A SURVEY ON SHIP FINANCING: EXPERIENCE OF NIGERIA

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.