Stakeholders Unveil Framework to De-Risk $700m CVFF, Seek to Avoid Repeat of Failed Lending Scheme

Wale Igbintade

Stakeholders in Nigeria’s maritime, banking, insurance and legal sectors have unveiled a comprehensive legal and financial framework to de-risk the planned disbursement of the approximately $700 million Cabotage Vessel Financing Fund (CVFF), warning that lessons from the failure of the fund’s first lending window must guide future implementation.

The recommendations emerged at the maiden Maritime Policy Roundtable organised by Olisa Agbakoba Legal (OAL) in Lagos, where industry leaders examined the legal, financial and operational structures needed to ensure sustainable vessel financing and deepen indigenous participation in Nigeria’s maritime sector.

Participants agreed that the success of the CVFF would depend on rigorous credit assessments, robust legal due diligence, effective risk management, enforceable security arrangements and specialised maritime-finance expertise capable of protecting both lenders and borrowers.

Opening the roundtable, Managing Partner of Olisa Agbakoba Legal, Mrs. Yvonne Ezekiel, stressed the need for stronger collaboration among banks, maritime operators, legal practitioners and regulators to address longstanding obstacles to vessel financing in Nigeria.

Senior Partner of the firm, Dr. Olisa Agbakoba, SAN, traced the evolution of the Cabotage Vessel Financing Fund, recalling that it was established under the Coastal and Inland Shipping (Cabotage) Act, 2003 to facilitate vessel acquisition by indigenous shipping operators and expand Nigerian participation in coastal trade.

He also reviewed earlier maritime policy initiatives, including the Nigerian National Shipping Line, stressing the need for a financing model capable of sustaining indigenous shipping businesses.

Presenting a legal and credit-risk framework for participating financial institutions, OAL Partner Mr. Collins Okeke identified independent credit assessment, corporate and regulatory due diligence, effective security structuring and clearly defined recovery mechanisms as essential safeguards against non-performing loans.

According to him, banks should independently verify applicants’ financial capacity, operational competence, debt profile and projected cash flow rather than rely solely on information supplied by prospective beneficiaries. 

He also recommended verifying beneficial ownership, regulatory compliance and the source of applicants’ mandatory equity contributions before approving any facility.

To protect lenders, Okeke proposed enforceable mortgages over financed vessels, assignment of vessel-generated income and receivables, comprehensive insurance cover and clearly defined restructuring mechanisms for borrowers facing financial distress.

Managing Director of NBC Maritime Ltd., Capt. Nicolas Bernard, highlighted professional ship management as a critical factor in preserving the value of financed vessels and safeguarding investments.

He said vessel acquisition represented only the first stage of the investment cycle, noting that sustainable returns depended on efficient technical management, preventive maintenance, crew administration, regulatory compliance, procurement, financial oversight and digital monitoring.

Bernard also advocated involving professional ship managers from the acquisition stage to strengthen technical due diligence, improve regulatory compliance, reduce operating costs and minimise vessel downtime.

During discussions, participants urged authorities to critically review the shortcomings that undermined the CVFF’s Series 1 lending programme before commencing Series 2.

They maintained that sustainable ship financing would require active participation by commercial banks, backed by an enabling regulatory framework, continuous credit monitoring and specialised maritime-finance expertise throughout the life of each facility.

The stakeholders also underscored the importance of cargo reservation systems, noting that guaranteed cargo volumes would significantly improve banks’ willingness to finance vessel acquisitions on commercially viable terms.

Beyond the immediate implementation of the CVFF, the roundtable examined broader strategies for building a sustainable maritime-financing ecosystem, including cargo-backed financing and long-term Contracts of Affreightment to create predictable revenue streams and strengthen indigenous operators’ repayment capacity.

To deepen technical expertise, participants resolved to expand the forum’s membership to include ship managers, marine insurers, marine surveyors, engineers and valuers.

They also nominated Mr. Wale Mesioye of Fidelity Bank as Coordinator of the forum to work with Olisa Agbakoba Legal in building institutional capacity in maritime finance, while encouraging participating banks to establish dedicated maritime-finance units.

Representatives of Fidelity Bank Plc, Zenith Bank Plc, TAJBank, Lotus Bank, the Bank of Industry, SUNU Assurances Nigeria Plc, Capstone Insurance Brokers Limited, NBC Maritime and Seamate Group attended the roundtable.

The meeting comes amid renewed efforts to operationalise the Cabotage Vessel Financing Fund, which was created under the Cabotage Act to strengthen indigenous shipping capacity, facilitate vessel acquisition and increase Nigerian participation in domestic coastal trade.

Closing the event, Agbakoba announced that future editions of the Maritime Policy Roundtable would include shipowners, additional financial institutions and officials of the Federal Ministry of Marine and Blue Economy as stakeholders continue to develop practical solutions for sustainable maritime financing in Nigeria.