A SURVEY ON SHIP FINANCING: EXPERIENCE OF NIGERIA
- Project Research
- 1-5 Chapters
- Quantitative
- Chi-Square
- Abstract : Available
- Table of Content: Available
- Reference Style: APA
- Recommended for : Student Researchers
- NGN 3000
Background to the study
Shipping has been around for almost 5000 years, with the earliest known marine commerce network connecting Mesopotamia, Bahrain, and the Indus River. Shipping is always evolving, and today's shipping is very different from what it was 5000 years ago. The discovery of global sea routes in the late fifteenth century, the industrial revolution in the late eighteenth century, and the dismantling of the colonies in the second half of the twentieth century all contributed to the transformation of shipping from a slow and expensive land-based mode of transport to a tightly knit global business community (Stopford, 2008).
industry of shipping Due to the substantial investment costs associated with highly technology boats, shipowners who know how to obtain money are required. "We have a unique chance to learn from the past since shipping is such an ancient business with a history of continual change, sometimes gradual and sometimes catastrophic" (Stopford 2008).
The goal of this study is to discover how ship-owning corporations fund their investments using historical data and lessons learned from previous years. The investigation should, hopefully, give solutions to questions about funding in the ship-owning business.
Financing is a critical step in establishing an asset-based business, such as a ship-owning corporation. Financial and financial knowledge may be required for a firm to develop new goods and services. In an interview with Sysla (Aadland 2014), the CEO of Havila Shipping stated that maintaining the marine cluster in Norway is critical to maintaining Norway's leadership position in the shipping sector. He went on to say that shipowners, yards, classification organizations, suppliers, insurers, and Norwegian seafarers are all focused on finance. The interview took place when one of the company's ships was flagged out to the Bahamas since sailing under the Norwegian flag proved inconvenient. This is disastrous for Norway's marine sector.
This is a knowledge-based industry that is vital to the Norwegian economy. Norway is a world leader in this area, with the marine industry directly employing almost 90,000 people (Fiskeri department et al, 2014). The economic, social, and welfare rights and duties of seafarers are impacted by the flagging of ships to other countries (Solhaug 2014). Flagging out ships might result in a defection from the maritime business and a delay in the growth of the knowledge-based industry, which includes shipowners.
The industry is critical to maintaining Norway's high gross domestic product. The maritime industry accounts for 6-9 percent of Norway's value creation, according to the Norwegian Ministry of Trade, Industry, and Fisheries (Fiskeri department et al 2014). Financing research and development might aid the ship-owning sector in obtaining money and facilitating future expansion. Understanding when and why alternative funding strategies should be used is critical to making Norway's recent success sustainable. As a result, the focus of this research is on ship finance in Nigeria and how it influences the industry's development.
1.2 Statement of the problem
Small and medium enterprises (SMEs) have long been recognized by the World Bank and other multilateral agencies as crucial to these institutions' economic growth in their more focused operations in developing nations. Small firms come in a variety of shapes and sizes, with varying levels of vitality, technological sophistication, and risk tolerance. Many are quite steady in terms of technology, market, and size, while others are more technologically sophisticated and serve critical product or service niches. Others may be high-risk, high-tech "start-ups" that are dynamic (Darlberg Global Development Advisors, 2011). SMEs are important for job creation, economic growth, and the development of entrepreneurial skills, including indigenous technology. As a result, national governments have been working to ensure the economy's long-term growth and development through private-sector initiatives. SMEs in the marine shipping industry, on the other hand, are garnering growing worldwide attention in the search for private sector-led development.
According to UNCTAD (2011), maritime shipping includes a wide range of businesses, including shipbuilding, ship ownership, ship operation (container ships), ship financing, ship scrapping, ship classification, ship registration, ship insurance (Protection & Indemnity), seafarer supply, and port operation (container terminal operators). The favorable developments in the value of exports on ships, floating structures, and the global seaborne commerce support the chances for sustainable expansion in these sectors of marine operations.
Shipping is a significant component of the national economy since it offers vital inputs to the rest of the economy.
Unfortunately, in Nigeria, this industry is dominated by a few foreign companies that can afford the vast capital necessary. In terms of ship ownership and operation, for example, Okoroji and Ukpere (2011) report that Nigerians own just around 8% of the total number of boats that called at the Nigerian port terminal between 1997 and 2006. According to Igbokwe (2006), Nigeria only has three boats approved for Cabotage shipping services out of a total of 140 required by the oil sector. These figures point to negative consequences for the growth and profitability of indigenous SME's in the marine industry, as they lack the necessary capability to compete. The federal government has used special intervention programs in the past to remedy this imbalance (although ineffectively). Direct finance through the Ship Acquisition and Ship Building Fund (SASBF), the Cabotage Vessel Financing Fund (CVFF), cargo reservations, and outright cabotage legislation are some of these options. Ship acquisition and fleet extension, on the other hand, are better done through debt funding, which can only be given by financial institutions, as is customary in established maritime states. This reality calls into doubt Nigeria's financial institutions' commitment to provide entrepreneurial funding to SME's in the shipping sector, particularly commercial banks.
Abereijo and Fayomi (2005), Beck (2007), Hoff et al., and Gibson are just a few of the studies that have looked at the role of entrepreneurs in creating and maintaining SMEs in developing nations (2008). According to Dalberg Global Development Advisors (2011), SMEs, which are critical to advancing growth, innovation, and prosperity in developing countries, face significant challenges in obtaining the capital they need to grow and expand, with nearly half of SMEs in these countries citing access to finance as a major constraint. At one extreme, the government has been blamed for failing to provide direct funding or adequate legislative support for financial institutions to do so; see Cumming et al (2006), Lerner and Antoinette (2005); at the other extreme, financial institutions point to entrepreneurship-related factors such as a lack of lender information, risk profile, and legal environment, among others.
1.3 Objective of the study
The core thrust of this study is to investigate the ship financing structure in the Nigerian middle of the expedition. Nigerian companies face problems far more enormous than their inability to raise the capital is far more historic than others.
The purpose of this study is to achieve the following objectives:
1. To identify the factors considered by shipping companies before collaborating with financiers.
2. To identify the factors on which the future development of the market depends
3. To determine the most viable ship financing model used by shipping companies.
4. To determine the factors that significantly influences the methods of financing ship acquisition.
1.4 Research Hypothesis
H0: There is no significant relationship between the methods of financing ship acquisition and the predictor variables.
H1: There is a significant relationship between the methods of financing ship acquisition and the predictor variables.
1.5 Significance of the study
Thus, further research is needed to identify the constraints hindering banks funding in development of SMEs or the maritime businesses in the shipping sector. The outcome of this study would provide insight into factors affecting the commercial banking institutions in the provision of credit to private sector led SME development.
well as provides policy recommendations towards the financing of shipping companies in Nigeria.
The findings from this study would also provide basis for designing intervention policies aimed at addressing the funding issues of shipping industry in the maritime/shipping sector.
1.6 Scope/Limitation of the study
This study on ship financing is focused on the ways and strategies of developing the shipping companies in the industry with financing, and is within the confines of Nigeria.
This study is limited by Time constraints, financial constraints, availability of resources and material, and accessibility of materials for use of the study.
1.7 Definition of Terms
Ship Financing
Is an arrangement that uses vessel charter fees as the principal source of repayment, while various forms of collateral structured around shipbuilding and charter agreements are assigned to mitigate credit risk.
shipping finance
The assets we finance include, among others, tankers (crude oil, gas, chemical, product), dry bulk vessels, container vessels, container boxes, car carriers, and ferries.
Ship
A ship is a large watercraft that travels the world’s oceans and other sufficiently deep waterways, carrying passengers or goods, or in support of specialized missions, such as defense, research and fishing.
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