OAL Proposes Legal Framework to Unlock $700M Nigerian Cabotage Vessel Fund

OAL’s Framework Targets Lending Hurdles for $700M Cabotage Fund

Nigerian law firm Olisa Agbakoba Legal (OAL) has introduced a legal and credit-risk framework designed to persuade banks to lend against the $700 million Cabotage Vessel Financing Fund (CVFF). The framework, unveiled at the maiden Maritime Policy Roundtable in Lagos, addresses the deep-seated reluctance of financial institutions to finance vessel acquisitions by local shipowners under the fund, which has lain largely idle since its creation under the Coastal and Inland Shipping (Cabotage) Act 2003.

Senior partner Olisa Agbakoba traced the CVFF’s troubled history, noting it was established to grow indigenous shipping capacity and Nigerian participation in coastal trade. Collins Okeke, a partner at the firm, then laid out a step-by-step credit risk tool for banks: independent assessment of an applicant’s financial strength, existing debt, operational track record and projected cash flows, rather than relying solely on the applicant’s own documents. The framework also insists on verification of beneficial ownership, regulatory compliance and the source of the mandatory equity contribution before any loan is approved.

Nicolas Bernard, managing director of NBC Maritime Ltd., warned that buying a vessel is only the first hurdle. He stressed that professional ship management – covering technical maintenance, crewing, regulatory compliance and digital monitoring – is essential to protect the asset’s value and generate the cash flow needed to service debt. The roundtable also explored the idea of cargo-backed financing and long-term Contracts of Affreightment to give lenders predictable revenue streams.

The gathering agreed to widen its membership to include ship management experts, marine surveyors, insurers and valuers, and named Wale Mesioye of Fidelity Bank as coordinator to build a permanent body of expertise around ship financing in Nigeria.

Why Nigeria’s Maritime Financing Needs Legal and Operational Overhaul

Closing the Credit Gap for Indigenous Shipping

The CVFF was always an ambitious policy tool, but banks have been unwilling to deploy it because the underlying risks – opaque vessel ownership, weak financial disclosure and uncertain repayment capacity – were never systematically mitigated. OAL’s framework directly confronts that blind spot by giving lenders a standardized due-diligence checklist. By forcing an independent look at cash flows and debt structures, it turns what was largely a political disbursement mechanism into a credit committee’s playbook. The call to verify the source of an applicant’s own equity contribution is particularly pointed in a market where beneficial ownership is often complicated.

Why Professional Ship Management Matters to Lenders

Nicolas Bernard’s presentation highlighted a second, equally critical layer. Even a well-funded vessel loses value rapidly if it is poorly maintained, mismanaged or fails crew and safety inspections. For a bank, the loan’s collateral is the vessel itself. If the ship is laid up or blacklisted by inspectors, the security evaporates. Bernard’s push to involve professional ship managers from the selection stage directly aligns the interests of the operator and the financier; it amounts to an operational guarantee that the asset will keep working and generating revenue.

From One-Off Deals to a Sustainable Financing Architecture

The roundtable’s discussion of cargo-backed financing and Contracts of Affreightment signals a move beyond individual vessel loans towards a whole-of-supply-chain view. If an indigenous operator can show a long-term transport contract with a credible cargo owner, the bank’s credit analysis shifts from a bet on the vessel’s residual value to a cash-flow-lending model. The references to cargo reservation systems in other jurisdictions – an idea that would require legislative backing – could, if adopted, create a captive cargo pool for Nigerian-flagged vessels, making them far more bankable. For now, however, that remains a policy aspiration and not a decided reform.

Next Steps for Banks and Ship Operators Under the New Framework

• For banks: Apply OAL’s credit-assessment template immediately, with particular focus on independent cash-flow verification and beneficial ownership checks, before committing to any CVFF-linked facility.
• For indigenous shipping operators: Engage a professional ship manager at the vessel-selection stage – not after delivery – to satisfy lenders’ operational-risk conditions and protect the asset’s value.
• For policymakers and the expanded forum: Prioritise a concrete study of cargo reservation arrangements from other countries and their link to bankable vessel financing, as raised by roundtable participants.
• For the newly appointed coordinator (Wale Mesioye, Fidelity Bank): Publish a roadmap within six months for the body of expertise, including a standardised ship-financing due-diligence package that can be used by all participating institutions.