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$350 million Cabotage Fund: NIMASA gives Banks 72-hour ultimatum to release modalities

The Nigerian Government has given Primary Lending Institutions (PLIs) a 72-hour ultimatum to release modalities for the disbursement of the $350 million Cabotage Vessels Finance Fund (CVFF).

This was disclosed by the Nigerian Maritime Administration and Safety Agency (NIMASA), through its, DG, Dr Bashir Jamoh, after a meeting with the banks on Tuesday.

The Primary lending institutions involved are Zenith, Polaris, United Bank of Africa (UBA) Jaiz and Union bank.

Modalities: Jamoh noted that modalities to be released would include interest rate, tenure, collateral and requirements needed to access the fund, with an interest rate in line with global standards as it would be in foreign currency. He added:

  • “We can’t start disbursement without stakeholders’ engagement, therefore, stakeholders’ engagement starts today. We are on track, we have started with the PLIs and all five of them are here today.
  • “We have listened to them and they listened to us and from all indications they are ready for us as well.

72 Hours: The NIMASA chief added that he gave the banks 72 hours to come up with a collective decision and a standard template to disburse the funds.

  • “What we want them to do now is to come up with a collective decision and this cannot take more than 72 hours. They have to decide on a date because we don’t want them to come individually with their own interest rates.
  • “We want them to have a consensus and a standard template on the disbursement of funds as well as the interest rate”.

Guidelines: He also added that ship-owners should be notified once the banks have concluded plans on the guidelines, citing that guidelines would adhere to best practices for interest rates proposal.

  • “The guidelines will tell us the interest rate, the tenure and what will be the collateral because we can’t allow them to make the shipowners feel insecure.
  • “I told the PLIs that on the issue of collateral, they have NIMASA money with them so all these things will be deliberated upon among themselves.
  • “On the interest rate, we are giving them international currency, not Nigerian currency, so they cannot start looking at Nigeria lending rate, they should look at the uniform international best practices, and the guidelines stipulate everything”.

The Managing Director of Jaiz bank, Dr Sirajo Salisu, raised concerns regarding the risks involved on the part of the banks, saying:

  • “Whatever it is that we need to do in terms of structure and interest rate will be carried out, but the most important thing here is to ensure that this succeeds.
  • “We are also very much aware of the environment we operate in, we know things can be a little bit turbulent; policies, economic situation, things might change. So, we need to ensure things are done well”.

What you should know

The CVFF was introduced in 2004 from 2% deductions from every contract value awarded under the Cabotage regime. Shipowners are expected to access it in order to afford the purchase of new vessels and at the same time, maintain the existing ones.

The CVFF is under the management of the Nigerian Maritime Administration and Safety Agency (NIMASA) while the fund is being warehoused at the Central Bank of Nigeria (CBN).