Operators are worried over the delay in the disbursement of the Cabotage Vessels Financing Fund (CVFF). Hence, they are seeking the Federal Executive Council (FEC)’s intervention.
When will the Cabotage Vessels Financing Fund (CVFF) be released to its beneficiaries? Which modalities will the Minister of Transport, Rotimi Amaechi, and his Finance counterpart, Zainab Ahmed, adopt for the release of the cash? How much is in the fund? Does the money belong to the Federal Government or ship owners? What measures has Amaechi put in place for a smooth disbursement of the fund?
These are the questions stakeholders want the Federal Executive Council (FEC) to answer at their next meeting.
The disagreement among some government officials is delaying the disbursement of the CVFF to beneficiaries, it was learnt
Despite the directive by President, Muhammadu Buhari and the Attorney-General of the Federation, Abubakar Malami, that the money should be released to indigenous ship owners, the fund, which is in the region of N136.5 billion, is yet to be disbursed because a senior government official, it was gathered, is opposed to the move, claiming that the money belonged to the Federal Government and could not be released to a private group.
Cabotage Services
True, the Federal Government enacted the Coastal and Inland Shipping (Cabotage) Act 2003 to limit foreign participation in domestic coastal trade, but foreign involvement is still high.
Objective of the Cabotage Act
Speaking with The Nation, a university don, Dr. Dipo Alaka, said: “The objective of the Cabotage Act is primarily to reserve commercial transportation of goods and services within coastal and inland waters for vessels flying the Nigerian flag and owned by Nigerians.”
The role of NIMASA
The Nigerian Maritime Administration and Safety Agency (NIMASA) is saddled with encouraging indigenous shipping operators to participate in coastal and inland trade.
What is CVFF?
The Cabotage Fund was established alongside the Nigerian Coastal and Inland Shipping (Cabotage) Act of 2003, to empower indigenous ship owners to acquire vessels to take control of coastal and inland shipping business, otherwise known as Cabotage trade.
The CVFF is a complement of the Coastal and Inland Shipping (Cabotage) Act 2003. The money, based on the Cabotage Law, is collected to assist indigenous ship owners with the acquisition of vessels to enable them to take full control of the captive market created for them by the cabotage law
“However, stakeholders that lobbied extensively for the enactment of the law and the lawmakers that passed it into law understood the need to have a financing fund that would empower Nigerian ship owners to acquire vessels that will make them operate maximally in the Cabotage trade, as part of efforts to end foreign domination of the nation’s shipping sector,” Alaka added.
Involvement if the Federal Ministry of Finance
A former President, Association of the Nigerian Licensed Customs Agent (ANLCA), Price Olayiwola Shittu, said the Federal Ministry of Finance was not involved in the collection and disbursement of the fund based on the provision of the Act that set up the Fund
He said: “It seems to us that the Ministry of Finance is claiming the ownership of the Fund based on the recent introduction of the Treasury Single Account (TSA) by this administration. The total amount collected by NIMASA is domiciled in the TSA and that is why there is this belief that the Ministry of Finance has a say on it.
“But that is not the case.The purpose of the collection of the Fund is well spelt out in the Act. The Act is the Act of the National Assembly which they must all rise to defend. It is not the duty of the Minister of Transportation to call for the judicious disbursement of the CVFF, it is the duty of the Federal Executive Council (FEC), the National Assembly, lawyers, indigenous ship owners, other Nigerians and the media.
“The Federal Government owes it as a duty to disburse the Cabotage Vessels Financing Fund (CVFF) to qualified Nigerian ship owners in line with the spirit of the Cabotage Law entered into by the government.
“Although many of the prospective beneficiaries, the disbursement guidelines and some necessary things ought to have been stated before announcing the disbursement. For instance, the actual figure lying in the Fund ought to have been made public by the Ministry of Transportation through NIMASA.
“As a matter of fact, how much has accrued to the Fund since inception has been a source of bickering and controversy over time. Various amounts had been bandied about. Some had said the fund was worth $100 billion, some $300 million and for some it is $700 million and $124 million.
“But NIMASA, the agency collecting the fund, is yet to come out with the total figure. Even as the authentic source, the agency’s inexact figure did not do anything to douse the speculation and the controversy. This is more so considering the many years the two per cent collection has been accumulating, plus the interests in the banks and the waiver fees foreign companies have been paying to continue to play their leading role in the country’s Cabotage trade.
“But 19 years after the enactment of the Cabotage Act, and over 15 years since the money started accumulating in the CVFF, it has remained untouched, with previous administrations and the present one refusing to let the Fund serve the purpose for which it was established. After several promises of disbursement, and sometimes putting the machinery in motion for the purpose, everything would become a mirage as, in most cases, those promises and disbursement efforts turned out to be mere political statements.”
The Minister of Transportation, Rotimi Amaechi, announced the move for the disbursement about two years ago, at the Nigerian Shippers Council Stakeholders Appreciation Night in 2019, held in Lagos.
Amaechi told ship owners and other stakeholders at the event that he had received presidential approval to disburse the CVFF. He said he would meet NIMASA and the Nigerian Shippers Council (NSC) the next day “to look at the dynamics of the Fund” while the ministry would begin meetings with indigenous ship owners in January 2020, to begin the disbursement process.
“In January, we will invite the operators for their proposals and to see the nature of their businesses and how they can get the aid. The President has given the approval and we will begin the process to disburse it by next year,” Amaechi declared.
“This, coming from the Minister of Transportation, Nigerians would have seen the disbursement of the CVFF as a fait accompli. But this is not the first time Nigerian ship owners had been treated to such empty promises. But if Amaechi is now insisting that fund must be disbursed to the ship owners, we must support him to boost our maritime trade and create employment for the youth,” Shittu said.
Sanctions
“Since NIMASA has the power to stipulate appropriate sanctions against Primary Lending Institutions (PLIs) who contravene the criteria set by this guideline. Applicants who make false representation and submit false documents to mislead NIMASA and the PLIs in their assessment of application shall in addition to other penalties be permanently barred from further access to the Fund and other maritime capacity development initiatives, I think now is the time for the Federal Executive Council to ensure that the Fund is disbursed by settling the unnecessary controversy surrounding the disbursement of the CVFF,” said a maritime lawyer, Mr. Muhammed Oluwaseyi
Applicants/Beneficiaries
It was learnt that only shipping firms owned by Nigerians as defined by the Act could benefit from this Scheme.
A senior official of the Federal Ministry of Transportation ((FMoT), who craved anonymity, said: “To qualify for the CVFF loan or guarantee under the scheme, in addition to any other requirements set out by the Fund or NIMASA, an applicant shall:
“Prepare bankable feasibility reports which report shall be subject to independent verification by NIMASA and the Primary Lending Institution (PLIs). The functions of these institutions shall include liaising with NIMASA in determining the risk acceptable criteria for the utilisation of the CVFF funds or issuing of guarantees; participation in the financing and management of specific projects where necessary to further secure repayment of the loan or obligation; active involvement in on-lending, monitoring and entire loan management; and any other financial advisory or ancillary services as the Fund may determine.
“The PLIs shall carry 100 per cent risk exposure and NIMASA shall bear no credit risk. It shall be the responsibility of the PLIs to carry out detailed credit review and ensure that all identified risks are covered.
Fee
“Applicants for loan or guarantee may be required to pay administration fees, investigation fees and other charges.
“Administration fees shall not exceed 0.5 percent of loan requested. Investigation fees shall not exceed one per cent of loan requested.
“The investigation fee shall cover the cost of the investigation of the project described in the application and the participants in the project, the appraisal of properties offered as security, where applicable.
“Where for any reason, the application is rejected or disapproved, 50 per cent of the investigation fee will be refunded.
“Other charges approved by NIMASA shall be determined in a manner that shall be reasonable and capable of promoting the objective of the Fund towards the development of local shipping capacity.
“Credit for processing or filling fees: A fee fixed by NIMASA shall be charged as processing fee for all applications. Upon approval of application, the filling fee shall be credited as payment towards the investigation fee,” the FMoT official said
Parties to the Fund FMoT, NIMASA and the PLIs, particularly commercial banks, and the Fund applicants, the official said, are the primary parties to the Fund.
“The success of this scheme would depend largely on the Primary Lending Institutions. NIMASA shall set out and publish qualification criteria of commercial banks’ participation as a primary lending institution. This would ensure that only banks that have the capacity and commitment to the purpose of this Fund and the drive of NIMASA are included under the scheme.”
Without prejudice to NIMASA’s qualification criteria, it was gathered that, the following shall constitute the minimum qualifying criteria for a bank to be appointed a PLI under the CVFF scheme. The bank:
must have an existing relationship with NIMASA; and must have shareholders’ fund in excess of N25 billion; and must have proof of substantial financial support in terms of credits extended to indigenous maritime operators.
Sources of funding
Section 43 of the Act provides that the following shall be paid into the Fund: A surcharge of two per cent of the contract sum performed by any vessel engaged in Cabotage trade; a sum as shall, from time to time, be determined and approved by the National Assembly; money generated under the Act including tariffs, fines and fees for licences and waivers; and such further sums accruable by the Fund by way of interest paid on and the repayment of the principal sums of any Loan granted from the Fund.
The two per cent surcharge on contract sum shall be calculated and collected as specified in the Cabotage guidelines
The frame work for operation of the Fund shall include:
The FMoT is responsible for issuing and reviewing this CVFF guidelines subject to the provisions of the Act. It shall review the application and operation of the Fund by NIMASA yearly.
