Skye, Diamond, Fidelity, FirstBank lead investors in vessels acquisition

Against the backdrop that Nigerian banks often shy away from investing in shipping, especially vessel acquisition, BusinessDay probes show Skye, Diamond, Fidelity and First banks as four major commercial banks that have taken the lead to invest in that sector.

The probe further reveals that Skye, Diamond, Fidelity and First banks, have over time, invested multiple millions of dollars as debt financing and equity stake required by indigenous shipping companies to acquire vessels for marine support, crew carriers, barges and oil tankers.

Earlier in the year for instance, First Bank of Nigeria Limited increased the capability of one of its corporate customers, Petrolog Inc, by funding the acquisition of a multi-purpose support marine vessel, an investment valued over $75 million. Petrolog is a frontline indigenous service provider in the upstream sector of the oil and gas industry, which provides subsea solutions and vessel chartering services in Nigeria and across the continent.

This, the management of First Bank says, was part of its drive to improve the local content participation in the nation’s maritime sector, including oil and gas industries, so that wealth and job opportunities can be created for Nigerians.

Skye Bank has also been identified as maritime and  shipping friendly, due to some notable investment made in vessel acquisition, which has also helped in improving the fortunes of Nigerian ship owners.

“Our commercial banks, which include Skye, Diamond, Fidelity and First Bank, are very much involved in vessel acquisition, but we are saying that the level of their participation is not enough for many indigenous shipping players to grow and compete favourably with their foreign counterparts, said Adewale Ishola, a master mariner who is abreast with happenings in the shipping sector.

According to Ishola Nigerian commercial banks are learning to focus on ship building and ship ownership by funding indigenous players.

Ishola, who describes the tenure for loan repayment in Nigeria (24 months)  as very short and not favourable for the growth of shipping business, observes that banks in the Western world, give ship owners between five and ten years to repay loans. “This is because shipping is a long-term business that takes a long time for the investment to mature and investors to make profit.”

The renown shipping expert observes that some Nigerian banks are also not engaging professionals to head their maritime/shipping departments, and that that is why some of them which invested in ship acquisition in the past got their fingers burnt.

He further suggests that Nigerian banks need to think of long-term borrowing for shipping firms.

On why investment in Nigerian shipping business has remained unattractive to commercial banks, Taiwo Akinpelumi, managing director of Oceanic Energy Limited, an indigenous shipping firm, says that many Nigerian commercial banks do not have the financial muscle to give long term credid, and observes that it is only in Nigeria that businesses are given facility at double digit interest, which can be as high as 22 percent.

He says this practise has worked against Nigerian ship owners, such that they cannot compete with those from foreign environments where interest on loans is much lower. Akinpelumi says most Nigerian banks are further cramped by their lack of expertise in vessel acquisition.

He says banks need to employ more maritime experts to help them navigate the intricacies of vessel acquisition. He further calls for full implementation of the Coastal and Inland Shipping Act (Cabotage) so as to make cargo available for Nigerians, and business attractive to banks.

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