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Nigerians have no suitable vessels for crude – Nwagbara

By BusinessNews Staff on February 27, 2015

The Secretary, Maritime Arbitrators Association of Nigeria, Mr. Osuala Nwagbara, tells COMFORT OSEGHALEwhy banks should partner stakeholders to build ships

NIMAREX has been an annual event in the last five years and not much seems to have come out of it. Why should this year’s be any different?

We want to use the 2015 event as a trade platform where stakeholders get together and possibly sign Memorandums of Understanding on the floor of NIMAREX and get back to do business later. We are looking at bringing operators outside Nigeria who have the funds to invest and we want to match them with businesspeople in Nigeria who have the opportunity for investment. They will interact and establish joint ventures in the maritime sector. There are so many areas where they can pool resources together and invest.

You might not have seen much arising from past events; that is why we should at the end of this event be able to show how many foreign participants have come to invest in Nigeria. We have also, as part of the package, planned to create a space where businesspeople will go into an enclosure, discuss what has brought them to the platform of NIMAREX and then discover people they can work with and execute MoU.

We are bringing financial institutions which will identify those that have business on their hands and agree to finance the business. For the first time, we expect this to happen. We also want to see the possibility of businesspeople who have disputes in their business relationships, broker an agreement and resolve the disputes. We are also looking at a situation where NIMAREX will be able to attain independence and not be tied to any particular stakeholder. It is only when NIMAREX begins to generate its own funds that you can really say NIMAREX has come to stay just like it is done internationally.

Stakeholders have consistently complained of high interest rates from Nigerian banks. How do you intend to resolve this?

The finance institutions that we have invited are both Nigerian banks and international institutions. Agreed that our banks are known for their high interest rates but you also have to have sufficient knowledge about the area you want to invest in. Shipping is a capital intensive business; it takes quite awhile to mature. When you are given a long-term credit that has a lot of prospect, you don’t give loans at the same rate as you will give when the tenure is shorter. So, we are trying to get the Nigerian banks to understand why they should be major stakeholders in our maritime industry. When you give out loans, for instance, for the building of a ship which will take 24 months to complete and then go into a business, you don’t expect a return until in three or four years time. Although the return is huge and profitable, such loans are not given for a period of six months. That is why we are encouraging a joint venture between the banks and operators of shipping business. We are looking at the banks bringing down the rates. Overseas, big banks finance the entire project of building a new ship. The ship will be given out to an operator to operate it commercially; he is called the despondent owner of the ship. The real owner is the bank that financed it. The bank is paid back as agreed over a period of time, at the end of which the operator becomes the owner of the ship. That is the type of partnership we want in Nigeria between the banks, ship operators and managers.

Why was why this partnership not forged all these years?

We don’t expect that everything that we are doing now should have been done before. NIMAREX is the biggest maritime event in Nigeria that attracts global attention; the awareness is still being created. Countries like Greece that have been in the ship owning business for centuries, you don’t need to educate their banks to invest in ship building. NIMAREX is just a new idea compared to Poseidon, a similar platform in Greece. If it has taken decades or centuries to get the banks in Greece to buy into the idea of ship finance, then five years will be the beginning for us.

In the last 10 years, the idea has been discussed. With more bank showing interest in NIMAREX, they are beginning to appreciate their role in the industry. We believe more Nigerian banks, if not all, will show interest this year. Once I was at a training programme to set up a maritime desk in a bank and one of the foremost officers in the legal department had asked me why I wanted banks to invest in shipping which is a high risk business. This is less than five years ago. I replied that though shipping is a high risk business, it is also a high yield business.

Nobody expects individuals to fund the purchase of a ship overseas. That is why the banks are there. Good enough the banks in Nigeria have been recapitalised and they have the funds to inject into the purchase of ships just like it is done in other countries. Nigeria has the wherewithal to make shipping work; talk about the provisions of the Cabotage Act that restricts trading in the coastal waters to ships owned and built by Nigerians and registered in Nigeria. That is enormous potential for business in Nigeria. If a bank could decide to fund the construction of new ships within Nigeria working perhaps with other stakeholders, then you will find that the ship will never run out of business.

Oil companies sometimes complain about the quality of our ships. Section 5 of the Cabotage Act restricts the carriage of petroleum products on the Nigerian territorial water to Nigerian owned ships. Why is it not working? It is because we don’t have new builds in Nigeria; no suitable vessels. That is why foreign operations are still engaged in the carriage of Nigerian crude and NIMAREX is one of the platforms where we can work towards changing this trend.

We expect all Nigerian banks and some international finance institutions that we have invited to show interest in NIMAREX, particularly as regards the financing of shipyards, new builds and other related industries.

If MoUs are to be signed for new builds; what is being done about the construction of shipyards where the ships will be built?

Right now, we don’t have very viable and functional shipyards in Nigeria. We hope that ship building companies overseas will see the attraction the Nigerian maritime industry holds and then come in to establish shipbuilding industries in Nigeria. We have written to quite a number of them and are getting responses even with the shift in the date of the exhibition to April. We expect that these foreign investors will take advantage of the provision of the Cabotage Act and forge joint ventures. You can imagine the advantage of building shipyards in Nigeria; we have 853km of coastline within the Gulf of Guinea, next only to South Africa with 2,413km. You can imagine the advantage a ship building company will enjoy in Nigeria with our rich potential in iron and steel industry. The iron and steel industry can be made to work again when the banks show interest in revitalising the industry. There is so much to gain in an environment that places maritime business in the front burner. If the banks could come together and form a consortium to revitalise all the steel rolling mills in Nigeria, you can imagine how many people that sector will take out of the job market.

In 2010, for instance, China engaged 3.5 million people in their iron and steel industry. That is more than the population of Bayelsa and Nasarawa states put together. Imagine if half of that number can be taken out of the job market in Nigeria. That will give almost two million persons employment in one sector alone.

We keep talking about keep seafaring jobs; you can imagine how many seafarers will be engaged in a well developed maritime economy.

Philippines have well over 340,000 seafarers working all over the world and making over $6bn per annum and this is injected into their economy and their population about 100 million. With a developed maritime economy, Nigeria with a population of over 170 million can employ more people than the Philippines and can make more money. That is why all stakeholders in the industry have been invited.

[Punch]

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