SOAN) and they were asked to merge together to become one but they disagreed that different associations shouldn’t be the condition for disbursement of the fund.
At a stage when hopes of disbursing the fund was lowest, one of the associations of shipowners in 2021 resolved to set up a national carrier with equity contributions from its members and also float a $500 million fund to serve as revolving loan to enable its members renew their vessel fleets. The plan did not see the light of the day.
Marginalised local shipowners despite Cabotage law
Today, none of the indigenous shipowners can participate in crude oil lifting despite the fact that Cabotage law says all vessels operating in Nigeria’s territorial waters must be owned by Nigerians, manned by Nigerians, built and maintained in Nigeria.
Meanwhile, all over Nigerian waters, foreign ships are receiving petroleum products from mother vessels for local distribution.
Speaking with Daily Sun, a lecturer at the Nigerian Maritime University and also the Managing Director/CEO Kamany Marine Services Ltd, Charles Okerefe, said that the CVFF remains a long-drawn issue and that the solution to it is very far-fetched.
According to him, the trade term is a major issue because Nigeria still exports her crude oil on Free On Board (FOB) basis.
He said lifting the crude oil on FOB gives the buyer of the crude the right of nominating the vessels to pick up the crude.
“What Nigeria does is to sell the crude to the vessel nominated by the buyer and goes to sleep, which means that Nigeria does not earn any freight element from the shipment of her crude oil.
“This has been the case since Nigeria started her crude oil export. The ideal thing will be for our crude oil to be freight on Cost Insurance and Freight (CIF) basis, in which case Nigeria or the NNPC if you like, the seller of the crude, will be in charge of nominating the vessels that will lift the crude to any destination around the world.
“And that means the buyer will pay for the freight element of the crude he’s buying. And if Nigeria is supplying the vessel, of course, Nigerian shipowners will earn the freight. That is not the issue now. If you want to relate that to CVFF, as it is, we are hearing the money is about $700 million and is not enough to buy an ocean-going crude oil tanker. $700 million is just for one tanker that qualifies to carry crude out of Nigeria.
“So CVFF, as far as crude oil vessels are concerned, is neither here nor there. It is not even in the guide of acquiring crude oil vessels. And even if he’s able to buy the crude oil vessel, what about the trade terms I just mentioned? Until that trade term is amended, whether our crude oil is lifted in whatever way, we are going nowhere and we’ll continue to earn zero dollars from the export of our crude oil.
Lack of synergy between shipowners
The story from various stakeholders is that local shipowners are fragmented and financially weak, unable to form a synergy due to constant infighting. However, Aminu Umar, Managing Director of Integrated Shipping Services Nigeria, disagrees, insisting that shipowners have been working together and deepening partnerships.
“Shipping is in stages, and the ones that shipowners are presently participating in, they are doing so in partnerships,” Umar said. “There are other stages of shipping which are very capital intensive. Remember, the money to buy ships is not coming from the shipowners. They are supposed to also get bank finance, whether from CVFF or the capital market. Unfortunately, none of these avenues are available. So, if you don’t have it, how can you now buy the ship at the exchange? That doesn’t mean they are not participating in other stages.”
He explained that the high cost of purchasing crude oil ships, nearly $100 million (over N100 billion), makes it challenging for shipowners to participate in this sector. “How many banks have the capacity to give a N100 billion loan? Very few, if any. So, the question now is, where can people get this money to buy this ship? Only CVFF and other intervention funds can provide such amounts. If the CVFF is not disbursed, there is no way a shipowner can secure that kind of money, even if they all come together.”
Conversely, Charles Okerefe stated that local shipowners are weak both financially and operationally, with Nigerian banks unable to finance vessel acquisition, especially for crude oil vessels. “Nigerian banks are weak, and the indigenous shipowners are fragmented and always fighting among themselves. The lack of synergy prevents them from coming together to challenge the fields dominated by foreign operators.”
He added, “Even if you have someone willing to finance you, knowing there is no unity of purpose among the players makes them wary of funding vessels. This is a major issue affecting the movement of crude oil in Nigeria. Most shipowners are merely agents in the industry. Additionally, there are no younger people bringing in new ideas on how to finance a vessel to lift Nigerian crude, coupled with unchanged trade terms. These are the major issues working against Nigerian freight in lifting crude oil.”
Unending losses
In the area of international shipping, Nigeria has already lost to foreign domination both in contract and money.
Apart from the $10 billion Nigeria loses as freight, Nigerian Association of Master Mariners (NAMM) recently revealed that the country also loses in excess of $100bn annually to foreign dominance of its shipping agency businesses.
Daily Sun learnt that the money is being lost as many of the foreign ships that call at Nigerian ports conduct their shipping agency transactions from their home country even when they are inside the nation’s ports.
So, Nigeria is losing a whooping $100 billion to foreigners under shipping agency services.
Investigations by Daily Sun revealed that no Nigerian shipping company participated in the six crude oil deliveries to the $19.5 billion Dangote Petrochemicals Refinery in Lagos. These deliveries were handled exclusively by foreign shipping lines, highlighting Nigeria’s financial losses due to reliance on large foreign vessels for transporting crude oil products to the refinery.
Of the six shipping companies involved, only one was from an African country, specifically Angola, while the other five were foreign companies from outside Africa. Currently, no Nigerian company owns vessels of the size required for such operations.
Ayokunle Adedoyin remarked: “Why won’t we lose money? Do we have freighters? Do any Nigerian shipping companies have freighters, container-carrying ocean-going vessels? No! Trade agreements and similar matters should be discussed and agreed upon, like a barter system. Bilateral agreements should ensure mutual benefits, such as mutual access to shipping routes.”
Adedoyin emphasised that under the Cabotage law, Nigerians should ideally handle about 70 percent of carriage, especially for government imports and exports, which has not been achieved. He noted that the Cabotage regime has not been actively enforced, indicating a need for substantial improvement.
“Look at America—they advocate free trade, but they still have laws protecting their own. I can’t buy a vessel and operate it on American waters. How would that happen? As long as we continue to see ourselves as inferior, we’ll keep facing these issues. We must enforce the Cabotage law or we’ll keep deceiving ourselves. There’s no point in buying a freighter without a guarantee of goods to carry. Who will fund that?”.
Adedoyin further explained; “all these big companies like Maersk and MSC already have agreements guaranteeing them goods to carry. If a Nigerian invests in a freighter without government support to enforce the Cabotage law, they will end up in debt and ruin. That is the reality.”
NIMASA and NNPC Shipping Limited
Recently, the Nigeria Maritime Administration and Safety Agency (NIMASA) held a pivotal meeting with the new Managing Director of Nigerian National Petroleum Company (NNPC) Shipping Limited, Mr. Ponas Gliatis and the President of Nigerian Chamber of Shipping (NCS), Mr. Aminu Umar, at the agency’s headquarters in Lagos.
During the meeting, the then DG of NIMASA, Dr. Bashir Jamoh, restated the agency’s commitment to resolving the ongoing impasse in CVFF.
Jamoh affirmed NIMASA’s commitment to tackling issues that have affected the CVFF disbursement.
Jamoh revealed a critical stumbling block as the discrepancy in the interest rates proposed by the approved Primary Lending Institutions (PLIs) appointed by NIMASA.
He said while the banks insisted on a 7.5 percent interest rate, NIMASA advocated for a slightly lower 6.5 percent. He explained that the one percent difference has impeded the progress of CVFF disbursement.
The NIMASA Director General further highlighted the agency’s prior engagements with NNPC Shipping, where the company had committed to taking up 9 percent out of the 15 percent reserved for ship owners. Despite the setbacks, Jamoh encouraged the new NNPC Shipping boss to build on the milestones achieved by his predecessor.
Addressing the pressing issue, Jamoh stated that the discussions surrounding CVFF could be concluded within the next six months. He pledged to update the Minister of Marine and Blue Economy, Adegboyega Oyetola, on the deliberations and progress made.
During the meeting, the DG NIMASA emphasized the importance of CVFF in promoting job creation and expanding the maritime industry. He lamented the comparatively low contribution of shipping to Nigeria’s GDP, citing Singapore’s example where shipping accounts for over 7 percent of GDP.
On his part, Mr. Ponas Gliatis, the Managing Director of NNPC Shipping, assured NIMASA and the maritime community of the company’s collaborative role in addressing shipping challenges. Gliatis specifically pledged support for the nation’s seafarers’ development, offering strategic seatime opportunities.
As discussions unfolded, it was revealed that NNPC Shipping had agreed to be off-takers for vessels acquired through CVFF disbursement. This development, coupled with the interest from foreign banks, including Afrexim Bank, African Development Bank, and American Express Bank, injects fresh optimism into the CVFF fund disbursement process.
The meeting concluded with a commitment to expedite the process. The NIMASA DG appealed to NNPC Shipping to revive agreements made with the previous management, setting a timeline of six months for the CVFF disbursement
Speaking with our correspondent shortly after the meeting, President of the Nigerian Chamber of Shipping, Aminu Umar, expressed satisfaction with the proposed 6.5 percent interest rate on CVFF, deems it favourable in Nigeria’s challenging fiscal environment.
Umar further noted that the collaboration signifies a significant step towards fostering investment, job creation, and economic growth in Nigeria’s maritime sector.
In his closing remarks, Mr. Ponas Gliatis assured that under his leadership, previous agreements between NIMASA and NNPC Shipping would be promptly acted upon, further underscoring the commitment to drive positive change in the maritime industry.
Way forward
Maritime players insist the federal government needs to understand the kind of money that it can make by ensuring that the industry works, which is the only way out.
“You know you can be shouting about the blue economy. What is the blue economy going to deliver if you don’t have the local shipowners owning assets? You don’t have stevedoring services in Nigeria being run by a Nigerian company. There are so many things that need to be done. We will just continue to be lying to ourselves.
“You know the maritime industry to the government is like a joke until they realize what they are losing. We will just continue to make noise. Even in the upstream area that we operated from, I have like five assets. Where are all the assets now? So, it is really sad! Government is not doing enough,” he said.
