$700m CVFF: Lack Of Indigenous Shipbuilding Capacity Threatens Disbursement

The planned disbursement of the $700 million Cabotage Vessel Financing Fund (CVFF) by the Nigerian Maritime Administration and Safety Agency (NIMASA) may hit a snag over one of the stringent guidelines in the Cabotage Act, LEADERSHIP can report.

LEADERSHIP reports that a strict implementation of the cabotage regime says all vessels operating in the country’s territorial waters must be owned by Nigerians, crewed by Nigerians, built in Nigeria and maintained in Nigeria.

But, presently, Nigeria lacks the necessary capacity for shipbuilding. This means indigenous shipbuilding is a key requirement for participation in CVFF.

Currently, the lack of ship maintenance facilities has resulted in massive financial losses, as reports indicate that between 2022 and June 2024, Nigeria lost N2 trillion ($1.25 billion) to foreign shipyards

However, Marítime experts have argued that unless there is a waiver clause for vessels built in Nigeria, the disbursement may have a snag as no shipyard in Nigeria can build vessels in the country.

According to a foremost ship-owner, the government would have no choice but to waive the section in the Cabotage Act if the disbursement is to come to fruition.

“No shipyard can build a vessel in Nigeria; even for dry docking, we go to neighbouring countries, so the section that says built in Nigeria would have to be waived at least for a start, then subsequently, we can talk about indigenous shipbuilding when we have the capacity,” the shipowner who craved anonymity said.

A former Lagos coordinator, Nigeria Shipowners Association (NISA), Capt. Taiwo Akinpelumi corroborated the view that since the country cannot build vessels, they should make granting of waivers very easy for indigenous operators.

According to Capt. Akinpelumi, “once you are an indigenous operator, the waiver is supposed to be automatic with a fee for them to generate revenue.

“Indigenous operators will be granted a waiver because we do not have the capacity yet to build vessels, but as time goes on, by the time we grow capacity and have shipyards that can undertake such a construction, the government can now say we don’t need to go abroad to get vessels.

“By then, if anyone wants to buy foreign vessels, the penalty indigenous operators would pay as a waiver will be high. The intention of the waiver is for specialised vessels that Nigerians can’t procure, such as heavy-lift vessels, which are too expensive, are highly specialised, and we don’t have the capacity in this climate to procure them. The cable lanes, how many people have cable-lane vessels in Nigeria?

“If the government wants to undertake cable lanes, they can still go for foreigners, but with a succession plan for over a couple of years to say, henceforth, by the time we want to give this contract out in five years, it has to be Nigerians.”

Capt Akinpelumi argued that the waiver clause is not bad in its entirety, but the government should check indiscriminate granting of waivers.

“They know that Nigeria can’t build vessels. The Minister of Marine and Blue Economy, Adegboyega Oyetola, is aware that we don’t have the capacity. In Nigeria, we don’t have shipyards that are building those sophisticated oil tankers, bulk liquid cargo, bulk solid cargo, bulk carriers? None in Nigeria.

“However, I support that it should be embedded in the law that over time, we should attain a stage whereby we should be able to start building these vessels, and I believe that’s the intention of the Cabotage Act, but if we say they should expunge it, it will not encourage us to grow capacity in that sector in the nearest future,” he argued.

Capt. Akinpelumi further stated that granting of waivers for vessels to be built out of the country should be made seamless for indigenous ship-owners.

He said, “The thing is, since the country doesn’t have the capacity, they should make granting of the waivers very easy for indigenous operators. Once you are an indigenous operator, the waiver is supposed to be automatic with a fee for the government to generate revenue.”