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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
