FG Changes CVFF Guidelines After Nine Years | Independent Newspapers Limited
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Business, Maritime

FG Changes CVFF Guidelines After Nine Years

Posted: Jul 3, 2015 at 12:05 am   /   by   /   comments (0)

•   I Don’t Know How Much Accrued – Permanent Secretary

By Andrew Airahuobhor –  Lagos


The Cabotage Vessel Financing Fund (CVFF) will no longer be disbursed to qualified beneficiaries any time soon. This is because, Federal Ministry of Transport have dumped the first guideline issued in 2006 with which six companies were prequalified to access the fund in 2013.

The first guideline was issued pursuant to section 44, part V111 of the Coastal and Inland Shipping (Cabotage) Act 2003 for the purpose of prescribing the procedure for the administration and implementation of the CVFF.

“CVFF was established to create access to funding. We regret to say it has not been as rosy as expected. We have come out with new guidelines,” Permanent Secretary of the Ministry of Transport, Mohammed Bashir told Daily Independent on Tuesday.

He urged shipowners to study the guidelines so they can have better access to the fund. But he said, “I don’t know how much has accrued to the fund so far,” raising fears there might have been accountability issues. This is because the Permanent Secretary is the most senior officer in the Ministry, who takes charge in the absence of a Minister.

CVFF, established under the Coastal and Inland Shipping Act 2003, is derived from the two percent deductions from all contracts awarded under the Cabotage regime designed to enable indigenous shipping companies acquire ships under a tripartite arrangement involving the borrower, banks and Nigerian Maritime Administration and Safety Agency (NIMASA).

The borrower provides 15 percent equity contribution while the banks and NIMASA will provide 35 percent and 50 percent respectively.

NIMASA is the statutory secretariat mandated to disburse the fund. The agency has since 2008 appointed four banks as Primary Lending Institutions (PLIs) for the CVFF. They are Skye Bank, Diamond Bank, Fidelity Bank and Sterling Bank. A PLI is a financial institution that meets the requirement of NIMASA to participate in on-lending, monitoring and management of loans under the CVFF scheme.

Out of the several applications received for the CVFF facility, six applications have been processed and endorsed by the banks and accordingly recommended by the management of NIMASA to the ministry of transport, which the former minister Idris Umar said were being evaluated for approval from 2013 till the day President Goodluck Jonathan dissolved the cabinet in May 2015.

‘’We are observing due diligence to ensure that we don’t repeat the mistakes of the past,” Umar had said at the 2014 edition of the Federal Ministry of Transport Ministerial Press Briefing held in Abuja.

At the ministerial press briefing, Umar hinged the delay on due diligence, which were apparently not satisfactorily done, saying that similar funds disbursed by the government to some borrowers were not properly utilized and repaid. According to him the borrowers came up with arguments that the loan given to them were their own share of what they called the ‘national cake’ “So we are taking our time and being very careful. We will not be stampeded,” he said.

On default in repayment of past similar loans by government, Umar was referring to the Ship Acquisition and Ship Building Fund (SASBF), which was allegedly actually disbursed to cronies of government in power, many of whom did not use it for ship acquisition.

To forestall a repeat of the SASBF saga when people collected the loan directly from the defunct National Maritime Authority (NMA) and refused to pay back, banks were recruited for the CVFF and made to have an equity contribution of 35 percent, this was to make sure only genuine companies participate in the fund as the banks are believed to have strong governance structure regarding granting loan applications. NIMASA and the banks have already done due diligence.

The seventh Assembly carried out unsuccessful investigation into the long delay in disbursing the CVFF; the last disclosed figure by the Transport Minister was N40 billion as at April 2013. The legislators were miffed that since 2008, the funds could not be used to enhance the participation of Nigerian shipping companies in coastal shipping trade.

National Assembly reportedly embarked on the probe because the exact amount that has accrued into CVFF with the accompanying interests has been shrouded in secrecy.