Dangote’s vessel plan can revive Nigeria’s shipping industry – Olubowale

A former President of the African Shipowners Association, Captain Ladi Olubowale, has backed Dangote Group’s plan to acquire vessels for distributing its products across West and Central Africa, saying the move could also help rebuild Nigeria’s indigenous shipping capacity.

Speaking during an interactive session with selected maritime journalists, Olubowale urged the conglomerate to allocate part of its cargo requirements to competent Nigerian shipowners through medium- and long-term Contracts of Affreightment, time-charter arrangements and other bankable cargo commitments.

Olubowale, who is the Managing Director of Seamate Group, said there was nothing wrong with Dangote owning vessels to strengthen its supply chain.

“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,” he said.

But he said the company’s planned vessel acquisition presented a bigger opportunity for Nigeria’s maritime sector.

“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 requirements could be deliberately structured to develop competent Nigerian shipowners,” he said.

Olubowale said this could be achieved through firm medium- and long-term COAs, time-charter arrangements and other bankable cargo commitments awarded to technically qualified indigenous operators.

He warned that Nigeria’s inadequate vessel capacity had already cost the country opportunities in the maritime sector.

“We have already seen the consequences of Nigeria’s inadequate indigenous vessel capacity,” he said.

“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.”

According to the maritime expert, cargo remains the foundation upon which successful shipping fleets are built.

He expressed confidence that the huge cargo generated by Dangote’s industrial operations could become the catalyst for producing a new generation of Nigerian shipowners.

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

He argued that Nigeria could use the opportunity to strengthen its position as a major African shipping hub.

The former ASA president also cautioned Nigerian investors against acquiring vessels simply because financing was available.

He said a prospective shipowner seeking a $25m loan to purchase a vessel would face critical questions from banks about the type of vessel, trade route, charterer, cargo, contract terms and repayment plan.

“Shipping is attached to trade,” Olubowale said.

“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.”

He said having identifiable cargo backed by a firm, long-term contract could significantly improve the bankability of vessel financing.

“Nigeria has cargo,” he said.

“Oil and gas generate cargo. Agriculture generates cargo. Cement generates cargo. Fertiliser generates cargo. Manufacturing generates cargo.”

Olubowale added that the Dangote Refinery was generating cargo on a scale capable of influencing regional maritime trade.

“The challenge is converting these cargo opportunities into sustainable Nigerian shipping capacity,” he said.

He explained that a Nigerian shipowner armed with a multi-year cargo contract from a major industrial company would present a stronger case to a financial institution.

“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.”