University of Nigeria...University of Nigeria Research Publications Author UKEANYA, G. K....
Transcript of University of Nigeria...University of Nigeria Research Publications Author UKEANYA, G. K....
University of Nigeria Research Publications
UKEANYA, G. K.
Aut
hor
/PG/M.BA/91/11306
Title
Appraisal of Methods of Financing Ship Purchase in Nigeria
Facu
lty
Business Administration
D
epar
tmen
t
Banking and Finance
Dat
e
August, 1995
Sign
atur
e
A P P R A I S A L 0 1 ' METHODS OF F I N A N C l N G S H I P
1)UiiC:HASE I N N I G E R I A
A T I - I E S I S PC:E:il;MTED IN PARTIAL' FULFILMENT OF
TI.{?, RK'.ii! I l;.i;ill; ?!TS F O R THE AWARC)!,,OF MASTERS - 1
DEGHEF: I ;L; FillSINESS ADMf NISW!AT?[ON (?IDA) ' .
H ~ I F ' K I N G AND FINANCE
DF,PP~PTPlF11~1'.~.' OF RANKS NG AN C F1 IJANCE
I.'" ::I I'FRSITY OF N I G E R l X
f.'NUGU CAMPUS
AUGUST, 1995.
CERTIFICATION -----
UKEAhTA, 5 . K., a tDostgr?duate s tudent
i r t h e Department o f aanking and Finance w i t h
Registration &umber P G / M R A / ~ ~ / ~ I J O ~ , has
sn t i s f n c t o r i l y c o s ~ p l e t e d t h e requirement f o r
course atld reseal-C;I wt.rri- f o r t h e degree :-1.
:'asters of i?l:si n e s s A c l m i n i s t r aL io t l (>IRA) i r ;
DA?LKI?~:G AM3 F l N A h CE . T h i s c l i s s e r t n t i n n i-s a!] errboCiment o.C
c r l g i n a l work o" the r,ut;:or.
PHOF. F . , . CrlAFi3R IIea3 of Department,
. - - - - - - ---a------- - ?-'!t@F. F. 6.. . OKAFOR Superv i sor
My s p c x i ,!.I t.ilanks yo to t h e Almlghty God; my
c r e a t o r who g ; l v ~ tlln t h e oppor t u n i t y to under t a k e
t h i s cwrse ar~ti ccwp1et.e t h i s pro J ec t . I am p a r t i c u l a r l y *
g r a t e f u l to n y p r c j e c t s u p e r v i s o r - Prof. F . 0. Okafor
who under:; tooi-1 r:y c o n d i t i o n s and g a v e tne f a t h e r l y and
s c h o l a s k i c enc:n~,rr-sqernent towards t h ~ . s u c c e s s of t h i s
study.
I also c ~ l c e lot of thanks to the s t a f f of t h e
v a r i o u s s h i p p i r ~ q c:o:npanies ; e n p e c l s L l y t h e N i g e r i a n
S h i p p e r s cou11c.i.J. National Marit ime A u t h o r i t y for
allcrwinq m e makc! I r l : ? of their l i b r a r y in t h e c o u r s e
o f t h i s s t u d y .
My sinccr . ~ r a \ m r e c i i 3 t i o n goes to lily husband - P a s t o r C. I . ~: , j li!r:kcmye for h i s 1n0riiX a n d f i n a n c i a l
s u p p o r t , my si s t a r s - Mrs. I l o e k e n i e alld M I S . P.
E k e k e z i e f o r their ancouragernents and f i n a l l y to
Mr. Bassey C. U?n who t y p e d the work.
UKEANYA, GRACE KANAYO
many forms in ~l?.q,:!;:-J.a., T h e s e f o r m s include l o a n s f rom
f i n a n c i a l inqt;!.h:ut:.lons, l e a s i n g , j o i n t v e n t u r e , h i r e /
time c h a r t o r ;:\ i ltl :;r.!t+$ i d y . P r e s c n k l y , tl~r! s i t u a t i o n has chinnr~ed as no
i n s t i t u t i o n ; i.ncA:lllj.ng government is interested i n
f i n a n c i n g s h i p p;rt,:!lase b e c a u s e o f t h e h i g h r i s k
i n v o l v e d . T1i.i::; :I; i:..idy r e v e a l e d t h a t s h i p f i n a n c e i n s ,: tS'
N i g e r i a is h.ll;hXy ! ~ c ! g l e c t a d u n l i k e w l m t . i s o b t a i n e d i n
d e v e l o p e d co!~nt-.r- 1.9:; of t h e world. ~ l s o t h e s t u d y
i n d i c a t e d t h e brrrik ela thod of f inanc : ing s h i p p u r c h a s e as
j o i n t v e r ~ t u r e w l r i c ' r d o e s n o t r e q u i t e the N i g e r i a n '.
s h i p p i n g company kf; p r o v i d e t h e f i r r a n c e r e q u i r e d .
The f i n a n c e r e q u l r ::I is being p r o v i d e d b y t h e i r f o r e i g n
c o u n t e r p a r t . b
N i g e r i a n s h i p s because o f very l i m i t e d a i d s , were
f o u n d to be ob.snle!€!. T h i s p r o b l e m r e s u l t e d i n t h e i r
n o t b e i n g able 4 x 1 ; > z w t i c i p a t e f u l l y i n l i f t i n g t h e
c a r g o e s a l l o c a h d dto them; especial ly t h e i r l i q u i d
o i l products. 7l . r - rna jor problcrn c r e a t e d b y N i g e r i a n s o
t e c h n o l o c j i c a l 3 y o'x;cvlete ships w h i c h has v e r y limited
c o m p e t i t i o n s w.i.1.l.i ( s t ller s h i p p i n g c o m p a n i e s of t h e
d e v e l o p e d col.\n t.r'ie:;. T h a t hecause of p r o b l e m s
imposed t o tile ?:ll.Ljrping c o m p a n i e s by the f i n a n c e ,
s h i p s availah1.fi 5 .1 ) Nigeria a r e t e c t ? n o l o g i c a l l y
obsolete ships :r~h i.c:i.l, c a n n o t p a r t - i c i p a t e i n c a r r y i n g
spec ia l cargcsF:= [r:; l i q u i d o n e s and as s u c h c a n n o t
c o m p e t e s f f el.:t!:ict.l y w i t h f o r e i g n s h i p s . T h i s
i n a b i l i t y of N:i.qerj..ln s h i p s t o c a r r y a s much c a r g o e s
as were allocated l;o them r e s u l t e d t o loss o f f o r e i g n
exchange which wo~ll rl h a v e b e e n e a r n e d 'by c a r r y i n g t h e
c a r g o e s .
The s t u d y t t r e r e f o r e r e v e a l e d t h a t p r e s e n t l y t h e r e
i s n o f i n a n c i n g culture f o r s h i p p u r c h a s e i n N i g e r i a
because as t t i @ t.l.me18 of t h i s s t u d y , no s h i p p u r c h a s e is
g o i n g on . Thc r l n L f ! ~ n a l M a r i t i m e f u n d is y e t t o t a k e
off . The s h i p p i r ~ g c o m p a n i e s i n Niger ia t . h e r e f o r e
depend on t h e i r fctrgsign p a r t n e r s for s h i p s t h e y a r e
u s i n g since f e u s h i p p u r c h a s e d as far back as 1980
. c o u l d n o t per.f!:!rn arid t h e s h i p s were impounded and
s o l d by t h e i r i : ; t i . t.11!;. i o n s t h a t f inancczd t.he purchase.
G o v ~ c - n n r ? ~ ) t. c ; T Y i g e r l a shouLd :i,pcad u p t h e
establishment o f .blar:itime Rank which will be
r e s p o n s i b l e f o r p r o v i d i n g f i n a n c e for s t l ip p u r c h a s e
v i i
s i n c e most: ins 1.i !:)I Lions t h a t are supposed to p r o v i d e
finance OK f 5 . r - t ~ n w s h i p purchase are n o t r e a d y to d o
so. Also quver.n~?r?rrt: s h o u l d take i t upon themselves
to g u a r a n t e e rt;!p!r':;:ble s h i p owners so t h a t t h e y
c o u l d o b t a i n aid:; Worn f o r e i g n c o u n t r i e s w h i l e t h e
N iger ian Nigercioi:k s h o u l d be upgraded from a s h i p
repair y a r d 1:o I . ;h ip b u i l d i n g y a r d .
v i i i
CHAPTER ONE: -- 1.1 Introdt~<:.t . io!l 1 . 2 Statement . o f Problems 1 . 3 Objactiven o f t h e Study 1 . 4 S i g n i f l c a ~ ~ c : ? of t h e S tudy 1 . 5 L i m i t a t i o ~ l s of t h e s t u d y
Page
i
i i
i i i
i v v
v i i i
CHAPTER TWO : lXF:V.Zfi:kl OF R E I A T E D LITERATURE -a*--- - 12
'-
2 . 1 Nigeria's N a k f o n a l S h i p p i n g P o l i c y 1 2 2 . 2 S i - g n i f .ic:ance of S h i p p i n g Indus try/Company 15 2 . 3 Approa(:l're:-; to s h i p p i n g finance .Ln some
Mari L i v i e < : ~ : > I . I I > t,ries. 21 L
2 .4 Some Finarrct-! methods t h a t ha? been u s e d in Nigcr.i.9. 26
Page
CHAPTER THREE: 11KSEARCt.I METHODOLOGY -.
3.1 Sources nf Data 3.2 Snmp1.e 5J.a." 3 . 3 sarnpl%nq R.r~,c:edure 3 .4 Methods of 1:)ata collectfon
* CHAPTER FOUR_: FJ&z!l&T OF F I N D I N G S . A N D ANALYSIS - CHAPTER F I V E : ---.- COiJCLUSION ..- AND RECOMMENDATIONS
2i.APTER ONE
G C N Z R A L INTRODUCTION ---. -. .-
1 - '1 IFITRODUC'kXOU --. -.-.- - T h e skewnes r , o f t h e w o r l d economy b r i n g s
to t h e forefr tmt t h e u r g e t o d e v e l o p t h i r d w o r l d
e c o n o m i e s and i n p a r t i c u l a r t o make it: v i b r a n t
i n t h e aron of s h i . p p i n g t e c h n o l o g y . ' T h i s i s
b e c a u s e th.:! 'r/ij,T 111 s h i p p i n g economy has e x p e r i e n c e d
w o r l d war.
t r a r i s p o r t a ! : i w 11,-(" o n t h e w o r l d war t r i g g e r e d
and n a v a l t le;?l;. ; s f - s o o n after t h e wi\r e n d e d i n
i n t h e war, r i~:t a. t ) ly t h e c o n t i n o n t s of E u r o p e
a n d ~rnerica r i r ? t ~ s c q u e n t l y dedicated enormous
n a t i o n a l rcsnil:-c-i!s t o d e v e l o p t h e i r s h i p p i n g
r e q u i r e m e n t . The d e v e l o p i n g w o r l d c o u l d n o t
h o l d b a c k o n the desire t o b u i l d a s o u n d p o l i t i c a l
a n d econcmic will a r o u n d s h i p p i n g . T h i s is
because o f t l lc i n f l u e n c e of s h i p p i n g i n m o t i v a t i n g
n a t i o n a l a n d r e g i o n a l i n t e g r a t i o n w h i c h was n e v e r -
theless a hitlr.lrrn agendum i n t h e p r o d u c t i o n o f
adequate s h j . l ) p i n q s e r v i c e s at: t h a t moment.
T h e ev,icu31%on o f a country*^ p r o d u c t i s
d e p e n d e n t on, t:h-?j.r m e r c h a n t s h i p s and s i n c e t h e
acquisitic)~'t/~~ur-tlhase o f s h i p s i n v o l v e h u g e
f i n a n c e , t. h ~ r ' l : i.7. n e e d f o r a l t e r n a t i v e m e t h o d s
o f f inancr: ii111:I q c ~ v e r n m e n t o f t h e n a t i o n c o n c e r n e d ,
come to t.hc! i 1 1 : l clf s h i p owners ~ , n d a s p i r i n g o n e s
b y g r a n t i r ! q ! ; l , ~ i ) : ; i d i e~ a s i s o b t a i n e d i n d e v e l o p e d
c o u n t r i e s . 8 .
Thol.tgh :iiori;s government may g s a n t s u b s i d i e s ,
f i n a n c i n y c:.f : ; I ) i 1 1 p u r c h a s e has heen a g l o b a l
problem; *?sp!!~::i.,l,lly i n a d e v e l o p i n y economy l i k e
ours. Tile r.t!,;>:;on is n o t f a r f e t c h e d . S h i p
purchase . i s c;-3;).;.t.al i n t e n s i v e but i3 c o u n t r y
c a n n o t , do vt.1. l .lw~rt. f i n a n c i n g s h i p p u r c h a s e b e c a u s e
i t i s a s .i I ~ ~ , ~ : . I - . ! ~ : , I I ! t as the c o u n t r y ' s t rade; n o
n a t i o n car1 CI:Y-I~)(?~ a n o t h e r n a t i o n to c a r r y i t s
g o o d s to m o t hnl- n a t i o n . 3
~ c c o r d i n g t o D a v i s (1992), s h i p s h a v e
a l w a y s r e p r e s e n t e d major c a p i t a l i n v e s t m e n t
f o r t h e i r owners, e v e n t h e e a r l i e s t o c e a n
g o i n g s h i p s , t h o u g h s m a l l , wou ld h a v e
r e p r e s e n t e d a major i n v e s t m e n t a t t h e t i m e - and a v e r y r i s k y o n e . AS a r e s u l t of t h e
h u g e f u n d i r i ~ i o l v e d i n s h i p p u r c h a s e , t h e
c o n c e p t of s h a r e d o w n e r s h i p o f s h i p s , w i t h
p r o f i t s a n d losses b e i n g s h a r e d b e t w e e n a
number o f i r1t i : i v i d u a l s p r e - d a t e d t h e j o i n t
stock. cornpilly k y s e v e r a l h u n d r e d years . 4 s h i p s
w e r e t h e r e b c ~ r r ? : : s u a l l y owned by t h e m e r c h a n t s
whose g o o d s t . k y c a r r y b u t t h e corni,ng o f s t e a m 2.
a n d t h e ch:3nge f r o m wood t o i r o n and steel h u l l s
S e a d i n g tc-) I a r g ? a n d more e x p e n s i v e v e s s e l s saw
t h e r i s e o f s h i p - o w i n g as a s e p ~ r a t e b u s i n e s s
based o n f i n a n c e r a i s e d t h r o u g h j o i n t s t o c k
c o m p a n i e s arid mrlny l e a d i n g s h i p p i n g c o m p a n i e s
of t h e p r e s e n t day c a n trace t h e i r o r i g i n s t o
t h i s t i m e . 0 n e c a n r i g h t l y s a y that i t i s a l m o s t
i r n p o s s i b l n fo r ;III i n d i v i d u a l t o e n t e r i n t o t h e
b u s i n e s s o f s h i 1 ) f i n a n c i n g . Some i n d i v i d u a l s
tried i t j n 3 a n d when t h e y c o u l d n o t meet
u p with t h e p; lyrrent , t h e s h i p s were seized and
c o u l d n u t g o i n L o o p e r a t i o n . T h i s d i d n o t
o n l y t i e down ttl~3r money b u t also d i s c o u r a g e d
o t h e r p f?o j~ l e w l r o w o u l d h a v e g o n e i n t o t h e
b u s i n e s s of s l ~ i 1) f i n a n c i n g .
Grorrps O L yove rnmen t es t a b l i s h r n e n t are
a l s o f i n d i n g If. .ss d i f f i c u l t as i n d i v i d u a l s t o
a c q u i r e s h i p s j r lce n o s h i p i s b u i l t : i n N i g e r i a .
~ c c o r c i i r l g to !'..llnlctcl (1992 ) , p a y m e n t f o r sh ipre is
b y f o r e i g n c : ~ . t r r ~ r ~ c i e s w h i c h h a s p r o f o u n d c o n s e q u e n c e s
for o u r ecol;clrLy !.hat is a l r e a d y b e h q o p e r a t e d o n
weak s t r u c L ~ ! r ' ~ ? . Banks are r e l u c k a n t i n h a n d l i n g
s h i p p i n g ~ ~ , c . t : l i o l i , ~ s as i n v o l v e m e n t i n s h i p p i n g
p o r t f o l i o l i m i t s t h e i r p o r t f o l i o d i v e r s i f i c a t i o n
t h e r e b y e r , ~ ) c r ; j rlq them to v e r y hi.ql.1 risk,
Nige r i i :~ , f o r e x a m p l e , owns a Fleet: o f 16
v e s s e 1 . s wh ictl Gerald C h i d i o f t n e N i g e r i a n N a t i o n a l
S h i p p i n g L i n g ? I N I I S L ) a n d Raymond D o k p e s i of B a l d o c k
s h i p p i r l e I , i r l c : 5 had v a r i o u s l y d e s c r i b e d a s
~ftechnoloy.i .c:al~Ly. o b s o l e t e a n d c o m m e r c i a l l y
u n d e s i r a t ~ l c . ~ ~ i n v i e w o f t h e compe t i t i v e n a t u r e
of t h e t r a d e s o r i g i n a t i n g and e n d i n g i n N i g e r i a .
T h e two p r a c t i l . : i o n e r s are n o Lone v o i c e s i n t h e
w i l d e r n e s s , ~ o v s r n m e n t knows t h a t t h e n a t i o n a l
f l e e t n e e d s r e t a n n a g i n g a n d t h a t a c c o r d i n g to
t h e r e s e a r c h c 3 r r i e d o u t i n 1905, N i g e r i a n e e d s
o v e r 200 ve:;sel.s t o h a v e an a p p r e c i a b l e i m p a c t
5 i n t h e carriage t r a d e . T h e s e a r e n o q u e s t i m a t e s .
T h e r e i s n c c d t.o b a i l t h e c a t , b u t how?
No tlo~il:t,, t h e b u l k o f t h e f i n a n c e s fo r s h i p
p u r c h a s e j n t t 1 i . s p a r t o f t h e w o r l d a r i s e s f r o m
f o r e i g n lo:l:~:;, T h e a b i l i t y t o o f f s e t t h e s e l . o a n s
d e p e n d s o n : . I ! , ~ I > J a 1 f a c t o r s ; among w h i c h i s t h e
c o s t ; of 1 . h ~ . I . o , ~ r r a n d t h e elerneri t of c a s h f l o w
a r i s i n g i r . c m : . l r c - c e s s f u l o p e r a t i o n . P r o b l e m s
e n c o u n t e r e d nc.~l.wit h s t a n d i n g , s h i p p i n g i s a n
i n t e n t I I ~ u s i n e s s w h i c h n o t o n l y g e n e r a t e
p h y s i c a l rc?:rotlr ces, b u t a l s o c o r p o r a t e image o f
wh ichever - c:o\.rllt r y t h a t : o n n s i t s i n c e n o n a t i o n c a n
force ano t1 .w~ . n a t i o n t o carry i ts p r o d u c t i n t h e
c a s e of. e x p o r t . / i m p o r t trade and also i n t i m e of
w a r , there i s n v ? c ( l f o r e a c h c o u n t r y Lo e n c o u r a g e
i n d i v i d u a l s t.0 o \ ~ n s h i p s a n d a l s o g o v e r n m e n t to
buy it:s own :;hip:;.
c a p i t a l i n v e s k m e n t t h a t b o t h i n d i v i d u a l s a n d
g o v e r n m e n t s are 1 i n d i n g i t d i f f i c u l t f i n a n c i n g t h e
p u r c h a s e . The q i : e s t i on now is : c a n a n a t i o n l i k e
N i g e r i a d o w i t h o l ~ t s h i p p i n g b u s i n e s s d e s p i t e i t s
i n t e r n a t j - o n a I, h~ ture? I f s h e s h o u l d n o t , w h i c h
me thod o f fin;qrrce s h o u l d b e u s e d i n p u r c h a s i n g
s h i p s i n c e a n a . v e r 3 g e v e s s e l cost n o t less t h a n , . -
W30rn. and if i r ~ d i v i d u a l s are l e f t a l o n e t o buy s h i p ,
how many of L h w ti.i.1 1 s h a r e the r . i s k @ f b u y i n g o n e
o c e a n g o i n g v e ? s t ? ! . H o w d o w e c a r r y 6 u r sea b o r n e
t r a d e i f we n o 3:Lcck s h i p f i n a n c e ? What are t h e
p r o b l e m s as:;w,ia t ? ~ l wi. t h e a c h me thod o f f i n a n c e ?
A r e all t h e rnc:;tml:; s u i t a b l e f o r c ,u r economy; if
n o , which met. l lo i : t ic; b e s t s u i t e d f o r o u r g r o w i n g
economy. T'licse ;\j:C t h e q u e s t i o n s t h a t t h i s s t u d y
i s d e s i g n e d to iirr:;\nrer and i t is i n t e n d e d t h a t the
r e s u l t o b t a i ~ ~ e d from t h i s study w i l l h e l p to
appraise t t ~ e rns t h o d s of f i n a n c i n g s h i p p u r c h a s e
i n N i g e r i a .
1.3 OBJEC:T1\.'13!; I* THE STUDY ----.---.- -.- The o b j e c t i v e s o f t h i s s t u d y are:
( i ) to ev;l.luaCe df f f e r e n t m e t h o d s of f i n a n c i n g
st1i.p p u r c h a s e i n N i g e r i a ,
(ii) e v a l t i s t c . t h e e x t e n t to w h i c h t h e s e m e t h o d s '
h a s hcen hampered by p r o b l e m s ,
(iii.) det:et:~rirlct w h i c h m e t h o d s of f i n a n c e i s best
for our f l i g e r i a n e c o n o m y , ..
( i v ) dc t r? , r - r !4 . r . f ! t h e role of government i n s h i p p i n g
( v ) LO r n d l c c i h L e c o m m e n d a t i o n s based o n the r e s e a r c h
1.4 - S1GNIFX.CAEICE: .--.. --.- - OF THE STUDY-
The s i.yr!j.f i c a n c e of t h i s s t u d y a r i s e s
f r o m the in c~:-c:~.lrr cr-1 s e a - b o r n e t r a d e and s p e c i a l i -
z a t i o n . No c o u n t r y i s self r e l i , . j n t and most
of t h e g o o d s pt,od~.lh,ed in d e v e l o p e d c o u n t r i e s
g e t t o N i g e r i a k h r o u g h t h e sea. A l s o b e c a u s e
of t h e h i g h c:r?.: I: O E a i r t r a n s p o r t , sea t r a n s p o r t
h a s ga ined p o p ~ ~ l a e i t y t h a t n o c o u n t r y c a n s u c c e e d
w i t h o u t h e i r r y . i . t*~volved i n sea t r a n s p o r t e i t h e r
d i r e c t l y o r i n d i . r e c t 1 y .
he d e v a l u a L i o ~ ~ of Naira has made i t v i r t u a l l y
i m p o s s i b l e f o r both i n d i v i d u a l s and g o v e r n m e n t
to a c q u i r e sti.!.pr, t h r o u g h t h e o l d m e t h o d o f c a s h '.
p a y m e n t . This r; t;l.~tly i r j v e r y n e c e s s a r y f o r p e o p l e who
are a s p i r i n g t o e n t e r i n t o s h i p p i n g i n d u s t r y as
i t g i v e s them Lhc o p p o r t u n i t y to choose b e t w e e n
d i f f e r e n t m e t h o d s of f i n a n c i n g s h i p p u r c h a s e a n d
t h e p r o b l e m a s s o c . i a t e d w i t h each m e t h o d . I t i s
a l so f o r those who are a l r e a d y i n t h e i n d u s t r y
t o know t h e a r e a {:hey will c o n c e n t r a t e so a s t o
i n c u r e m i n i m a l r i s k .
T h e sLudy w i . 1 I. a Ls.o e x p o s e o u r b u s i n e s s m e n
to a n o t h e r d.l.rnenr:,ion of b u s i n e s s t h a t h a s
been n e g l e c t e d ; w h i c h i s i n v e s t i n g i n s h i p s
t h a t w i l l not o n l y t a k e t h e m t o i n t e r n a t i o n a l
b u s i n e s s b u t a l s c ~ m a k e them popul.ar.
1.5 LIMI'TATII:Ib!S A N D SCOPE OF THE STUDY . .---- S h i p financing i s an i m p o r t a n t subject
to a n y n a t i o n arc1 i t i s a wor ld wide a f f a i r .
~ h c f i n a n c i n g P E thods a v a i l a b l e i n ' each n a t i o n
d i f f e r s t h o u g h there are b a s i c ages. T h i s s t u d y
h o w e v e r centres o n the b a s i c o n e s a s o u r c o u n t r y ;
~ i ~ e r i a i s n o t y e t a d v a n c e d as f a r as s h i p
f i n a n c i n g .i s c o n c e r n e d . 'rhe b a s i c o n e s i n c l u d e
l e a s i n g , s u b s i c l y , l o a n , H.Fre/tirne c h a r t e r , j o i n t
v e n t u r e .
T h e r e a r e o t h e r m e t h o d s of f i n a n c i n g s h i p
purch:!se w ! ~ i . c h a r . 5 not p o p u l a r i n ~ i g e r i a l i k e
I n t e r n ; t i n n ; ~ l..,'r a g i o n a l .development : b a n k l o a n s ,
b i l a t e r a l ,ii r:i I;>r i n t e r g o v e r n m e n t;al. s o f t l o a n ,
s p e c i a l n a l i i : : ~ ~ ~ a I . Funds set u p f o r s h i p p i n g a n d
s h i p - b u i l d i n c j d e 3 r . ~ l o p m e n t, r e t a i n e d or p l o u g h e d
hack p r o f i t e t c . T h e s e o n e s c a n n o t be c o v e r e d
by t h i s stuffy f o r .lack of m a t e r i a l s and a l s o
because they a r e n o t a p p l i c a b l e i n N i g e r i a .
Ma~?y o f the f i r m s t h a t are i n v o l v e d i n
s h i p bus i.nrr s s i.3 N i g e r i a do n u t owe t h e i r own
s h i p s . T h e s h i p s i n use by t h e s e e s t a b l i s h m e n t s /
o r g a n i z a t i c : ~ ~ a c e c h a r t e r e d w h i l e some are a c t i n g
a s agent-; "L:) f o r e i g n s h i p o w n e r s .
T h . i s ,5 1:udy i s t h e r e f o r e c e n k r e d only o n few
es t ab l i s l lm~!r~ k. Located i n , -ApaI)a area o f L a g o s
S t a t e t h a t : v c r c i n v o l v e d i n a n y of t h e f i n a n c i n g
m e t h o d s cover e ! l by t h i s s t u d y .
2. a , . I ! . "Neglect of s h i p f i n a n c e u .
3 . E d w a r d , I . . , S h l p p i n y P r a c k i c e 2nd Ed. , , ,., ,--,-,,)
V o L . 2 , 3 : ~ ~ : ; t i : Pi tman and Sons ~ i m i t e d .
1 9 8 3 , pp.. 2 - - 2 0 .
4- qJajal.d,l, ,5. A . , "Types of M e r c h a n t F l e e t deve 1opmr:rr t. !,olicies. f f An Asse.ssm
C t1,2PTER TWO 4 --
REVIEW OF RELATED LITERATURE -. .--- -- --
c o u n t r y ' s tr-anspor? p o l i c y which I t s e l f i s a n
e l e m e n t o f :-ln o v ( ? r . l l l e conomic pollcyel It is
d e v e l o p e d i l r :;om,? c o u n t r i e s and eonsis ts of
v a r i o u s elenlcrr1:s d e p e n d i n g o n t h e s i z e and t h e
economic: impnr r:ai-u? o f t h e mcrchan t f lcets o f
t h e s e coun trj. ti!!;, I -gnacy , (1989) d e f i n e d s h i p p i n g
p o l i c y as a tc:)l;il l Lty of economic , legal and
indminis t x a t i . v t 2 rnct ::Lures by means of which t h e
s ta te in£ luwc::!:; ' tie p o s i t i o n o f , i t a n a t i o n a l
f l e e t in the r\,i: t.:.l:)r~al economy arid i 1 . 1 the i n t e r -
T h e r e ..:--:. J , i r p r i n c i p l e , f o u r el emen ts t o
s h i p s , sea f arc: a::, , c a r g o and shippi . r ig c o m p a n i e s . 2
According t o i . i ( : l { . l~c . : : , l ( 1991 ) , t h e r e w e l aws and
r e g u l a t l o r : ~ o f i': general n a t u r e whi::h a p p l y also
t o maritime tr..,~nr:l\<:rt but i n most m u f \ C r l e s , a n
i m p o r t a n t sp~~1::iP.I c: i n s t r u m e n t e x i s t s ; namely:
the Maritime c:oc:\c cr t h e Merchant S h i p p i n g
~ c t . f3y t ih is i r r : : +:rumen t , legal framework is
established f r : ~ ~ : ;:.<: t ivi ties of nat j.onals i n the
( h ) A n c i l l a r y :- 1 1 : S ~ ~ p i n g activities, of ten r e s e r v e d
for na ti.on;.!.J c::;mpanies such a s cuas ta l nav iga-
t w o aspects o f s l ! i p p i n g policy - measures a p p l i e d
to o w n n e r c l ~ ~ ~ n t- ]!..a r:- i n es &nu measures capplied to
domestic inrfu:if.s Je-ls arc protect.-1 from e x t e r n a l
c o m p e t i t i o n 1 1 1 1 ' t l 'en i f there shc ~l d be compcti-
tion, the p i - ; ~ ~ r - i ~~1 e o f f ree and f - a i r c o r n p e t i t i o n
i n s e a t r a n c r r u r t . , i r r e s p e c t i.ve of the f l a g the
w h i c h are prc;~ l ; ~ : t . i .ve because of khe n a t u r e of
our d e v e l o p ! 1 1 ;> ccla)norny . nlso N i g e r i a b e l o n g t o
five c o n f erl !;I:::* 1 i n e s which Inclrldc:
ec~nomic davr?.l.opment, p r o d u c t i o n ,
p r i c i n g , i nc:cme g e n e r a t i o n and d i s t r i b u -
t f s n . Tri?.nnl?nrtation i s t h e very founda- 0
t i o n o f at::.t~s~f!mf c d e r e lopmen t . BQ th
l a r g e s c a l ~ . ~:rodrac t i sn and i t s wide
dis tr ' ibvl : \ ~ - I I I I a r e n o t f e a s i b l e wi t h a u t
re1 a t.ivcfJ 'j rrr4vquate: capacity to more
resources 6 r ' o m one p l a c e to a n o t h e r .
In the s n n e . \day, p r o d u c t i v i t y , market
deuelopnt?t>t , trade and r e g i o n a l
speciaAizir l:l.sm, which is induced by
exchangn, aro~al d n o t have been p o s s i b l e
w i t h o u t nr:'wlu~,te t r a n s p o r t a t i o n .
For example, the Pdiger iaSs c a r l y stages
of economl r,: ~i~cve loprnent were c r i p p l e d due
to l a c k of m;dd and dcpendabl e t r a n s p o r ta-
t i s n syst.nms to move e s p e c i a l l y t h e v a l u a b l e
a g k i c u l tux AI produce t o the various places
where the:{ wcxe most needed.
between Pt $.c;cx.L a and the European communi-
5 t ies . 4rt"r4.~ 11-ve e n ~ ~ u r a q e d r e g u l a r
shipmenk crf k he country's e x p o t t products
t o overma, m a r - k e t s . Over thc! yenrs w i t h
increased 8 v a A l a b i l i t y of modern ocean
g o i n g vcssals, domest ic outputs of N i g e r i a
e x p o r t ccwnndk k i e a apptecbatod s t e a d i l y .
The i n c f m c rafised from t h e a p p r e c i a t e d
Q X ~ O ~ & r:c?mn9nclJ t ies was the major determinant
i n tha trcr~.rrulkry's purchasing power and
furthar d.n-krcrs tment i n other smctors 6
The a b a w mantioned reasons ass true of any
c o u n t r y a1.l owrr t h e . world. The rapid
davclopmenclr of t h e countries of Europe and
~ m a r i c a wan l inked to dependeble, efficient
and ef f actkvn kranspor tation systems
especially t h c s h i p p i n g . #
can be apprs?cA;a.ked when we rea l iae the
fact t h a t t - i ~ . . ~ ~~, l \ ter ia l s has l i t t l e or
no value urrl.a:w nthay are moved to t h e
p lace whs.ra thtry are needed. In other
words, prod~mt9,sn of goods. usually c a l l s
for bringing t-aqether a variety of i tems
i n the right; p w p o r t i o n to, produce
7 va luab le kh.!.n<~S* By t h i s , transpor takion
creates vall:.le h y br ing i n y toge;irAar raw ., .
incomgl et;? ~ a ? t .l a commadi t y ha..; reached
t h e who w 6.a; kh .I:.(:. make use of it ,
Ttrcrr? I.:; l i t t l e doubt tha t i n c r e a s i n g
t h e scope rxf c:ountry8s t r a n s p o r t a t i o n
fac i1 i tb .h:: tlt.r.ough s h i p f in .ancc w i l l have
mox c beneff d . c : i $ l ef f a r t.s on t h e factor
rnobibif y ;lrrrl r r r o d u c t i v i t y ar; production
is n o t c : :~ p.l.c?f:e u n t i l t h e prc )d i~c t reaches
0 t h e f inaL cwhxumer. Economisfis and
markctcsz all. over t h e world k e l l s v e t h a t
goods p r c ~ d n w d a t one p o i n t h a w l i t t le
va lue u u r . l t . ! ~ , r : r he y s a n bd moucci to the
p l a c e w t ~ ~ ! a : c ! I.k8sy are demanded or market
e x i s t . '1'1-I@ I.ir.rge scale production of
crude o i l ~ m c l the a c c r u i n g real w e a l t h
wou 1.d n-j h. D r c ~ \ ~ ? been f e a s i b l c MA. t hou t sea
transpostntJ .cm .across t h e n a t i o n a l boarder.
One can thm say that transpartation plays
a pivots l . rcilr i n realising f o r e i g n
cxchang.~! rbasassary for both qcnerwl import
and czxpax-0.. i: f goods and werv:tc:as.
Equal ly , prf ces. of goods and services
are substankially fnf luenced by t h e cost
of transporl;a t Lon. Very of t e n , t h e *
immediate h n p a G t of improving t r a n s p o r t
f a c i l i t i e s .I..:: t.he lower cos t of c a r r i a g e
of gsods th,r.~t rrasult to lower prices o f Q
the good:." 0 ; s u j i (1988) observed t h a t of
a l l t h e 1: rr?ns- -mmtinental transport system,
2.3 A P P R ~ A ~ ~ ~ , t ~ ~ , ~ i ~ - T , O ~ ; I ~ P I N G F&%IFCE IN SOME HARITlbll-; <:(JUNTRI ES -- - 3- .-..-- . .
Maritlne c o u n t r i e s has, adopted v a r i o u s
a i d s to solve t . F p problems a s s o c i a t e d with
s h i p p i n g Eirrwnc:a These include t h e Capital
Construct ins. Fund. (CCF) , Construction
D i f f crenkial s u b s i d i e s (CDS) , O p e r s t i n g
iff cren t i i a 1. ~ u ! : , s i d i s s (ODs), the T i t l e
X I f i n a n c i n p guarantee. 10
Japan a d ~ l n o l s t e t s a dames t i c l o a n
programme kh r-ouqh t h e J a p a n e s i Development
~ a n k ( J D R ) errd n ther comnercial, banks. Under
t h e schcnt?, 1 3 1 Eftwont f i n a n c i n q structures
are av iz l l 11; rr'r d i f f a r e n t cki~sscs of wessels.
Th? h F P q 1 ' l o 3 . r ~ are repayable over ten
y e a r s af tm t h r m ? years s f ter t.hsca y e a r s
o f p r f n c i p ~ t 1 n.>t-atorium w h i l e the p r i v a t e
bank loan'; 31'? repayable with f i v e y e a r s of
delivery. l.119:arr:at; rates are 43.5% per annum
of JDB lOi\ tas ;and 9.5% per annum of bank
l o a n s - Dan~!.t ic owners may qlualif y for
r a t e subsf,tlJ rrs o f 3 3. 5% on conk a i n e r s h i p s
and LNG rnrr l r?%s and 2.5% on 1~1a lk
carriers; - Far h".hlp export c r e d i t s , s h i p yards
receive j o i n t financing from &he Export-
Import !3nnL o f Japan and p r i v a t e banks
which tcagmtlre~- cover up to t h e e x t e n t
a v a i l a b l e in the Ovcrnca Export C r e d i t
Department (QECD) u n d e r s t a n d i n g on export
c r e d i t s far s h i p s . Other i n c e n t i v e s a t '. Japanes? ybr r d s a r e guaranteed export
credit X I ) l;trx- qnce cf f ectcd by the Ministry
of Xnkax.n;~tion:nl Trade and I n d u s t r y . X t
covers a v n n q r of commarcial and p o l i t i c a l
r isk
to s h i p p i n g inx:c! t o n s f d e r a b l y ahundant
d e s p i t e O l - h ~ . i . c . r'c'l~'.4uct;ion i n 198GDn The
modif l e d nchcmc as at 1906 subsidized
new buibdAnqs kt? a s much as 15% w i t h the
p r o v i s i o r i c f f.n(t;p,rest s u b s i d i e s The
object of & ~ I c ~ : E ; E ? YPS t o equate commercf a1
bank loans r ~ . i . k l t OECD e x p o r t c r ~ d h t s .
Xn w r r - w . Q . ~ , government provides a 5.5%
i n terctet .r; uh:i 1-3y for Norwegian s h i p yards,
T h i s rcducen khn cost of borrowing to 9%.
The ntary i s not d i f f e r e n t for the >.
35 mariti~e! ~rihtjons which i n 1990 c o n t r o l l e d
more than 94:; o f t h e world merchant fleet,
O f t h i s , s h i p mmers of o n l y two c o u n t r i e s
( G r e e c e and Japan) c o n t r o l l e d over 27% of
world tonnafn while t h e t e n moat important
c o u n t r i e s and twritories a s shown i n Tabla I
c o n t r o l l e d 69.35% of t h o world fleet and
the n e x t kc11 carantries c o n t r o b l e d a further
15.0-1%.
+ South Itoroh, S p a i n , . Sweden, Taiwan,
Germany ,' Canada, ~ e n n l a r k , F i n l a n d , France,
Brazil, Ilel(lf un, Greece and t h e U n i t e d
Kingdom of f nr v a r i o u s forms of promis ing
a i d s to t h ~ 9 . r : s h i p p i n g trade. 12
taxation r e : l * d l a t i o n s r e g a r d i n g new i n v e s t -
ments by Qrrnwl tic s h i p owners . F i n a n c i a l
a s s i ~ t ~ n i : ~ I..::; i ? f f e r e d to B r i t j . a h s h i p yard
througtr kha l . j~rYnrvantion fund urrdcr the
schc.nle, t.ha r:l'??:tr traent of industry p r o v i d e s
construst;i.czr;~ :;!~!9sidy d e s i g n e d to remove or
a t l e a s t ~ i ~ t ' ~ : ' ~ ~ l ~ the gap between the prices
of U n i t e d . ;i I ~n~l~!orn and f arei gn hu J 'i. t ships.
Gobft!?r~~n'ent a l s o offers c r e d i t schemes
to owners .:~r-~firing from United Kingdom
s h i p yards. P r i v a t e f i n a n c i a l i n s t i t u t i o n s
p r o v i d e l . ~ ) ; r t . l : wf up to 80% (3% crontxact 13
(. f.vertnmcnt guarntrkc?le. Under
f make-up, banks charge a f i x e d
7.5'9: interc!lst on t h e ownqr wh.Lle t h e i
govcrnmerr t,: m;.'; e up the d i f f arerace between
t h i s lo 4 I i\ t e and market rate.
Nlgcr-Z i:. ,;oas not owe shipbuilding
i n d u s t r y . 'ibl?: beat: t h a t ha:< hadn achietred,
of course 81 rudimentary s t a g e i s t h e owner-
s h i p a n 3 c ) l v K : \ t i o n o f ship yard ded ica ted
to s h i p r c!f:;.:irs, maintenance and tlry-
dock ing . The re is t h e r e f o r e no s h i p
f i n a n c e c!!l t w e i n Niger ia and government
though ;th:olht s e t t i n g up a mar.ltirne Bank, i s
r a t her too E: I C!W I
2.4 SOME P.Ttfi\tl('F; METHODS THAT )!AS REEN -CIIL.r)-U".",-,*-- ..", USER X M NL(;ERIA -.-,..l -.-"..I.-
Venturirtq f -n to s h i p f i n a n c e i s a h i g h l y
risky businwis 1.Dpt r e q u i r e s huge c a p i t a l of
upwards o f t h J ~ - I : ) ( 3 0 ) m i l l i o n Naira for a
new s h i p . j4 Srcli7el to t h e huge c a p i t a l
required t , ~ fJ nilrce s h i p purchase , N i g e r i a ' s
case i s nct ~ r r i exception from ather c o u n t r i e s
of t h e world.. klany methods arc a v a i l a b l e a s
having been nsaml i n f i n a n c i n g s h i p / a c q u i s i t i o n
though the i r - ] : q w l a r i t y differs. These methods
as men tioncd wr'l icr i n c l u d e :
J o i n t vcPntutv?
L e a s i n g
stabs i d y
Loan
Hire/Tims! Charter.
2.4 .1 3 c t i n ; ~ f m t u r e
This I n the p r o c e s s whereby ~ i g e r i a n
s h i p p i n g conpan7 e n t e r i n t o agreement w i t h 9
t h e i r forctlqn p a r t n e r s who prov ide t h e
f i n a n c e far $ h e s h i p purchase . . I n t h i s
case, tl.it! 9111p yard a c c e p t t o c ~ n s t r u c t /
b u i l d the s lr ip once 10% deposit has been p a i d
by t h e i n t : l r ~ e . s f e d buyer ; b u t hef are t h e
a c c e p t a n c e is made, t h e s h i p yard r e q u i r e s
a bank 0,:. g~,w~rr~rrnent g u a r a n t e e from the
raqu.1,1-tt ;. t I I!: :L .I !., .?res t a d buyer kcr $5 ~ . A % . R t h e type
and canf lg 11,: in t: i m of the s h i p ha rf shes to
buy.
I n Nigtr' l .2, governeenf i n not i n t e r e s t e d
i n guararr t:alrn:ln,; s h i p o w n e r s , nc1.t hclr are banks
because of kha h i g h risk inra.l.vlmd. T h i s
h a r d s h i p hc-4ng .faced by N i g e ~ , i a n S ntending
s h i p awnnrri ~ : c r . r t l t e d to Federal Ck~vernment
i n 1987 crrp-~~,~er.~i(g N i g e r i a Narj. t i m a ~ u t h o r i t y
( P ~ H A ) to set: up ;hnd run a s h i p - b u i l d i n g and
acqui s i t i cxn fiw~tL'tby way of s p e c i a l i z e d bank. 16
One would ex1mr:l. t h e bank to h a v e taken off
put on h o l d .Esr l e g a l r e a s o n s , ~ h l s
delay in the 1:iib:rl: off of the k m k has made
t h e shippjrlrl 1 ~rtrwtry who has been banking
on t h e e n t ah!. .i.s ! t i rent of t h e bank to razrlise
t h e i r dresrns c:rZ o w i n g modern s h i p s a s e x i s t i n g
merchant anc l c:.cv:.~-tercial banks hava been
unwilling ta f.~!wst t h e i r money i n a l ~ n g
term project of hip a c q u i s l t i a n .
T h i s is un:.lkc deve loped c # > u n t r i e s where
government pL.ay c u t s tanding role I n seeing
t h a t shipown~wr: or i n t e n d i n g ones do no t
suf ftr to ar;:qt..r l I-e their new s h i p s through
t h i s method nf l":inancing, 18
p r o p e r t y qr,trrt: to a n o t h e r the right to
possess, 1a:;tr arr i enjoy such p r o p e r t y
for spec i.f i r t d p ? r i o d o f t i m e f n exchange
for peric>rl j> ,ny~f l?nt of a s t i p u 3 . a t e d p r i c e
r e f e r r e d to a s tent , 19 Equipnsn t l e a s i n g
h a s also b?lrn *I?fineci as an agreement
between ;I I ~ : : s t r l: and lcssca f o r - the h i r e of
a specif 1 (. ' ? Y S P t se1ect ;ed Prom a rnanufactu-.
r'er or v~11 .119r o f s u c h a s s e t by the lessee.
The laasor ;:etains o w n e r s h i p and use of t h e
assets arl p,xymcnt of s p c e i f i e d rental@ 2 9 + 21
a p e r i o d . The p e r s o n who c a n v e y s
i s c a l l e d ' lessor , w h i l e the person to whom
it i s conveyed i s c a l l e d ' lessee'. The
lessor rrLet.;.rw the r i g h t to regain
possessinc~ o i the equipment concerned. 22
Con tras ted wi th h i r e purchase, l e a s i n g
does no t s nqt~.Rre down payment . LeasJnq is an important source of
f i n a n c e for c o r p o r a t e s h i p owners but
less impor katr t amongst the e n t r e p r e n e u r i a l
s h i p owing a ~ r m u n i t y . 23 Leas ing c o n t r a c t s
invo l .ve g c ! n c ~ > a l l y heavier or h i g h cost
equipment. m ~ l extends o v e r medium to l o n g
term pcr: i.r:jtj:- . Threxi:! s r s p r i n c i p a l l y two types of
l e a s i n g c'cln l,r ?ct - f inancia.1 or f u l l payout
leilse arid cryt:rl-at inq l e a s e ,
The fin ;cnc % a l lease f s f urtlw: d iv ided
into l c w r aged lease, sales Rype lease,
opera t ing aeaqe,, s a l e and lease back,
syndica Le4 .Ae.qse, cross bord.cr l ease
and open--.en13 ;I l ~ d c l a s e d - e n d A ~ ~ s c s .
Th.7: ~11::s t romman t y p e of lease in
ship f i I ,+II :.;b n i l arc ]leveraged 1,car;e and
because t ~ f 2,hn huge sum of money involved
2 .4 .3 SuW btj*( .-..-.... l. .. This .I F :r*l instance where c;ovcrnments
i n a n effcns l; t:*> ~leve lap t h e i r national
f l ee t s , f l ~ t ~ ~ r ~ : . : ! c a r t of t h e tort of new
s h i p s . Wbcn ?,his ef fort is geared towards
new s h i p s , 5 1. Js known as c o n d t r u c t ion/
p u r c h a s ~ s ~ i : , : L r l l j . 24 T ~ L S t y p e of s u b s i d y ,
t h o u g h not qr. l.t;c? developed In N,i.qetia is
s h i p buyers i : : l w : 1 ; up w i t h the f i n a n c i a l
o p e r a t i n g .;t!!.~s J r y , c r e d i t and :loan s u b s i d y ,
s c r a p and nui.1.d s u b s i d y , cargo/f l a g
r e s e r v a t i o n and pregerence subsidy ctc.
In Nigeria, a l l the s u b s i d i e s ace mere h i s t o r y
except cargo! f 3. a l j r e s e r v a tioil and p r e f e r e n c e
subsidy. 'rnkLd % show countries and
s u b s i d i e s k .he : j of: f er.
profit;at:.lp i ; ~ . ) r r rces of business to commor- 3
cia 1 backs, j. \ can a 1 . s ~ be one of t h e most
r i s k y as rn;i!n;l hanks has found Lo their
projects, l o m f i n a n c i n g i s a method of
f i n a n c i n g sh.5.p purchase i n N i g e r i a . In
detrelopcd I!::::$ r:wmies government; grant low
i n t e r e s t 1.i:: it ir:; t o shf p owners for the
purpose of . . t . ~ l ~ r c ! . r t i n g in vessel; a means
of encournqi i.:l?l t h e es t n b l i s h n l e n t af new
ships. 26
research 1131 rlgunlala i n 1992, o n l y f i v e
banks out o:f I.bs whole l o t have firlanced
s h i p [Ur : : t t i l~~ i n NLgarPa. These banks
Fncludi? Li. O l d I . : mited (Merchant Bankers)
t h a t was isrx:t.l\,r:? i n l e a s i n g , 'Jnitcd Bank
for Africa (I . l i :?t . , ) , . ~ l l . i e d Bank .OR r-ligeria,
Habib Bank arb6 Universal Trust Rank.
Ogunl el a r r f l l l . n t t?;ir the dormancy of Nlqerian
h a n d l i n g ? ' I! l l:r>;d rry p o r t f o l i o s , !;he noted
t i o n s fr2r r.ic';!:l? : irrance a s lack of c o m p e t e n t l y
prepared f c l i ) r d t i . l i t y s t :ud i s s LO support
such a s al.cQrti 2 3 p r o f i t a b l e cnryocs for
s u i t a b l e ter'lrli; itnd Lack of c o n f i d e n c e i n
the ability o f Pl igcr ians to managa the
v e s s e l s . %.hi !; a njor problem bcJ.ng
errcowm tercc' .., 1.1 l g a r i a d o c s not. a p p l y i n
some csut) t r I.!!: r; ;is t h e i r government has
set ~ : p a gt:,r.t;r h r t k or f inance house to
CI
as co AAa? cr.ij!,g;, mortgage on . the vessels
guaramt:ecs r::f ..he s h a r e h o l d e r s to c o v e r
the total vls.l.1ll* ~f the amount i n v o l v e d
and a, (lei a!: l i:. c ; i" 20% of the v a l u e of t h e
vesscls In .t.f,:.:t!rl dcposh t account: for t h e
whole pcr'.im:\ 05 the repayment of khc
l o a n . 2 7 Ii'it:!ic! c :ondi t i o n s by Miyer I a n '.
b a n k s m a k e .I.(; * t r ? r y d t f f i c u l t for 'the enter-
prenmr- to r.nirjc? that: which ht takes to
own a tanker rw: a bulk c a r r i e s and govern-
ment i n the1.s uwn way is kakinq a long
time to com~ to the a i d of hntending/ship-
owners except .In 1977 when g o v e r n m e n t
provided money ko N i g e r i a n National sh ipping
line w i t l * v h A t : f t 19 combo ships were: bought
from South I(rrs'r*n, an a i d that came after
about 32 ye nr.? of 6s tablishment o f N i g e r i a n 28 N a t i o n a l stk f.p).r i.qg l i n e . .
Present :l+kf Ln N i g e r i a , no i n s t i t u t i o n
i s g r a n t i n q 1.1) 111 f o r s h i p purchase e x c e p t
Oversea cuur.sl:n',ies who base t h e i r s h i p
v e n t u r e s on t l r l . ~ u r o - d o l l a r market, w i t h a
premllcm r.vr?r lr~rd above t h a t f i g u k e r e p r e s e n t i n g
the bank' ,? III;~--!J I,n to pay for their e x p e n s e s
and provldrb B;' ) v r w i t h a prof it. 29
2.4.5 T.Lmc Ctlia!: _...._ - k.r?r/ -. Hire
T h i s d.s it 1ir.y and means occasionally
ava i lab le ku 'lw,::me a s h i p owner o f sort
w i t.hout: t\cc:CS?i?IC: l %y o b t a i n i n g e x . p e n s i v ~
loans or pmcr l.d . i l ~ < l cons idcrable. c.apit;al . 30 T i m e chartrx V::I.:. ! ; u f f i c i e n t ; durmtlion, and
a t a rate Lhiltl. lr~;.lld_gcnerate ermuqh cash
m i g h t j.nc.tuc. F , i , :s 7-tk . to , f Pnanca a sh ip
t h e hire i r ! r : c : ~ ~ . : ! : ! I ( ' the s h i p . 31 It may also
charterer v:hv 11 1 : regular cargocc La shift,
rcsponsibfl i t r y of- operat ing h i s own s h i p s .
He can t h e z : b ~ , , i ~ r - l ; * , r in a s u i t a b l e vessel,
and l e a v e thc n.\.r~t;ing to t h e ownEr, whilst
he arranges Ci:IT<iGlC'S and deals w i t h t h e voyage
operation s l 1 ~ 1 . r :I,:; purchase and supply of
bunkers , i \ ~ ~ . t s : t S . r l I. r ~ e n t of agenks , payment of
p o r t c h a r g a ~ . t l l ~ lt!:: ,. 32 a 33
PIany s l : t S ; p r ? iyag lines opera Ling in 9
to char tcs. I : as they do not; hear 1:he
charter. T?; ~ i s ..:;..: h used in paying is normally
is c l e a r l y t . l ? c ! : .cast r i s k y of the other o p t i o n s -
This he sa.lrl l;l~!c:;..uscr there must h;lve been a
running cost 5 5 i! i g h l y reduced baeause
lynacy , C - , 14 j~ t roduc t,ian t o S k i ' - i n q k o n o r n i c s . F i r 9 , pp. i.&-%2l.
D n k p e s i , i t . I \ . , :JigeciaBs Maticcal S h i p p i n g p o l i c y and the r n v i.::-lc ‘I t h e Unit-.ed tJ<- t l o r ! r, C o n v e n t ion o n ;I Coda ciC L-J l l t u c t 1 , i n c r Conf rrroncer, P r e s e n t S t a t u s , ~ n : l [ ) I - I > ;tli?ct. 1992, pp. 5i-.3.0 .
O n r , I!. i ., WGovernment D a r k i c i p a t i o n i n S h i p p i n q .I r r , 1 1 1 < ': world w i d e . C;c)vernrnen t a n d -..--- B , I ? , ! > p . 4-6.
The New Erlc'fr: l.o;vrdia B r i t a n i c a , Op. c i t (See 3 ) .
A c h i , C. I.!., '' ; l r j n i f i c a n c e of t n n n s p o r t a t i o n i n t h e N i g e r i a r:c:o-li>my.tt The N i g e r i a J o u r n a l of Mar'ke tin : i-kp.3: t m e n t of Marke Ling, U n i v e r s i t y n i y e d n , i ; n G 9 I Campus Vol. 3 ( 2 ) . 1988.
Hanson , J . I . - A , t l j . c t i . o n a r of Econol!lics a n d Commerce. London a n d 1 '1 ,:l.rlcq>uth: The -b Eng 3-sh L a n g u a g e Hook
v . Ibid., I . :
S loggck i - , J .. i : : . , S h i . u ) i . n q 17inar:c:c. P1,3ir p l a y -- - zTI:~3'-"'".- P u b l i c a I , . i c t .1 ' I ' ! i % i I P P *
2 3 , Jamr!!;, d l . : , F a i r p l a y Pub:l.ic:a?..ioplr:i,
2 . ~ a r , , I :it (See 2 5 ) .
CHAPTER THREE ....
f t E;Sli;/,HCB METHODOLOGY -,... .......- ."
T h e r e are about f i v e c o n f e r e n c e l i n e s
(COWAC N o r t:h, 1:C-L'AC S o u t h , U KWAL, FEWAC and .C
MEWAC) and t-znc: rlr?n-conf e r e n c e l i n e s s e r v i n g
N i g e r i a n por 1 : s . A1t;oge tiler, t h e r e are a b o u t
s e v e n t e e n s h i p p j n q c o m p a n i e s r e g i s t e r e d
w i t h them. l'he s h i p p i n g compan ie s n o t r e g i s t e r e d
w i t h any of t . h e c o n f e r e n c e l i n e s Or t h e non-
c o n f e r e n c e l i n e s are r e f e r r e d t o as t r a m p
o p e r a t o r s who c a n s a i l i n a n y r o u t e .
Fo r the p u r p o s e o f t h i s s t u d y , a l l t h e
s h i p p i n g c o n p a n i r . ~ r e g i s t e r e d w i t h t h e c o n f e r e n c e
l i n e s and n o n c o r r f e r e n c e l i n e s c a n n o t b e c o v e r e d
b e c a u s e o f t i t r ~ e c o n s t r a i n t s b u t a s many o f t h e m
as possible w l . 1 1 be i n t e r v i e w e d i n c l u d i n g some
o f t h e trarrlp o p 2 r a t o r s . T h e o n e s c h o s e n are
those locat-ed 117 , \papa a r e a of Lagos S t a t e . T h i s
is b e c a u s e ~ p i i p 3 i n Lagos i s t he base o f all
s h i p p i n g ac t iv .L5 . :?s a s i t i s v e r y n e a r t o t h e
p o r t s . Thc i ' l ? - a - - v i e w f i n d i n g s w i l l be u s e d t o
complement t l i . : .; ,::ondary data where t h e s t u d y
h a s b e e n based m n i r ~ l y on d e s k r e s e a r c h b e c a u s e
of insignif ic;n.rrc:c? 1 ,opu la t i an of s h i p p i n g i n d u s t r i e s
t h a t h a s been i . n v ~ ~ l . v e d i n s h i p p u r c h a s e i n N i g e r i a .
'The d a t < . ~ ro : t h i s study h a s b e e n b a s e d
mainly on s c - . r r r ~ ~ : i . l . ~ : : - i ' d a t a , and t h e rest from
primary s o u r c ~ 5 - F'or t h i s , d i f f ere11 t documen t s
o n s h i p p i n g f j :' t 3 ~ ~ : - - " , b o o k s , n e w s p a p e r s , j o u r n a l s ,
s e m i n a r p a p c r s , J t ~ ~ ~ o r t s and magazines were u s e d .
The pr i r i~ ;~ t . ; < o u r c e of d a t a came f r o m v a r i o u s
i n t e r v i e w s heltl IFh some t o p l e v e l o f f i c e r s o f
t h e selected f : t ~ . i l l i n g c o m p a n i e s . E x p e r i e n c e s ftom
o t h e r c o u n t r i e s ~ - i r : , i e found very h e l p f u l because of
3 2 SANPLE S J l X h : ---a. - --
O u t of t h c \ ~ h o l e r e g i s t e r e d s h i p p i n g c o m p a n i e s
i n b o t h conferencs and non conference i i n e s , i t was
f o u n d out t h a t o n l y NNSL and A f r i c a n Ocean l i n e s
h a s been i n v o l v e d J:I r e a l s h i p p u r c h a s e w h i l e t h e
o t h e r s inher.!. te:! t.',ig?ir s h i p s from t h e i r p a r t n e r s
and as s u c h krir:~.! r tc , th ing about the type of
s i z e now becan~e j v ~ i q n i f i c a n c e since t h e r e s e a r c h
i s based on d w r k s : f -rk . Rut during t h e o r a l *
i n t e r v i e w , an rs;ir.\\' s h i p p i n g c o m p a n i e s r e g i s t e r e d
w i t h t h e con? ? ? r . c w c . t - - u and non-conf erencs l i n e s were
c o v e r e d i n c l u d i . n a some t r a m p o p e r a t o r s .
3 3 SAI'IPLXNG I'RQC'k; UURE -.--* -....- * ..^ - ..-
A l l the r~c;il stered s h i p p i n g c o m p a n i e s w e r e
f i r s t c o n s i d e r e d t :? f i n d out t h e o n e s t h a t h a v e
been i n v o l v e d i . r l s r ? i p p u r c h a s e and i f t h e y h a v e
t h e method LI:;CIC\ . ' I twough t h i s p r e l i m i n a r y i n t e r -
view, t h e sh i 1)pi f ir; c o m p a n i e s t h a t had p u r c h a s g d
their own !jh i 1 ) wi'r f? known and t h e y were t h e o n e s
3.4 METHODS OF DATA COLLECTION L_.--.- ..* l. 5 - .I__
The m e t h o d a d o p t e d i n t h e c o l . l e c t i o n o f t h e
d a t a was p e r s o n a l i n t e r v i e w w i t h t h e t o p l e v e l
e x e c u t i v e s o f the s h i p p i n g c o m p a n i e s c o n c e r n e d .
Each of them v i s i t s d w e r e asked q u e s t i o n s b a s e d
on the type o f l i 11 ;ance t h e y used and the a n s w e r
recorded. ?'hi,:; :nethod used was fast and
efficient i n the cl3ta c o l l e c t i o n a s many people
are not: reac ly k u r ~ s p o n d to w r i t t e n q u e s t i o n n a i r e s
i n Lagos becau!;e d t h e b u s y nature of t h e town.
CHAPTER FOUR
HESIJL'P C F F I N D I N G S AND ANALYSIS ---- -- .- 7
'1'0 et-lsur e t . h a t a d e q u a t e i n f o r m a t i o n were
collected reg83rd.ing t h e m e t h o d s o f f i n a n c i n g '%
s h i p p u r c h a s e .it) N i g e r i a , many s h i p p i n g c o m p a n i e s
were v i s i t r _ . . d ,?,rrd t h e i r top managemenl; s t a f f
i n t e r v i e w e d . From t h e i n t e r v i e w r e s u l t s , most
of t h e shi; p.i.l>!; m m p a n i e s h a v e not: b e e n i n v o l v e d
i n a n y form i> f o l l i p p u s c h , a s e s i t l c e . t.hey s t a r t e d
o p e r a t:.i.on- S..l~:-l: z o m p a n i e s i n c l . u d e Gl.ohe S h i p p i n g
l i n e , Esacc!.? 1. i r ~ e , B r a w a l S h i p p i n g 1-S.ne, B a l d o c k ,
Comet , 1,agor; .i!r~c! ~ Y l g e r s t r i p p i n g Agency etc.
Though t h e y h 3 . v ~ b e e n i n opera t . i . on f o r a r e a s o n -
ab l e l e n g t l r or' i:, !,ne h e r e i n N i g e r i a , t h e y r e p r e s e n t
t h e i r .fore.iqr~ I:::I !:'hers whom t h e y entered i n t o j o i n t
venture agreemen!: w i t h - The purchase o f t h e s h i p
a n d p r o c u r e m e n t of f i n a n c e f o r i t : ; i n w h i c h e v e r
method, i s bc>:rns S y t h e f o r e i g n p a r t n e r s .
T h e shi}:.pi.r~g c o m p a n i e s who are i n v o l v e d i n
! a g r e e m e n t w i t h t h e i r oversea p a r t n e r s
i ~ d v a i ~ t a g e s s i n c e they are n o t r e q u i r e d
11.l.P j )urc .hase i n any f o r m . T h e s e s h i p
j o i n t v e n t ~ r r e
s t r e s s e d the
t o f u n d t h e :!s
p u r c h a s e wc.r.3 h + . . ! r t b y t h e foreiyn p a r t n e r s who
enjoy one s\ lb!; idy or t h e o t h e r I.n their home
c o u n t r i e s . n~:c.(>r.ding t o the r e s u l t of the
d i s c u s s i o n h e 1 3 .r L t h t h e C h i e f A c s o r l n t a n t of "P
Cross Marifle : ;e : ,.ices L i m i t e d who are i n j o i n t
v e n t u r e w i ' t h 0 .ve . : - sea l i n e , t h e i r - work i s t o
a r r a n g e w i t.h . L l i * ~ : : , f who want t o make use of t h e
s h i p i n t r ana ;mr ! : i n g t h e i r f i n i s h e d ' g o o d s or r a w
m a t e r i a l s to t .17~3 laces w h e r e t h e y are most n e e d e d ,
t h e n t h e y are p a i d t h e a g r e e d sun1 p e r e a c h t r i p
t h e y c o n t r a c t . .
O n the cs t:~,:-.r h a n d , ICON Limited ( M e r c h a n t
Bankers), :Jnite::l 3ank f o r Africa ( U R A ) and ~ l l < i e d
Bank were k h r s t i ~ i i : : i ~ t h a t h a v e bean I n v o l v e d i n
f i n a n c i n g ship p l ~ r c h a s e a r o u n d "184. ICON w a s
i n v o l v e d i r r leasing of s h i p s t o s h i p p i n g company
w h i l e t h e other b a n k s s y n d i c a t e d l o a n to A f r i c a n
O c e a n l i n e s w i t h w h i c h t h e y b o u g h t t w o s h i p s .
T h e loan acc01,lnt d i d n o t p e r f o r m s o t h e two s h i p s
were i m p o u n d e d and s o l d o u t . The n o n - p e r f o r m a n c e
of t h e l o a n was b l a m e d o n t h e management who
d i v e r t e d the p r o c e e d s t h a t would h a v e b e a n u s e d
i n s e r v i c t n y snd l i q u i d a t i n g t h e l o a n to t h e i r
persc.nal 11:;~s. yhe two bankg t h a t were i n v o l v e d
in the 1 0 . 1 1 ~ j y r i ! t c a t s ion h a v e not: tried any fo rm
of s h i p f ;rra:rcLrl) a g a i n becausc of the e x p e r i e n c e
t h e y had f o r ~ r ? ? r 1 f . A l s o ICON d i d n o t e n t e r i n t o
a n o t h e r 1c;lt;ct s I r eement s i n c e after t h e o n e t h e y
h a d with k i t l l l : i; 1 ; 1) line.
DurJr?(t I.') i n t e r v i e w w i t h t h e s h i p p i n g
c o m p a n i e s , ?..llt?.f c o n f i r m e d t h a t no f i n a n c i a l
i n s t i t u t i ~ n 1.5 t ! ~ - a n t i n q them any form of a i d .
Their main rc!in:;l.!11 was t h e r i s k i n v o l v e d w i t h s h i p
finance and :I, i r l c : . : ! t h e r e a re a 1 t s r n a t i v e v i a b l e -
o u t l e t s f o r tl,wi:l to i n v e s t t h e i r f u n d s , why
e x p o s i n g therrse:.\es to s u c h a r i s k t h a t is n o t
secured i n any f c r m e x c e p t w i t h the s h i p t h a t i 8
f i n a n c e d w h i c : h ~ ~ i ~ i l s t h e h i g h sea and s h o u l d
a n y t h i n g happen ko i t , t h e i n s t i t u t i o n t h a t
f i n a n c e d i l ; w i l l be i n t r o u b l e a s t h e i r c u s t o m e r s
money are . Invol \ed. Banks a l s o e x p r e s s e d t h e i r
series of d lsap1:o in tment f r o m such v e n t u r e s where
they have t o write off huge sum as, bad d e b t . ~ l s o ,'
t h e new prucllr!~~ l i ;I ! g u i d e l i n e s t o b2,nks ( f i n a n c i a l
I n s t i t u ( ; i o v s ) r : !o~ l : : not provide any h i d i n g place
f o r s u c h an t;.i.c.ipi;t:ed bad d e b t .
The i n l c ! t : v l . ? w r e v e a l e d t h a t many of t h e
s h i p p i n q co.l\pil\n.j cs 5:' are in j o i n t vnn tuxe w i t h
f o r e i g n par:'t:~.lc.!r r. v h o u n d e r take the p u r c h a s e of
t h e s h i p s i n c e . t.kc:ir g o v e r n m e n t e n c o u r a g e s them
t h r o u g h some f 1 . n a v f i a l a i d s as car) b e seen i n
t ab le .
T h e oversea pa.t.trri3.rs t h e n p a y N i q e r i a n s f o r m a n i n g
t h e v a r i o u s sh.1 p s : t h e r e b y p r o v i c i i n y employment
f o r t h e m whi le? or1 t h e o t h e r h a n d , t h e y d o n o t
b e a r t h e cost. o f L l ~ e s h i p . T h i s m e t h o d i s ,. . p r e f e r r e d by t t ~ e : : h i p p i n g c o m p a n i e s b e c a u s e i t
g i v e s them t . h c .jl>r t u n i t y of r u n n i n g s h i p p i n g
c o m p a n i e s w i t h o u t b o t h e r i n g t h e m s e l v e s w i t h t h e
h u g e c a p i t a l invo lved i n t h e p u r c h a s e o f s h i p .
N o f i n a n c i a l insl-.j. t . u t i o n i s d i s t u r b i n g them w i t h
l o a n repayment : , It!2se r e n t a l s e tc .
Some of t : l w s h i p p i n g c o m p a n i e s s a i d t h a t t h e y
p r e f e r r e d b e i n g ac:;.nt to o v e r s e a . s h i p p i n g c o m p a n i e s
s i n c e NigeriLan gov=rnmen% h a s no p r o v i s i o n /
s u b s i d y for indegc-nous ship owners. They
s t r e s s e d t h a t the commiss ion b e i n g paid to them
by t h e s h i p cwners c a v e r s e v e n what t h e y would
h a v e been rttal.isir,'; a s s u m i n g t h e y b o u g h t t h e i r
own s h i p s . ' This was b e c a u s e N i g e r i a n P o r t
A u t h o r i t y c h a r g e i n d i s c r i m i n d t e fees t o s h i p
o w n e r s f o r making u s e o f t h e i r part;s.
An0 t h a r method whereby N i g e r i a n s h i p p i n g
compan ie s opcr."i~.te jbs by h i r i n g o r c h a r t e r i n g s h i p
f o r a s p e c i f i e r l k i s~c p e r i o d . his is i n no way
e a s y f o r them Iw!. :s i . l \ se t h e y h a v e t o pay i n f o r e i g n
c u r r e n c y ; ah:.! l . ' 1 , (,)00 d o l l a r s per d a y and a .. .
c h a r t e r p e r l w i !.:; !:ot less t h a n five weeks; a
minimum of 3':llr , ' ; ) : . I ( : ' dollar-s to c h a r t e r a s h i p ,
Though t h i s r n d F I C : ~ : was f ouncl b y s h i p p i n g compan ie s
t o be t h e easiest; ~ i e t h o d o f a c q u i r i n g a s h i p w i t h i n
a s h o r t p e r i o d , Ltrr fees p a y a b l e per charter is
v e r y h i g h , 1 . i . v 9 . r t q t h e c h a r t e r e r w i t h v e r y little
p r o f i t . One ol 1 t-12 s h i p p i n g l i n % ? s i n v o l v e d k i t h
c h a r t e r i n g of s h i ~ r , i s Comet s h i p p i n g l i n e .
from t h e N L.ger.i a r~ g o v e r n m e n t . T I I ~ p r o p o s e d
Marit ime Rank uhl.ch is t o f i n a n c e s h i p
acquisition Ni.3eri.a i s y e t to take off while
t h e r e i s no 5M.p b u i l d i n g y a r d s i n ~ i g e r i a . The
N i g e r ~ o c k . j.!; o -1 i .( i nvo . lved w i t h s h i p r e p a i r s
and m a i n tc:l;i:~c: s~
blor ;my ,:;h ' - 1 1 t o be p u r c h a e e w i t h a n y f o r m
of credit; fro111 0 , x s e a c o u n t r i e s , g o v e r n m e n t o r
bank guarar;t.m~ I- . r e q u i r e d and since N i g e r i a n
g o v e r n m e n t ir: I N ' . . i n v o l v e d i n any f o r m o f a s s i s t -
a n c e and bznb;l; , I . ..:: s e e i n g s h i . p p i n g of b u s i n e s s
as a v e r y r . i . sb;>~ c.r.:e: n o go a r ea , s h i p p u r c h a s e '
i n N i g e r i a i s k : l l l x l y j e o r p a d i s e d . The o n l y t i m e
g o v e r n m e n t w.7.:; !!:l:olved i n s h i p p u r c l ~ n s e was i n
1 9 7 7 when 1 3 s l ? i p:; were bought for N i g e r i a n
N a t i o n a l Shipy:l:i.nq L i n e f MNSL) w i t h c a s h payment
from S o u t h itorema.
B e i n g t h ~ ! . .I s h i p w i l l cosk n o t less t h a n
H30rn, cash I'ur'Cl'ra:;?! was condcmnecl b e c a u s e if a n
e s t a b l i c h ~ ~ e r ~ i . c:o+.tl.c.l u s e more t h a n W30n in b u y i n g
a sea g o i n g venwt" ; t h a t w i l l mean tying down t h e i r
c a p i t a l anil . ; I I . ~ > ~ . I ~ . ~ t h e s h i p s i n k , i t w i l l
resul t to t,nhal loss that c a n cause t h e e s t a b l i s h -
ment: to l i q r . ~ . i c f ~ : ~ l : ~ ? .
'fhare I:; tl:,?refore n o s h i p p u r c h a s e c u l t u r e -*
i n Nigeria an(l r ; . . ! s h i p f i n a n c e ! 1s a b s e n t
p r e s e n t l y i : h ~ . ) ~ l ~ h *,he N i g e r i a government: i s w o r k i n g
h a r d tl'lrouqh I:he ! J a t i o n a l Maritime A u t h o r i t y to
e s t a b l i s h ;L w ) r : l ; i;i:)le s o f t l o a n for' i n d e g e n o u s
c o m p a n i e s \:haA: !n.!;! w a n t t o a c q u i r e ,their own s h i p .
As A ! : t : l : t 'dR: . lme t h a t t h i s project was w r i t t e n
t h i s soft .\.0;3n ;I:;.:; n o t been o p e r a t i o n a l t h o u g h
e v e r y p l a n f o r i l to be o p e r a t i o n a l h a s b e e n
c o m p l e t e d .
-b
It i s e s r : e c i a A l y d i s c o u r a g i n g to
f i n d t h a t a sJ ~ e a b l e number of f i n a n c i a l
i n s t i t u t i o n s E :-c more w i l l i n g to s u p p o r t
t h e s t a r t : u.11 c f a new cable t e l e v i s i o n
o p e r a t i o n o r t o r e s c u e a p r o p e r t y d e v e l o p -
ment cornpanall than p r o v i d e t h e f u n d s Lo
f i n a n c e a wel l c o n c e i v e d new s h i p b u i l d i n g
programme I,;l.:l. a n , 1992 ) . The reason i s
n o t f a r fctlc:h?cl. No i n s t i t u t i o n is so >.
much intr!r:~.::; tn:l i n l e n d i n g l o n g . T h i s
is to yiirc: !:hr:n t h e opportunj t y to reassess
the l o a n s ar\(;I t l ~ u s secure t h e in t ere s t of
Nany i )alt l . - ; h a v e o p t e d n c t to be
i n v o l v e d w . i l . l ~ .Ire s h i p p i n g i n d u s t r y due to
t h e i r prev.i.c!nr, tmd e x p e r i e n c e o f w r i t i n g
off l a r g e ~ C N . I I ~ t.s of t h e i r asset based loan
p o r t f o l i o s ( I.1t4,orah, 1 9 9 3 ) . I n ~ i g e r i a
also, the : i t t i.l!l:.ing i n d u s t r y has s u f f e r e d
from lower ~ c . c ~ n o m i c a c t i v i t i e s around t h e
world wl) i c t ~ h ~ s , caused c o n s i d e r a b l e
detcri.or3ti.c:l: i.rr t h e f r e i g h t m a r k e t s and
t h e values o f s h i p p i n g a s s e t s , so w h i l e a l l
areas of t h e L a n k s * p o r t f o l i o s are under
s c r u t i n y at p r e s e n t , t h e s h i p p i n g i n d u s t r y ,
h a s been p a r t i c u l a r l y v i c t i m i s e d by i t s
a p p a r e n t l y I.) hs c ;xe image.
The! mktldy a l s o revealed t h a t t h e r e i s no
f i n a n c i n q ccl.I.t:ti:e for s h i p p i n g i n d u s t r i e s in '.
N i g e r i a . The! perat at ions of t h e s h i p p i n g
i ndus t r i c o II,!?::.~? found to b e dependent on
f o r e i g n s hf.l;.r> i.~:l:r companies who owe t h e i r
own s h i p s t;ci~.:~!,rlr;e o f t h e i r we1 1 d e v e l o p e d
f i n a n c i n g c111 t i t. e.
This absenca of f i n a n c i n g culture i n
Nigeria 11x: heen a t t r i b u t e d t o g o v e r n m e n t
negligence h a t h a t sector o f t h e i n d u s t r y
which made j.!: * d i f f i c u l t f o r b o t h t h o s e
who are alrilitc-!.y i n t h e i n d u s t r y a n d t h e
i n t e n d i n g c ' l i \ c~s t o o b t a i n f i n a n c i a 1
ass i s t?.nr:c! . liank s a r e af ra i : j Lo t i e down
t h e i r c.r~s.l::rmc!rs' d c p o s i t on s:~ch v e n t u r e
t h a t yov;>x'ru-rr:rrt c a n n o t guarantee.
Nigeria c;.~i?r)cl:. therefore boost o f e n o u g h
s h i p s t o (::ax n v t h e i r p r o d u c ts t:o w h e r e
they arc? nccc!?d a t the r i g h t tins a n d a l so t .
b r 3 . 1 I . t h e o n e s t h a t i s r 3 q u f r e d .
his ha:-: r.et;!; L i v e effect on o u r gross
n a t i o n a l proc!uc t ( GNP ) a n d a l s o direct
negat iv l? e:l.f e c t on o u r f o r e i g n exchange
e a r n i n g : ; ,
A c:ob,!n t:: y l i k e N f g e r i a tt'ra t p r o d u c e s
a lot. of cza.ido o i l . c a n n o t boost: of their
i n d i g e n o u s shS.,ps b e i n g u s e d ko c a r r y t h e
their own cr',?l:li '- from banks for the purchase
of ships d J . d no! . succeed a s t h e y c o u l d n o t
k e e p to the te;rt:c> of t h e l o a n The
b a n k s i n v o l vc?d S mpounded the s h i p s and s o l d
them o f f .
Pre:;~!!'11:. l . ( , N i g e r i a n National s h i p p i n g '.
l i n e w h o t \ s : : kh%.ir own s h i p s are c r y i n g to
the governmw~t: Lo come to t h e i r a i d s i n
r e p l a c i n g t tw b x : h n o l o g i c a l l y o b s o l e t e s h i p s
t h e y have so t;tr4nk t h e y can w i t h s t a n d t h e
p r e s e n t tectwcr . \ .og ica l demand for e f f e c t i v e
c o m p e t i t i o n i n the i n d u s t r y .
N i g e r i a n s h i p p i n g i n d u s t r i e s a r e n o t
d e v e l o p e d . Evan t h e Mari t ime bank which i s
e x p e c t e d t o s i 1 i t 4 u p d e v e l o p m e n t i n s h i p p i n g
i n d u s t r y b y p t c ~ v i d i n g f i n a n c e s t o them is
yet to t& c (:)I' 1' . G o v c r r ~ t a w ~ P , s h o u l d n o t h e s i t a t e i n
.h
u p - g r a d i n q ktw t l i g e r ~ o c k from a mere s h i p -
r e p a i r y a r d t o ;! s h i p - b u i l d i n g y a r d as i t
w i l l go a lor ry way i n s o l v i n g t h e , p r o b l e m
being faced k r y s h i p p i n g i n d u s t r y . A l s o
i n p r o v i d i n q mcney so t h a t m o d e r n , s h i p s
could be bought, g o v e r n m e n t should n o t g i v e
deaf ear t o t h a k prob lem. Our i n d i g e n o u s
i n d u s t r i e s need t o p a r t i c i p a t e fully i n l i f t i n g
o u r crude o i l which i f d o n e w i l l increase o u r ...
r e v e n u e . 'l'hfrrl? .is ever): r e a s o r ; for u s n o t to
be de~>cndernl: s,21.tl ly on f o r e i g n s h i p s f o r
l i f t i n g our (:rw:h o i l as o n e w j , l l n o t be
s u r p r i s e i . f t ; he f o r e i g n s h i p o w n e r s t u r n o u t
o n e day tc w.l t::r.:!n:aw the s e r v i c e s of their s h i p s
to N i q e r : i;~.
There .is aLso need for a n a t i o n to
have i t s own s h i p as no c o u n t r y can force
another coun1;r-y to c a r r y i t s product to t h e
d e s k i n a t.ion where the c o u n t r y that: owes
t h e s h i p doc:: r v , ? want t h e s h i p to sail to.
This problem i .nf : .c .nsif i es d u r i n g outbreak
o f war when t : k ~ ( ? c o u n t r i e s concerned withdraw
their s h i p s jinx. ~ a f e t y .
hchi, . . "::ignif i cance of Transports- ?[.on i n the N i g e r i a Economy11. r"e Nigeria Jour r l a l of Harket inq: I .. I.. I-.-- --. .--I-. - 11 i..:tartment of Marke k i n g , 4.J lS.versity of Niger: i.a, Enugu I:-tr~pus vol. 3(2) 1980.
Adeosun, 0 - , " , : t \ i p ~ c q u i s . L t i on , b u i l d i n g :'I!! ~d comingw. Guardian , ,;li(y~st 11, 1 9 9 3 , p . 3 K
~ d e w u n m i , W ., , l i?dus trial Equipment leasing j r ~ N i g e r i a : Problems and 1 i c s p e c t s . A paper presented ?I.{: 3rd N a t i o n a l S s m i n a r on I:ci,llipmen t l e a s i n g . February ??93 . '.
Ahmed, "Barrlc-1 nq and F inance" . African -.- V e r i t i r n e Economist V o l . 4 ..._.* , - . 7 ~ ~ r i l m 11. 29.
~ l a n , n . , "~h.l. F f inancel l . Annkcm of
P9 --A- S h j p i n . S t . C a t h a r i n e s C o l l e g e , -- ...
Carnbr dge. 1992, pp. 1600-1730.
Bundu, A . , ~ q : : I ~ \ : ~ . [ ~ f i n a n c e s : What Hope?" ;,i I ,..- .i can Maritime Economis t, !/c)l.. 4 NO. 'I ~ p r i l , 1992, p. 1 6 .
Dolcpesi, R * A * , r l f g e r i a t s ~ a t i o n a l s h i p p i n g 1x1. :.,:y and t h e review o n t h e u n i t e d I i p k i m s C o n v e n t i o n 013 a Code of r:l:>!l l!lc t 1 i n a r c o n f e r e n c e s p r e s e n t :i lrat:rls and p r o s p e ~ t . 1991, 1'P. 9-10,
Edward, F. s., s h i p p i n g Practice, 2nd Ed. Vo.1. 2 ; Isaac Pitman and s o n s Lfml Led 1983 , pp, 1-20.
George, 3 . B. and Steer, E. C,, Ships r.:r:ln:~nmics. London Mari t i m e F'i'e3s Limited, 1970 pp. 25.
Hanson, 3 . 1 , . , i" d i c t i o n a r y of i3::onomics G I id ~ommerce. I,u~ldon and Flaymouth: T h e E n g l i s h I . ' ~ n g u a g e Book s o c i e t y atld E ,>cdonald and Evans L i m i t e d , 1 3 7 7 , p. 5 0 .
I g n a c y , C . , ,\ri .r - ~ i : r o d u c t i o n to S h i p p i n g lZ.:nnomics. F a i r p l a y p u b l i c a - Rlon, 1 9 8 9 , pp. 112-121 .
James, d . G . , ~ I ~ : . ~ l p i n g F i n a n c e . F a i r p l a y i l \ r h l i c a t i o n s , 1 9 0 4 pp. 15-27 .
Kean, S., k ~ r l d .f; h i p p i n g b a r n a c l e d , but b a i l i n g cu:: of t r o u b l e " . Accot~r l tanc . I .c n l o n ICACW. V a 1 ' . 3 ~ m f 3?!!2, p. 100.
Mordi , P. , Govr! r r l r i r ; . t l t POS t p o n e s Mar i. time
Obalade, Y. , "Packaging lease t r a n s a c t i o n t t . A papsr p r e s e n t e d a t 3rd N a t i o n a l Sc?m 1.n lr on Equipment: l e a s i n g . February, 199 3 .
Oluwajana, R., K t : : ! . : ; pment Leasing i r l N iger ia , .I.$? ;ii' :l 3nd Reyula t o r y E'rame wbrk ' c 1 ; i n . A paper prcsen t e d 21% .3r-\:i National Sern.'.rrar o n P .
~ q u i psl%nt l e a s i n g . );'abruary 1993.
Osuji, O., Rf:>?f-i %'*: . : ! \sportation i n Nigeria': h ::,i~:;~-: study o f Ekene Dili Cl'i!.ll:::~ir ~ i g e r i a L i m i t e d . U e r i a --- ,Jol.Kn,al. of Market ing , EnuyU, Dcpw%rent of M a r k e t i n g , Un ivers i ty of rl.i.cycria, Enugu Campus. Vol.. 3(2) 3.9f28 pp. 24.
Packard, W. V., Sale and Purchase of s h i p s . pairplay P u b l i c a t i o n s 1 9 8 8 . pp. 25-31.
S l o g g e t t , 3 . K t , s h i p p i n g F. inance. F a i r p l a y E u b l i c a t i o n s , 1 9 8 4 , I'P. 11-13 .
Vant lo rne , J , C. ,. F i n a n c i a l Manayemen t and P o l i c y , Seventh E d . 1988 , i'p. 553-559.
Wajilda, J - A * , "Types of Merchant Fleet ({evelopment PaZic.iGsW . ..
The 35 most imporlant rnaritirne countries .- .-. (as at 1 July 1990) d
,I 3 __I
Tad
-- 1321 2 848 1 138 1 398 *664 .I 305
918 1 547
581 899 039 5 57 416
363 293 147 378 375 74
2 67 289 178 300 587 442 88
J27 135 273 176 19
I64 78
367 20 1 --
23 HI8 ---- I oa
26 631
Tad u pounuge d
world 9 llCIl
13.76 13.41 9.25 . 9.24 5.00 50.73, g* 4.9 1 4.3 1 4.21 2.64 2.14 68.94 1.96 I .Q4 1.81'
1.77 1.66 78.08 l,45 , , 1.26 1.10 1.03 1.03 83.95 1.01 0.96 0.93 0 93 0 86 0 78 0.70 . 0 f17 02; 0 58 0.50 0.56 0.42 0.40 0.40 - *- 14.14 ' --
Naucnd flag
35 671 510 35 283 965 18 4Y7 870 36 794 OX2 3 324 449
28 529 891 7 976 654
20 113 492 I I 469 60J 4 756 600
10 W I 718 6 872 868
10 335 360
6 734 465 9 528 079 8 595 4(W 4 653 044 5 8hS 055 5 147 637 3 045 1)61 5 768 581 2 489 694 2 693 018 3 244 520 4 89') n 1.1 2 855 ? X X 4 100 111')
461 238 3 2W) 253
934 107 2 769 bh6 2 456 I bll
501 445' 1 554 369
550 263
312 717 522
55 8
340 889 126
57.2
Grcccc Jrpm UIIII~ S ~ ~ r c r Norway Hong Kong USSR* Unitcd Kurgdom Chtna Republrc of Korca G c n m y Italy Denmark Lrd~a IIuwan. t'ruvmcc of
Clunr Brui l Iran (lslrmic Rep.00 Surgaprc Turkey Cyprus I:rancc Yug~s luv~a Bcly~um Swc*., hc~hc~ landr spill h u w r ~ ~ l ' \ ) l ~ l J 4
SWIIUI~~IIJ Phhpptncs 1:rnlmJ Au6lralla Argcn~ina Y h n a n Il~duneua ("dllddd
-
44 2 I loo World t a d I( 18 754
I ! ' I Source: lnformu~on tupplred by Lloyd's M a n i a n e lnlonnauon Scrv~ccs Id. (LMIS), h d t n - I
I : I a/ Vcsrelb of 1,000 gn and above, crclucluig Urulcd Si&r reserve flcel m d Urutcd Sutes and G n d a Cirul &kc8 fla~ I
' - ,, 8 I
,I
d l F~gurer m h a column show armulauve louh I - [ I
I I ----
AFRICAN MARIT lME ECONOMIST, APRII, 1992. I
! '
I I ! 1 9 -.)P' 9 s - b
. ,, ; 1 66 1 ' I I . , r
I I
I Table 2: Summary of maritime subsidies. d , Country 1 Subsldy type , i
I 1 2 3 4 5 6 7 i 8 * * lo
11 ' Algeria I , . Argentina i * * I
Australia ' * * * * * * Belgium * * * i . Brazil * , * * * s
Canada I rC I * *
* Chile * I * Cdumbla I * * I * ' I . * I Denmark 0 !a * I Ecuador * I Egypt * *
'I * * * 1b ' * * * 1 Finland * ' I I
France * Germany F.A p V * * * 1 * Ghana * I I
Greece j
India + *
Indonesia * I
Ireland , I
2. I
Israel * I
* * * I I I
Italy * i Japan * + * Korea * g * * . , i Kuwait Malaysia * Mexlco * * Morroco * I
bietherlands * * * + I I t N i g e r k - - - . -- - *.
I *' , I
Norway * + * t 1 ' 1 Pakistan * * * t .
Panama * * t I 1 Peru * b * * , . * * * I . I
Philippines '. 1 I
Portugal + I 1 , Slrigapore South Africa * * Spain * O * * z * I . I Sweden * It * * I
Switzerland I
* I Taiwan * It I Thailand It I ,
Turkey * * * , I
United Kingdom * * I
I
United States * * * * !
Source: US Department of 'l'ranspor fation (1983), Maritime subsidies Washington DC: Author 1
Legend: I I i 1 Operating subsidics. I
!
2 Construction subsidies I I k 3 Credit and loan subsidics. 1 ,
4 Scrap and build subsidies (nlodcrni!,i\tion subsidies). t
5 Investment grants. I
\ ' 1
1 I 1
6 Taxation allowanccs (fiscal trcatmcrrt of shipping) ! ;
7 Cargolflag rcscrvation and prcfcrcnc c. I 1
8 Cabotagc - protection of coastal shippmg. I
I 9 Moratoria and guarantee on loans. I
10 Customes reductions. I ; 1 11 Social security reductions. I 1
I 18 . AFRICAN MARITIME ECONOMIST, APR& 199.
r e d I