Indigenous Shipping Firms Crumble Under Debt Burden
More indigenous shipping firms in the country are going under as the ills plaguing the Nigerian economy exacerbate as a result of the recession, THISDAY investigations have revealed.
Though many of the Nigerian shipping firms were not doing well but their woes were compounded by downturn in the economy, especially the low price of crude oil in the international market.
Hitherto, these companies had added enormous value to the economy through job and wealth creation, revenue to government-payment of taxes, and levies including cabotage fees.
Though the fate of these companies varies, one of them stood out as a sore thumb in the mouth. Established since 1987 as a wholly owned indigenous company with interests in banking and finance, real estate, agriculture, trading, media and publishing and hospitality, the promoters of the company who preferred anonymity decided to venture into the oil and gas industry in 1997 with the establishment of its shipping division.
Not a few stakeholders in the maritime industry saw the decision as not only bold but also timely considering the niche and absence of local players in the then lucrative industry.
With the support of some financial institutions led by one of the leading banks in the country, Diamond Bank in the past 20 years of existence, the shipping division of the company has continually invested millions of United States of America (USA) dollars in the acquisition of a fleet of state-of-the art ships.
The acquisitions were mainly platform supply vessels (PSV) and security boats of various capacities, sizes and shapes.
In spite of the fact that the shipping division of the company has offered cost effective and quality services to leading multinationals including ExxonMobil, Nigerian Agip Oil Company Limited (NAOC), Total, Addax and other national oil companies, the current challenges facing the oil and gas industry has put local players in distress.
This is not unconnected with the drop in the production level of international oil companies (IOCs) as a result of the fall in crude oil price, militancy in the oil and gas rich Niger Delta region, among other reasons.
THISDAY checks revealed that the situation is so bad that most of the IOCs have off hired vessels of their clients leaving them with no other viable alternative option than to drastically reduce their workforce through dismissal, downsizing and rightsizing.
In some instances, some of these shipping firms have either close shop or at the verge of doing so this year.
Already, some of these companies cannot afford to run their offices any longer not to talk of having funds to maintain the minimum standard of their vessels lying fallow in the ports (due to non- availability of contracts). The sad development has quietly led to mass retrenchment in the oil and gas sector leaving many to join the large army of the unemployed.
This is the reason behind the calls in some quarters for the Federal Government intervention before things totally go out of hand in the shipping sector of the economy.
According to some stakeholders, it will be suicidal if the Federal Government continues to watch the sad trend continue without intervention in the months ahead.
In the light of the foregoing, the commercial banks and other financial institutions, may have to reconsider various options of supporting local companies during this trying time by considering rescheduling payment of outstanding debts which are mostly in USA dollars. Many of these loans were gotten years back when $1 was exchanging for N100 or N160). Presently, $1 is exchanging for N375 and N520, official and black market rate respectively.
Analysts have opined that this is the best time to assess banks on their business friendliness and support even as they pointed out that the once lucrative sector had in the past yielded millions nay billions of naira/dollars for the banks.
Besides the Federal Government intervention, there is urgent need to strictly enforce the provisions of the Cabotage Act 2003. This is the only way to stop the flagrant abuse of the Act with the signing of waivers, the continuous engagement of foreign owned vessels for jobs strictly meant for indigenous ship owners.
Stakeholders including government agencies such as the Nigerian Content Development and Monitoring Board (NCDMB), National Petroleum Investment Management Services (NAPIMS), Nigerian National Petroleum Company (NNPC), Central Bank of Nigeria (CBN), need to come together and deploy resources so as to prevent a bad situation becoming worse in the months ahead.