Determined to end more than two decades of delays surrounding the disbursement of the Cabotage Vessel Financing Fund (CVFF), Minister of Marine and Blue Economy, Adegboyega Oyetola, recently directed the Nigerian Maritime Administration and Safety Agency (NIMASA) to work more closely with the 12 Primary Lending Institutions (PLI’s) to disburse the fund to qualified shipowners.
However, many of the fund applications put forward by indigenous shipowners are reportedly failing bank requirement following NIMASA’s revelation that it has received a total of 92 funding applications, with 20 already submitted to the PLIs and only one application was reviewed and forwarded for approval.
Contract issues
Speaking recently at the Nigerian Chamber of Shipping (NCS) Members’ Evening in Lagos, themed: ‘A Public-Private Dialogue: Unlocking Efficiency in the Marine and Blue Economy Value Chain’, Ms Iroghama Ogbeifun, a member of the NIMASA Governing Board and Managing Director of Starzs Investments Company Limited, explained that many applicants are failing the credit assessments conducted by their banks, which hold decisive sway over the approval pipeline.
She stressed that cargo guarantees are vital because they prove future cash flow, assuring lenders that vessels will earn enough to service debt. Ogbeifun admitted that even her own firm could technically struggle to qualify, due to its business model and the rigid bank requirements for long-term cargo contracts.
She noted that the single applicant, whose file is before the minister, should receive the $25 million payout before the end of 2026, adding that subsequent approvals will follow a strict first-come, first-served sequence once conditions are met.
Echoing these concerns, Dr Olisa Agbakoba, Senior Partner at Olisa Agbakoba Legal, noted that the lack of guaranteed cargo actively deters commercial banks from backing otherwise capable shipowners. He urged the NIMASA Governing Board to enforce the cargo reservation provisions of the Cabotage Act to explicitly tie vessel financing to cargo availability, pointing to the United States’ cargo preference framework as a viable model.
Will NIMASA intervene?
Speaking on why banks will demand a valid contract before releasing funds to any shipowner, president of the Nigerian Chamber of Shipping, Mallam Aminu Umar, explained that a valid contract assures the bank of prompt repayment of borrowed loans. In the words of the Sea Transport boss, ‘The demand for a valid contract by banks before releasing the fund is part of the approval process that guides many of the PLI’s disbursement process. The banks have done nothing wrong. It is part of their regulations.
‘The banks can only seek, maybe, the intervention of NIMASA to get waivers for applicants who don’t have valid contracts. The banks are being careful so as not to lose funds. Their stance on possession of a valid contract by indigenous shipowners is due to the fact that they want to be sure they can recover their money back. ‘I know some shipowners applications have scaled through and they are already in the process of accessing the fund. However, for those yet to perfect their papers, I will urge them to do so or seek waivers from NIMASA in order to access the fund.’
On whether the Nigerian Chamber of Shipping will approach NIMASA to grant waivers for indigenous shipowners, who do not have contracts, Umar stated: ‘We cannot appeal to NIMASA to grant waivers automatically for shipowners, who do not have valid contracts. What we can say is that it is possible for NIMASA to look towards that direction.
‘This is something that has to be privately arranged between the shipping company and NIMASA. It cannot be an industry-wide arrangement. That is, it cannot be something that should be arranged for all shipowners in the industry. ‘It is something that NIMASA may look into it from their own perspective, together with the bank, and see if its something they are willing to do.
‘In this regard, the integrity of the shipping company must come to fore. It should not be an arrangement that can be extended to everybody. If NIMASA is willing to go that way, then it has to be between NIMASA, the bank and the affected shipping company. This situation can apply if we have many shipping companies that are not getting the fund.
‘The problem is just that once it becomes public knowledge that NIMASA is granting waivers to some shipping companies that do not have valid contracts, every other person too will say they don’t have valid contracts. So, if it must happen, it has to be between NIMASA, the bank and the shipping company. It cannot be an industry wide arrangement, According to Umar, ‘All this is necessary because the PLI’s must follow the Central Bank of Nigeria (CBN) regulations concerning loan disbursement. It won’t be nice that the loans are granted and repayment becomes an issue. It is the banks that will suffer if this happens.
‘Until we get to that stage, I can only appeal for now that my colleagues in the shipping industry perfect their papers and go make their applications. I am sure they will get the fund.
‘If it is necessary, shipowners can form partnerships to access the fund. If Mr A does not have a particular paper; Mr B might have it. So, shipowners should explore partnerships to access the fund.’
Recall that the CVFF, which has accumulated more than two decades without being accessed by shipowners, is expected to provide low-interest, long-term financing for the acquisition of modern vessels and expansion of indigenous fleets. The initiative is designed to enable Nigerian shipowners to compete more effectively for lucrative coastal and offshore shipping contracts, reduce dependence on foreign vessel operators and retain more value within the Nigerian economy.