Dangote Urged To Engage Indigenous Shipowners In Vessel Acquisition Plan

A former President of the African Shipowners Association (ASA), Capt. Ladi Olubowale, has urged the Dangote Group to consider engaging competent Nigerian shipowners as it moves to acquire vessels for the distribution of its products across West and Central Africa.

Olubowale said there was nothing inherently wrong with the conglomerate owning vessels, but argued that part of its cargo requirements could be allocated to competent indigenous shipowners to support the development of Nigeria’s shipping capacity.

It would be recalled that the Dangote Group recently disclosed plans to acquire vessels to distribute its products across West and Central Africa, citing limited shipping capacity and the high cost of road transportation in Nigeria.

Olubowale, an indigenous shipowner and maritime industry leader, made the recommendation while speaking at an interaction in Lagos on vessel acquisition and its impact on the national economy.

He said, “There is nothing inherently wrong with the Dangote Group owning vessels. A major industrial organisation must secure its supply chain and move its products efficiently and competitively.

“But I believe there is a greater opportunity. Rather than building an entirely vertically integrated shipping system in which the industrial producer ultimately owns most of the vessels carrying its products, part of that cargo requirement could be deliberately structured to develop competent Nigerian shipowners.”

*Former President of the African Shipowners Association (ASA), Capt. Ladi Olubowale

“This can be achieved through firm, medium- and long-term Contracts of Affreightment (COAs), time-charter arrangements and other bankable cargo commitments awarded to technically qualified indigenous operators.”

Olubowale, who is the Managing Director of Seamate Group, said the planned acquisition had highlighted Nigeria’s inadequate indigenous vessel capacity.

“We have already seen the consequences of Nigeria’s inadequate indigenous vessel capacity. When Nigerian operators do not possess vessels of the appropriate size, specification and operational capability required by major cargo owners, commerce will not wait for us. The cargo will move. And somebody else’s ships will carry it,” he said.

The former ASA president absolved Dangote of any blame for relying on available foreign vessel capacity, noting that the situation reflected the wider weakness in Nigeria’s indigenous shipping capacity.

He said cargo was the foundation upon which fleets were built, adding that the enormous cargo generated by Dangote’s industrial operations could serve as a catalyst for developing a new generation of Nigerian shipowners and positioning Nigeria as a major African shipping hub.

“I believe it can. And if properly structured, the economic impact could extend far beyond Dangote, beyond the maritime industry and even beyond Nigeria,” he said.

On vessel acquisition, Olubowale cautioned against buying ships simply because financing was available, stressing the need to first establish the availability of cargo capable of sustaining the investment.

He explained that if a prospective shipowner sought a $25 million loan to acquire a vessel, a financial institution would typically want to know the vessel type, intended trade, charterer, cargo, contract terms and how the loan would be repaid.

“Shipping is attached to trade. Before acquiring a vessel, a serious shipowner must understand the cargo, its volume, the route, frequency, vessel specification, charter structure and duration of the commercial opportunity.”

“Once there is identifiable cargo backed by a firm, long-term contract, vessel financing becomes a significantly more bankable proposition,” he said.

Olubowale noted that Nigeria had substantial cargo-generating sectors, including oil and gas, agriculture, cement, fertiliser and manufacturing.

He said the Dangote Refinery, in particular, was generating cargo on a scale capable of influencing regional maritime trade, adding that the challenge was to convert these cargo opportunities into sustainable Nigerian shipping capacity.

“But imagine the same Nigerian shipowner approaching that financial institution with a firm multi-year cargo contract from a major industrial company such as Dangote. That is a fundamentally different financing proposition.”

“The cargo becomes the foundation of the financing. The contract gives visibility to future earnings. The vessel becomes connected to an identifiable trade. The lender has greater visibility over repayment. And the shipowner has an opportunity to build a sustainable business rather than merely acquire an expensive asset.”

To transform these cargo opportunities into a national maritime development strategy, the Master Mariner advised Nigeria to bring together major cargo owners, credible indigenous shipowners, the Nigerian Maritime Administration and Safety Agency (NIMASA), Nigerian financial institutions, development finance institutions, Afreximbank, insurers and experienced international technical partners.

He said the stakeholders should jointly determine the volume of crude oil, refined petroleum products, fertiliser, cement and other dry-bulk cargo to be transported, as well as the routes, vessel sizes and projected cargo volumes over five-, 10- and 15-year periods.

“Once we understand the trade, we can determine the fleet. Not the other way around.”

“We can identify the Aframax tankers, product tankers, bulk carriers, coastal vessels and specialised marine assets that Nigeria actually needs.”

“Qualified Nigerian shipowners can then be matched with specific cargo opportunities and supported to acquire appropriate vessels. That is strategic fleet development,” Olubowale said.

He also canvassed the use of the Cabotage Vessels Financing Fund (CVFF) within the broader framework of strategic fleet development.

According to him, the success of the fund should not merely be measured by the number of shipowners who receive financing, but by the number of commercially sustainable Nigerian-controlled vessels created, the volume of Nigerian cargo captured, the maritime businesses established, the employment and sea-time opportunities created for seafarers, and the freight income retained within the country.

“If an indigenous shipowner has a credible cargo contract and an appropriate vessel can be acquired for the trade, then CVFF and commercial financing can become powerful instruments for fleet development.”

“But vessel financing without trade risks creating ships searching for cargo. Nigeria needs the opposite: Identify the cargo. Secure the trade. Structure the financing. Acquire the appropriate vessel.”

Concluding, Olubowale urged the Federal Government to stop allowing Nigeria’s maritime value to be exported and instead create an environment in which the private sector could build sustainable shipping capacity.

He said reliance on foreign-controlled vessels to carry Nigerian cargo meant that freight payments, charter revenues, technical management income, marine insurance opportunities, ship-management revenues, employment and training opportunities could leave the Nigerian economy.

“Government cannot successfully operate every ship. Nor should it attempt to. Government’s responsibility is to create the regulatory, financial and commercial environment that allows competent indigenous operators to thrive,” he submitted.